Net 15
Net 15 payment terms require payment within 15 days of the invoice date. Learn how they work, pros and cons, and when to use them compared to Net 30.
What Are Net 15 Payment Terms?
Net 15 is a payment term where an invoice must be paid in full within 15 calendar days of the invoice date. This timeframe typically includes weekends and holidays unless explicitly stated otherwise. Businesses use Net 15 to balance cash flow needs with customer flexibility.
How Net 15 Works
- Start of the clock: The 15-day period begins on the invoice date or the date the buyer receives the invoice (for mailed invoices).
- Due date clarity: The invoice must clearly state the due date to avoid confusion. For example, an invoice dated January 1 with Net 15 terms would be due by January 16.
- Payment methods: Buyers can pay via bank transfer, credit card, or other agreed methods.
Net 15 vs. Net 30: Key Differences
| Aspect | Net 15 | Net 30 |
|---|---|---|
| Payment Deadline | 15 days from invoice date | 30 days from invoice date |
| Cash Flow Impact | Faster access to funds | Slower but more flexible for buyers |
| Buyer Stress | Higher (shorter timeframe) | Lower (more time to arrange payment) |
| Risk of Late Payments | Lower (shorter window) | Higher (longer window) |
| Customer Attraction | May deter buyers needing flexibility | More attractive to larger clients |
Pros and Cons of Net 15
Pros
- Improved cash flow: Businesses receive payments faster, reducing working capital gaps.
- Lower late payment risk: Shorter terms incentivize timely payment.
- Streamlined invoicing: Easier to track and manage due dates.
- Competitive advantage: Appeals to businesses prioritizing rapid payment cycles.
Cons
- Strain on buyers: May stress customers with tighter cash flow or complex approval processes.
- Potential client loss: Could deter buyers who need more time to pay.
- Administrative overhead: Requires clear communication and follow-up for overdue payments.
When to Use Net 15
Consider Net 15 if:
- You need faster cash flow (e.g., small businesses with tight budgets).
- Your industry typically uses shorter payment cycles (e.g., consulting, freelancing).
- You work with trusted, reliable clients who can meet deadlines.
- Invoices are for smaller amounts (larger invoices may warrant longer terms).
Best Practices for Implementing Net 15
- Clear communication: Specify Net 15 terms in contracts and invoices to avoid disputes.
- Automated reminders: Use invoicing tools to send alerts before the due date.
- Late fees: Charge reasonable late fees (e.g., 1.5% per month) to discourage delays.
- Early payment discounts: Offer incentives (e.g., 1-2% discount for payment within 10 days).
- Track aging invoices: Regularly review overdue accounts and prioritize collections.
Summary
Net 15 terms accelerate cash flow but require careful balance to avoid alienating customers. They work best for businesses with urgent capital needs, stable client relationships, and efficient invoicing systems. For larger clients or high-value projects, consider hybrid terms (e.g., 50% upfront, Net 15 for the remainder).
Frequently Asked Questions
Are weekends included in Net 15?
Yes, unless explicitly excluded. Always clarify in contracts if you intend to exclude non-business days.
Can I offer discounts with Net 15?
Yes. For example, "1/10 Net 15" means a 1% discount if paid within 10 days, otherwise the full amount is due in 15 days.
How do I enforce Net 15 for late payers?
Send polite reminders, apply late fees as agreed, and consider suspending services for chronic late payers.