Net 30 Payment Terms: Meaning and Contract Wording

What do net 15, net 30 and net 45 mean?

Net followed by a number is the count of days a buyer has to pay the whole invoice. Net 30 gives 30 days, net 15 gives 15, and net 45 gives 45. Due on receipt gives none. The count starts on the date the contract names, which is the next question. The facility billing guide covers the rest of a facility invoice.

A term like 2/10 net 30 adds an early-payment discount. It reads as 2 percent off if paid within 10 days, otherwise the full amount in 30. Here is a worked example. A $5,000 facility invoice dated June 1 is paid at $4,900 if the money arrives by June 11, and at $5,000 by July 1. You give up $100 to be paid 20 days sooner. That is 2.04 percent of $4,900 for 20 days, which works out to about 37 percent a year.

When do the 30 days start?

They start on whichever date the agreement says. Real documents differ:

From the invoice date. Mass General Brigham’s standard payment term is net 45 from the invoice date. The federal clause for early-payment discounts counts the same way: time runs from the date on the invoice, or from receipt of a proper invoice if it carries no date (FAR 52.232-8 and 5 CFR 1315.7).
From receipt. Gaston County, North Carolina, writes that it pays on a net 30 basis from receipt of the invoice, and expects monthly invoices by the 9th of the following month.
From submission. MTM’s standard agreement pays uncontested invoices within 30 days after online electronic submission.

The difference is real money. On invoice-date terms, an invoice dated June 1 but sent June 8 has already lost a week. On receipt terms the clock waits for the facility to have it. For goods, the Uniform Commercial Code (section 2-310) makes the same point: a credit period runs from shipment, and holding back the invoice pushes the start later, which costs the seller. Rides are services, so that section does not decide your case. Your agreement does, so name the start date in it.

What can you charge when an invoice runs late?

You can charge what the agreement says, subject to state law. A few facts frame the choice:

Texas. If a creditor has not agreed with the buyer on any interest, it may charge 6 percent a year on the amount extended starting on the 30th day after the due date. A creditor and buyer can agree on a rate, and the general ceiling is 10 percent a year unless other law allows more.
Hospitals. Mass General Brigham’s rules say invoices shall not include interest or late payment charges. Check a hospital’s supplier terms before you promise a fee.
Public payers. Federal agencies owe interest on late payments under 5 CFR part 1315, and it runs in your favor. Texas, Florida and Illinois do the same for local governments, and the local government prompt payment guide gives their due dates and interest.

If you set a fee, write the rate, the day it starts and how it is figured. State limits on commercial interest vary, so a lawyer should read the number before it goes in the form.

What terms do hospitals and counties set?

Large buyers can set terms in their own supplier rules instead of negotiating them. Mass General Brigham sets net 45 from the invoice date and requires its purchase order number on each invoice. Gaston County pays net 30 after delivery of service. When terms stretch, so does the money you carry. At $40,000 of invoices a month, which is about $1,300 a day, each extra 30 days of terms leaves about $40,000 of unpaid rides on your books. That is an example, but the arithmetic applies to any size. The cash flow guide shows how to plan around slow payers.

Putting terms into the agreement

A term that lives only on the invoice is easy for a buyer to ignore. Put these in the agreement:

The start date, invoice date or receipt, and how an invoice counts as received.
The due date printed on every invoice.
Accepted payment methods, so nobody waits on a mailed check. See how facilities pay invoices.
The late charge, if any, with its rate and start day.
A dispute rule that lets the buyer hold only the disputed line and pay the rest. The facility billing guide covers disputes.

The facility transportation agreement template has a payment clause you can adapt.

Setting terms per payer in HealthRide

HealthRide lets you set terms per payer, net 15, 30 or 60, once. The invoicing feature then sets each invoice’s due date from those terms and keeps a past-due list that shows exactly who to call.

Frequently asked questions

How does net 30 differ from due on receipt?

Net 30 gives the buyer 30 days to pay the whole invoice, counted from the date the contract names. Due on receipt gives no grace period, so payment is expected as soon as the invoice arrives. Most facility agreements use a net term, since accounts payable departments run on payment cycles.

Does net 30 start on the invoice date or the day the facility gets the invoice?

Whichever the contract says. Gaston County, North Carolina, pays on a net 30 basis from its receipt of the invoice. Mass General Brigham counts its standard net 45 from the invoice date. MTM pays within 30 days after online submission. An invoice you sit on eats into the clock when it runs from the invoice date.

Can I charge a late fee on a net 30 invoice?

Only if the agreement or state law allows it. Texas sets 6 percent a year, running from the 30th day past the due date, when no rate was agreed. Some hospitals bar the charge outright: Mass General Brigham's supplier rules say invoices shall not include interest or late payment charges.

When do brokers pay a NEMT company's invoices?

Each broker sets its own schedule. MTM's standard agreement sets payment at 30 days from online submission for any invoice that is not contested, and a claim filed later than 90 days past the service date is not eligible for payment (the state or plan MTM works for can set a different limit). The broker payment schedule guide lists the timing broker by broker.

Is a 2/10 net 30 discount worth offering?

Rarely. On a $5,000 invoice, a 2 percent discount costs you $100 to be paid 20 days sooner. Spread over a year, that works out to about 37 percent. Offer it only if you would otherwise borrow at a higher cost to cover that cash.

Net 30: payment terms on facility invoices, and the wording that makes them hold