What is Net 30? How to Better Understand Payment Terms

June 25, 2021
Business Basics

A few years ago, I had the opportunity to work with a major record label. 

I was hired to shoot photos in Seattle’s largest arena during one of their artist’s performances with another photographer. Seeing a crowd of thousands of people from an artist’s perspective is something that sticks with you.

You know what else stuck with me? How long it took to get paid.

Commercial creators – designers, videographers, or photographers who work with companies – know this struggle intimately. Working on commercial contracts is exciting and lucrative, but it can feel like forever before that money comes in.

It comes down to the payment terms in your contract.

What are payment terms?

Payment terms define how, when, and what method you’ll be paid by another company. Payment terms are typically included on the invoice that you send a company when requesting payment for completed work, but they should be defined before any work is done.

Payment terms typically have three crucial components:

  • The total amount due
  • When the payment is due
  • How the payment will be received

Of course, other items can be included like any deposits or advances required, available payment plans that you’re offering to clients, invoice number, and more.

Again, these terms are meant to provide clarity to both you as the business owner and the client regarding expectations for how, when and what payments are to be made. Payment terms should be negotiated in advance and included in your agreement.

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Why do we use net terms?

“Net” is the standard language that businesses use when talking about payment terms. It’s actually a credit term! When agreeing to payment terms, you as the business owner are agreeing to provide a service for your client that they will not need to pay for until X number of days has gone by.

What follows “net” typically refers to the length of time before an invoice is actually due. So, if you’re billing a client on Net 30 terms, it means the client does not have to pay the invoice until 30 days have passed. 

Just as Net 30 terms mean that you’re not owed payment until 30 days have passed, Net 10 terms mean that your client can wait 10 days. Net 60 would mean 60 days and so on.

Are there other payment terms?

Absolutely. When dealing with commercial contracts, payment terms can be negotiated. If you’re not comfortable with Net 30, you can absolutely request to be paid differently. According to QuickBooks, there are several types of payment terms to choose from.

Here are the most relevant for commercial creators:

PIA: Payment in advance

CIA: Cash in advance

Net 7, 10, 15, 30, 60, or 90: Payment expected within 7, 10, 15, 30, 60, or 90 days after the invoice date

EOM: End of month

21 MFI: 21st of the month following invoice date

COD: Cash on delivery

Stage payments: Set payments over a period of time, agreed upon by the client and seller

Forward dating: Invoicing for payment to be made after the customer receives the order

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Jeremy Millar
Written by:
Jeremy Millar

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