Don’t Make Them Wait

In the US, there are typical trade payment terms. Throughout business school all the examples we tackled always included the same specific terms.

Businesses selling to businesses often extend a 2/10 Net 30 term.  2 stands for the percentage amount of discount offered if the invoice is paid within the first 10 days.  Net 30 means that the entire invoice is due within 30 days, including weekends and holidays.  While we have mostly seen the 2/10 only in manufacturing settings, the Net 30 is used widely in certain professional services.  

It has been our experience that few larger clients, particularly where government funding is in play, rarely pay within 30 Days. This is specific to professional services.  There is often a Prime on the projects and they will not pay the consultants until they are paid. Paid when Paid is the term often used.  Check your contract with the Prime, those 3 words are almost always in there.

There may not be much a sole proprietor or micro business owner can do to enforce their own Net 30 payment term when up against large firms and government funding.  Try to include a few private pay jobs and there you will likely find more success in clients abiding by your Net 30 payment requirement.  

It is unfortunate that payment is so varied among industries.  And it seems the hardest for small consultants to be paid within an acceptable timeframe despite their payment requirements.  If you work for a larger organization that is often a Prime or a firm that uses government funds, be mindful that smaller companies do not carry the large lines of credit you do and do your best to pay them On Time.

Be well.