What Is a Net 15 and How Does It Affect Your Business?

“Net 15” is a common payment term in business-to-business (B2B) transactions, widely used to establish clear payment expectations. It specifies that an invoice must be paid in full within 15 days.

Understanding Net 15 Mechanics

When an invoice carries “Net 15” terms, the customer has 15 calendar days to remit the full payment. This period typically begins from the invoice issue date, not necessarily when goods or services are received. For example, if an invoice is dated May 1st, payment would be due by May 16th. The term “net” signifies the total amount due, with any discounts or credits already applied.

Generally, Net 15 terms include all calendar days, meaning weekends and holidays are counted. However, businesses can agree to exclude weekends or holidays, but this must be explicitly communicated and documented in the payment terms.

Financial Impact of Net 15 Terms

Utilizing Net 15 terms has distinct financial implications for both the invoicing party (seller) and the paying party (buyer). For sellers, these terms offer a relatively quick turnaround for receiving funds, which positively influences cash flow and liquidity. Faster cash inflow allows businesses to cover immediate expenses, restock inventory, and reinvest in operations more efficiently. Sellers must also manage their accounts receivable diligently, as late payments can still occur and negatively impact financial health.

For buyers, Net 15 terms require prompt payment, influencing their accounts payable management and cash flow planning. While a shorter window, it provides a manageable timeframe to organize finances without feeling rushed compared to immediate payment demands. Businesses accepting these terms need to ensure they have sufficient short-term liquidity to meet the payment deadline.

Some sellers may offer early payment discounts, such as “2/10 Net 15,” allowing a 2% discount if paid within 10 days, otherwise the full amount is due in 15 days. Taking advantage of such discounts can reduce procurement costs and improve the buyer’s bottom line.

Other Standard Payment Terms

Beyond Net 15, various other standard payment terms are commonly used in business transactions, each with different payment windows. “Net 30” is a widely adopted term, indicating that payment is due within 30 days from the invoice date. This provides a longer period for payment, beneficial for larger transactions or industries with longer sales cycles. Similarly, “Net 60” and “Net 90” extend the payment period to 60 and 90 days, often used for larger purchases or with established clients.

“Due on Receipt” means payment is expected immediately upon the customer receiving the invoice. This term is typically applied to smaller transactions or when dealing with new or unverified customers where immediate payment is preferred to mitigate risk. “Cash on Delivery” (COD) requires payment for goods or services at the exact time they are delivered. This is common for physical goods and reduces the seller’s credit risk.