The business side of the trucking industry is rife with financial lingo, with jargon like “net 30” tossed around without a second thought. But what does net 30 mean? More importantly, how does the concept affect a carrier’s business decisions?
To understand the meaning of net 30, you need some familiarity with payment terms. Payment terms are part of the agreement between a customer and a service provider. They describe, among other details, when exactly the customer must pay you. Essentially, net 30 is one such payment deadline.
Net 30 is a standard payment term in business-to-business transactions, and that includes the trucking industry. But net 30 is not the only term you’ll run into. You may also encounter net 15, net 45, net 60, and others. In these constructions, the first part of the term—net—refers to a duration of time. The second—30 in this case—refers to a number of days.
So putting all these details together, what is net 30? Net 30 is a payment agreement that means the customer has 30 days to pay your invoice in full. While that definition is simple enough, net 30 terms have all sorts of ramifications for running a trucking business, and the subject can get a bit complicated. Here are answers to five frequently asked questions about net 30 payment terms in the trucking industry.
What Does Net 30 Mean? A Trucking Industry FAQ
Net 30 payment terms are pretty common in the trucking industry (though so are net 35, net 45, and even net 60 terms). The following answers provide helpful context for all these payment agreements, but we’ll stick to net 30 as our standard reference point.
1. Does net 30 mean I’ll always get paid within 30 days?
Not exactly. Net 30 does require a customer to pay an invoice within 30 days, but that doesn’t mean you’ll get your money before day 30. Most companies like to hang onto cash for as long as they can, so if you agree to net 30 terms, many customers will pay that invoice on the 30th day after they receive your invoice. That often means it will take longer than 30 days for the funds to reach your account—especially if the customer pays by check.
A shipper might issue a check on the 30th day after you deliver a load. They may put that check in the mail the next day (or the next week), and rely on the postal service to get it into your hands. So net 30 terms don’t necessarily mean you can count on that money in exactly 30 days. Digital payments can speed up the process by removing transit time in the mail, but even with ACH transfers, delays are common.
The upshot is that it’s better to assume payments made on net 30 terms won’t hit your bank account for 35 or even 45 days following completion of service.
2. When does the 30-day period begin in net 30 payments?
Some people interpret net 30 to start a payment clock as soon as the terms are signed. Most assume the 30 day deadline begins on the invoice date, typically the day you complete the delivery. Others take net 30 to mean the payment is due 30 days after receipt of the invoice. It’s crucial to be clear about the starting point for a net 30 agreement, so be sure to include this detail in your contracts.
As long as you and your customer agree on the payment terms, you can set them however you want. But you do have to agree—and that agreement must be documented in a written contract.
3. What happens if a customer pays late on net 30 terms?
Trucking businesses have adopted all sorts of policies to encourage on-time payments. You might charge a late fee for customers who pay late (after 30 days on net 30 terms), usually a low percentage of the invoice value. Or you might incentivize earlier payments by discounting invoices that are paid early, say within a week or 15 days.
If you don’t write these incentives into your contract, however, you can’t enforce them. Payment terms are an agreement, and every agreement may be different. Work with your customers to reach payment terms that both sides can accept.
4. Which is the best payment term for carriers: net 15, net 30, or net 60?
Typically, in business, everyone wants to hang onto cash for as long as possible. The more cash you have in your bank accounts, the more you can optimize your own finances. Besides, you have bills to pay. You have to buy fuel. You may need to make payroll. You can’t pay your drivers 30 days later; they need paychecks on schedule. So for you, the carrier, the sooner you get paid, the better. You’re probably best off with net 15 terms—or even “due on receipt,” which means the company has to pay you as soon as they receive the invoice.
On the other end of this deal, however, there’s a shipper who’d rather collect interest on those funds for another month. They also may have a busy finance department that simply needs more time to process payments. They may only make payments once a week. These conditions all make it hard to pay quickly. For the customer, net 60 payment terms are probably more attractive.
This is where negotiation comes into play. Payment terms are a big part of any business contract. Don’t be shy about asking for quicker payments; the worst you can get is a “no.” But many shippers—especially larger companies—have pre-set payment terms. They won’t budge on their net 30 or net 60 policies. That leads us to our next question.
5. What if I can’t afford to wait 30 days for payment on an invoice?
Payment cycles in the trucking industry have been a challenge for carriers from the start. There’s a mismatch between the immediate cash-flow needs of carriers, who must buy fuel, and the financial cycles of shippers, who don’t get paid by their clients until products are delivered.
Luckily, the industry has come up with a solution to this problem. It’s called invoice factoring.
Factoring is a financial service in which a third-party company pays your invoice today, then collects the funds from your customer when the payments come due. Factoring companies charge a percentage of the invoice value for their services. At Bobtail, our starting rate is 2.99%—and less for larger fleets (four or more trucks), which factor more invoices. If you need funds immediately, this is a small price to pay—much lower than you’ll get from short-term loans or credit cards.
That’s because factoring isn’t a loan. It’s a transaction. The factoring company buys your invoices for nearly full value. So factoring won’t impact your credit scores or count against your borrowing limits. That leaves you free to expand your business, using your credit for new equipment—or even grow your fleet with additional trucks.
In short, if net 30 terms aren’t working for your trucking company, factoring is a simple solution. And with Bobtail, factoring couldn’t be easier. You simply enter load details into the Bobtail app, upload a bill of lading and rate agreement, and watch the funds hit your bank account the same day (or the next if it’s after 11 a.m. Eastern time).
We don’t make you sign long-term contracts. We don’t charge hidden fees. And we don’t try to make you factor more invoices than you want. With Bobtail, factoring freedom is in your hands—and our responsive customer service team is always ready to help.