Operating a small business comes with many challenges, especially when it comes to managing cash flow. One potential solution that can provide some breathing room is offering Net 30 business accounts to customers. Net 30 allows a business to extend 30 days of credit to its business customers, enabling the customer to pay for goods or services 30 days after they are delivered. This can be an attractive option for business-to-business (B2B) transactions.
Implementing Net 30 business accounts can provide several benefits for a small business while also helping to attract and retain business customers. Below, we’ll explore how offering Net 30 payment terms can be a win-win for both your business and your customers.
Why Consider Net 30 for Your Small Business?
For many small or newly established businesses, getting paid upfront isn't always realistic, especially when dealing with other businesses. Some B2B customers will expect or request the ability to pay for large orders or ongoing services on credit. This allows them to properly manage their accounts payable workflow.
As a seller, requiring upfront payment for every order may result in losing customers to competitors who do offer payment terms. Providing Net 30 terms is often a necessary step to compete for business-to-business sales.
Implementing Net 30 for business customers provides advantages, including:
Increased cash flow - Rather than having to pay for goods upfront, your B2B customers can pay after receiving and approving the items. This improves cash flow for their business.
More buying power - With Net 30 terms, your business customers can place and fulfill larger orders that would exceed their upfront budget.
Strengthened loyalty - Offering payment terms shows that you understand and accommodate the needs of other businesses. This helps build loyalty with existing accounts.
Competitive edge - Providing Net 30 gives your business an advantage when bidding for new accounts against competitors that require upfront payment.
Improved forecasting - With Net 30, your sales reps can more confidently book larger deals without putting as much pressure on the customer's budget. This allows for more predictable revenue forecasting.
Implementing Net 30 for your B2B clients not only helps your customers, but it can also improve business performance and stability for your own company.
Key Steps for Enabling Net 30 Payments
Moving to Net 30 business accounts requires some preparation and process changes. Here are some key steps to take:
Determine eligibility - Decide which business customers are eligible for Net 30 terms based on factors like sales volume, order history, credit health, and length of relationship. Larger, long-term accounts are often good candidates.
Update contracts - For existing customers moving to Net 30 terms, update any active contracts, agreements, or orders to reflect the new payment timeline. Have new customers sign a Net 30 agreement.
Implement a billing system. Whether you use invoices or a POS system for small businesses, configure it to properly handle Net 30 billing and due dates. Ensure any recurring charges are billed correctly.
Optimize accounting - Adjust your revenue recognition practices and accounting methods to accommodate delayed payments. Recognize revenue at delivery rather than order.
Track receivables - Use your accounting software or Excel to track accounts receivable and know which Net 30 invoices are open. Send reminders when payments are due.
Accept credit cards - Allow customers the option to pay open invoices early via credit card. This provides additional convenience and improved cash flow.
With the right business accounts receivable processes and software in place, extending Net 30 terms to your B2B clients can be relatively seamless. Be sure to regularly monitor past-due accounts and outstanding balances.
Net 30 Increases Customer Lifetime Value
A major benefit of offering Net 30 business accounts is that it helps increase the lifetime value of business customers. Having the option to pay on credit typically encourages customers to spend more over time.
Some of the ways Net 30 boosts customer LTV include:
Bigger initial orders - Customers can purchase more than their upfront budget allows.
Higher repeat sales - Easier purchasing encourages additional and more frequent orders.
Expanded product usage - Access to credit allows customers to utilize a wider range of your offerings.
Added services - Net 30 terms facilitate purchases of ongoing services and subscriptions.
Account growth incentives - You can offer increased credit limits for growing accounts.
Upsell opportunities - Customers with credit have more flexibility to purchase premium items.
The combination of larger order values and increased order frequency from Net 30 creates significant LTV expansion potential. And the improved cash flow for your customers enables this expanded purchasing. It's a win-win that strengthens your business relationships.
Mitigating the Risk of Non-Payment
One concern that deters some businesses from offering Net 30 terms is the risk of non-payment. There are a few best practices that can help mitigate this risk:
Start small - When first extending Net 30 to a customer, keep the initial credit line modest until payment patterns are established.
Review account history - For existing customers examine past payment habits, returns, and disputes before expanding credit limits.
Require credit applications - Have new Net 30 accounts complete a credit application to pre-qualify based on financial data.
Monitor account activity - Watch for signs of trouble, like multiple credit limit increases or high percentages of disputed charges.
Send reminders - Proactively remind customers of upcoming payment due dates via email or phone.
Offer electronic payment - Make paying open invoices fast and convenient via credit card or ACH.
Address issues promptly - Contact the customer before an invoice becomes seriously past due to discuss their situation.
Report chronic issues - If a customer habitually pays late, report the behavior to credit bureaus and re-evaluate their account terms.
Proper client selection, monitoring, and communication are key to minimizing the risk of offering Net 30 business accounts. The benefits for your business typically outweigh the costs.
Use a Merchant Payment Provider
For any small business, applying for and establishing Net 30 business accounts on your own can be challenging. This is why many companies turn to experienced merchant payment providers like 5 Star Processing.
With 5 Star Processing, you get tailored solutions, including:
Easy Net 30 account setup - They handle the entire application and approval process for your customers.
Fast underwriting - Get approved for Net 30 merchant processing in just 3-5 days.
High approval rates - Their underwriting model enables approval for more of your accounts.
Seamless integration - Net 30 account management and billing directly integrate with your small business POS system.
Dedicated account rep - An expert representative supports your business every step of the way.
Reliable payments - They ensure timely invoicing and payment to protect your cash flow. Their collection process achieves 96%+ pay rates.
Let the experienced team at 5 Star Processing handle all the details of providing Net 30 business accounts for your customers. This service enables you to easily offer payment terms that help attract new business, retain customers, and boost sales.
Net 30 Opens the Door to B2B Success
Operating a business today often means selling products and services to other businesses. However strict upfront payment requirements can limit these B2B opportunities. Offering Net 30 business accounts through merchant services gives you a competitive advantage.
Net 30 terms enable your business customers to purchase more and pay over time. This provides benefits for the company while growing the lifetime value of their account. Partnering with a processor like 5 Star Processing makes offering Net 30 simple and streamlined.
By providing business customers with Net 30 flexibility, you open the door to attracting new accounts, driving repeat sales, and boosting average order value. Net 30 terms facilitate the B2B success that is often the backbone of a small business. Implementing this bridge to business sales growth can propel your company to new heights.
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