Net 30/60/90

Net 30/60/90

Net 30/60/90 are payment terms indicating that the full invoice amount is due within 30, 60, or 90 days from the invoice date. These terms affect cash flow management and are essential in contract agreements between contractors, suppliers, and clients.

What Each Term Means

  • Net 30: Payment due within 30 days. The most common term in construction. Standard for supplier invoices and many subcontractor agreements.
  • Net 60: Payment due within 60 days. Common on larger commercial projects or government contracts where payment processing takes longer.
  • Net 90: Payment due within 90 days. Typically seen on large institutional or government projects. Hard on cash flow for smaller contractors.

How Net Terms Affect Cash Flow

The gap between when you pay your costs and when you collect from the client is where cash flow problems live. Consider this timeline:

  1. Week 1: You buy $15,000 in materials on Net 30 from your supplier.
  2. Week 2-4: Your crew installs the materials. You’re paying labor weekly.
  3. Week 4: You invoice the client for $38,000 on Net 60.
  4. Week 5: Your supplier payment is due — you’ve spent $15,000 + $12,000 labor = $27,000.
  5. Week 12: The client finally pays. You’ve been floating $27,000 for seven weeks.

When to Use Each

  • Net 30: Use for residential clients and small commercial jobs. Keeps your cash cycle tight.
  • Net 60: Acceptable for established commercial clients with good payment history. Build the float into your pricing.
  • Net 90: Avoid unless the project margin is large enough to cover the carrying cost, or you have a line of credit to bridge the gap.

Practical Example

A plumbing contractor takes on a school district renovation with Net 90 terms. The $180,000 contract requires $60,000 in materials and $45,000 in labor over two months. The contractor doesn’t collect until month five. Without a credit line or cash reserves, they can’t fund their other jobs. Many contractors add 2-3% to their bid on Net 90 projects to cover the financing cost.

Projul’s invoicing features help you send invoices quickly, track payment status, and follow up on overdue accounts. For a deeper dive, check out our construction cash flow management guide.