Net 30, Net 15, or Due on Receipt — Picking Payment Terms

The payment term you put on every invoice is one of the most-copied and least-thought-about decisions in service trades. Most contractors inherit “Net 30” from a template and never revisit it — even when 60% of their work is residential cash jobs that should be Due on Receipt. Here’s what each term actually means, how trades pick between them, and the 2/10 Net 30 trick that pulls cash forward without raising prices.

What each term means

• Due on Receipt — payment expected when the customer gets the invoice. In practice that means the day of service for cash/card, or 3–5 business days for ACH. Standard for residential service calls.
• Net 7 / Net 10 — rare. Used when you want urgency without saying “due now.” Some HVAC and electrical service companies use Net 7 for repair calls.
• Net 15 — payment due 15 days after invoice date. Common for small commercial work and trusted residential repeats.
• Net 30 — payment due 30 days after invoice date. Industry standard for commercial work, custom installs, and any job over $5,000.
• Net 60 / Net 90 — common with general contractors paying subcontractors and with large commercial GCs. Cash flow killer if you’re not pricing it in.
• 2/10 Net 30 — due in 30, but customers get 2% off if they pay within 10 days. Used to incentivize fast payment without dropping list price.

The cash flow math by term

Days Sales Outstanding (DSO) is the metric that matters — the average number of days from invoice to payment. Real-world DSO by term, based on commercial credit data:

• Due on Receipt: average 4–7 days DSO. Effectively immediate.
• Net 15: average 22 days DSO (terms + 7-day customer drift).
• Net 30: average 41 days DSO (terms + 11-day drift).
• Net 60: average 73 days DSO (terms + 13-day drift).

For a contractor doing $50,000/month in revenue, the difference between Net 15 (22 days DSO) and Net 30 (41 days DSO) is $31,000 in working capital permanently tied up in accounts receivable. That’s a credit line you don’t need to draw if your payment terms match your cash needs.

Industry norms by trade segment

Match your terms to what your customer segment actually expects:

Residential service (small repair, HVAC tune-up, drain cleaning)

• Due on Receipt with card-on-file or pay-at-the-door
• Customers expect to pay before the truck leaves
• Anything else looks like financing they didn’t ask for

Residential install (HVAC swap, panel upgrade, kitchen remodel)

• Deposit + Due on Completion (no Net terms)
• Standard 25–33% deposit, balance the day work is signed off
• Net terms on residential installs invite payment problems

Commercial subcontracting (GC pays sub)

• Net 30 standard, often Net 45 in practice
• GCs typically wait for owner payment before paying subs (“pay-when-paid” clauses)
• Verify the GC’s payment cycle before quoting and price the float in

Property management / HOA accounts

• Net 15 or Net 30, depending on AP cycle
• Most PM companies cut checks twice a month — Net 15 hits one cycle, Net 30 hits the next
• Ask which AP cycle they run before you set the term

Government / municipal work

• Net 30 minimum, often slower in practice
• Federal contracts protected by Prompt Payment Act (Net 30 enforceable)
• State and local often slip to 45–90 days. Bid accordingly.

When 2/10 Net 30 is worth it

The math: offering 2% off for paying within 10 days is equivalent to giving the customer a 36% annual discount rate on the float. That’s expensive money — you’d only do it if your business genuinely needs cash inside 10 days, not 30.

Worth it when:

• You’re paying suppliers Net 10 and need to match cash inflow to outflow
• You’re carrying a credit line at 8%+ interest — the discount is cheaper than the interest
• You have repeat commercial customers who reliably take the discount (predictable cash)

Not worth it when:

• Customers were going to pay in 15–20 days anyway — you’re just leaving 2% on the table
• Your margins are already thin (under 25%) — the 2% is a meaningful chunk of profit
• You’re primarily residential — homeowners don’t process discount terms the way AP departments do

FAQ

What does “Net 30” actually mean — from invoice date or end of month?

Net 30 from invoice date is standard in the US. Some industries use EOM (End of Month) terms — “Net 30 EOM” means due 30 days after the last day of the invoice month. Spell it out on your invoice to avoid confusion.

Can I have different terms for different customers?

Yes, and you should. Set defaults by customer segment in your invoicing system: residential = Due on Receipt, commercial = Net 30, GC subcontracts = Net 45. Bulk-edit terms when a customer’s payment behavior changes (slow payers earn shorter terms; reliable long-relationship accounts can earn longer terms).

Do payment terms apply to deposits too?

No — deposits are due before work starts, regardless of the invoice term on the final bill. State both clearly: “Deposit of $X due to schedule. Balance Net 30 from completion invoice date.”