It depends on who you’re selling to and what’s standard in your industry. If you work with other businesses, some level of payment terms is often expected. If you’re selling directly to consumers, collecting at the time of service or at completion is usually the norm.

Net 30 is the most common arrangement in B2B transactions. It means the customer has 30 days from the invoice date to pay. Some industries push for Net 45 or Net 60, especially when larger companies are involved. The longer the terms, the more you’re essentially lending your customers money interest-free. That’s fine if your cash flow supports it. It’s a problem if you’re struggling to cover payroll and materials while waiting to get paid.

Before offering terms, honestly assess whether your business can handle the gap between when you pay your expenses and when you collect from customers. If you have $15,000 in monthly overhead and you’re invoicing $20,000 on Net 30, you need enough cash reserves to cover at least a month of expenses without any collections coming in. In reality, not everyone pays on time. Some customers will stretch Net 30 into 45 or 60 days, so you need even more cushion than you think.

There are ways to offer terms while reducing your risk. Require deposits upfront, especially for project-based work. A 25% to 50% deposit before starting work is reasonable and protects you from doing work you never get paid for. For ongoing services, bill on the first of the month rather than after the work is done. Set clear late payment policies in your contracts and actually enforce them.

The biggest mistake small business owners make with payment terms is not tracking who owes what. Invoices go out and then nobody follows up. Weeks turn into months. By the time you realize someone hasn’t paid, the project details are fuzzy and the customer has moved on mentally. Having a system for invoicing and payment tracking makes the difference between offering terms that work and offering terms that drain your bank account.

If you’re unsure whether your business can handle extending terms, start conservative. Offer Net 15 instead of Net 30. Require deposits on anything over a certain dollar amount. As a QuickBooks ProAdvisor in Chandler, Sean helps business owners see exactly where their cash stands so decisions like this are based on real numbers rather than gut feelings. You can always loosen terms later once your cash position is stronger. Tightening terms after customers are used to paying late is much harder.