What is NET 30? (and how to make NET 30 work for your business)

Yesterday, I came home to one of my favorite things when it comes to running my own business – three (nice sized) checks in the mail.

These checks weren’t unexpected.  They were payments from stores for jewelry I had sent them in March.  These were checks rolling in from my NET 30 accounts.  And these checks now form the bulk of the income from my jewelry business.

What is NET 30?

Once you start wholesaling your products, you’re likely to run into stores who ask if you offer “terms.”  What this typically means is will you extend NET 30 credit to the store.  NET 30 means that you ship a store’s order, and they have 30 days to send you payment in the form of a check.  (Some larger companies may request NET 60 or even NET 90 – meaning they have 60 or 90 days to pay.)

While I don’t recommend extending NET 30 to first time wholesale buyers (for those I request a credit card up front), I do like to move regular accounts onto NET 30 after a few orders.

Obviously, there are plenty of reasons stores like NET 30.  It gives them 30 days to sell product and recoup some of the costs before they have to send a check.

But as a maker, I find plenty of reasons to love NET 30 too:

1.  More money in my pocket. It’s not uncommon for me to have wholesale orders of $500 or more (and some are over $1000).  If a buyer pays with a credit card, that’s money I lose on the credit card fee.  When a buyer pays NET 30 with a check, the full price of the order goes into my account.

2.  It’s easier to get the order out the door.  Sometimes, it can take a few days of playing phone tag before I track down someone who can give me the credit card information for an order.  With NET 30 accounts, I just make, pack, and ship.

3.  Money comes in even if you aren’t working.  Because my business is primarily based around wholesale, I had wrapped up my busy production season last year by the first week of November.  I was even able to take the entire week of Thanksgiving off.  (Not something that can be said for my friends busily prepping for holiday retail shows.)  But during that week off, I was far from concerned about not making money.  I had plenty of NET 30 orders rolling in to make November my biggest month that year to that point, even though I didn’t do much work.

Despite all the reasons that I love NET 30, I know plenty of makers who still find it a little scary.  After all, there are a few legitimate concerns.  Can you afford to spend the money up front for supplies, and only get paid a lot later?  What do you do if someone doesn’t pay?

When it comes to making NET 30 work for your business, there are a few guidelines to keep everything running smoothly:

1.  Only extend NET 30 to qualified accounts.  As I mentioned above, I don’t typically extend NET 30 to first time buyers.  When you offer NET 30, you are offering a store credit.  And it’s important to build a relationship with stores before you offer them credit.  (There are exceptions to this rule.  I sell to a lot of museum stores, and their accounts payable system is only set up to handle NET 30, so I grant it from the start.)  For any store looking to go NET 30, you’ll want to ask for a credit sheet.  This sheet details their banking information, as well as references you can use to check them out.

2.  Keep detailed records. When you send out a lot of orders on NET 30, it’s important to keep detailed records so you know who’s paid and who hasn’t.  I keep a master Excel spreadsheet of all my business income, and one page is specifically for keeping track of wholesale orders and NET 30.  I keep a list of all outstanding accounts and when payment is due.  That way, I know at a glance how much money is coming in and who is late on a payment.

3.  Balance NET 30 with credit card orders.  Even though I like having the bulk of my accounts on NET 30, it’s nice to have a few that pay via credit card for the quick influx of cash it provides.  Since most NET 30 accounts will be stores you’ve established a relationship with, it’s critical to always seek out new stores, since these will be the most likely to pay with a credit card.

What do I do if a store doesn’t pay on time?

The first thing to do is not to panic.  I usually give stores a few extra days to even a week just to account for mail time.  My experience is that most checks will roll in over that time period.

If you’re still waiting on the check after that, you’ll need to call the store.  Be firm but polite and let them know that you’re still waiting on their check.  You can also resend the invoice as a reminder. (Be sure to mark it PAST DUE.)

In the time I’ve been selling wholesale, I’ve never had a store fail to pay.  (I think a lot of this comes from building my business through trade shows – there’s a level of trust that takes place when you see someone on a regular basis.)  But if this happens, your only real recourse is to sue to try to reclaim the money (or the product).  Depending on the amount of the order, this may or may not be worth it.

But luckily, for every occasional horror story you might hear, there are plenty of excellent stores who pay on time and are great to work with.  So the next time an existing account asks if you’ll offer terms, don’t shy away from it.   It can actually be a really smart way to build your business.

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Want more in-depth information on the ins and outs of wholesale? Check out my best selling class on Creative Live, Sell Your Products to Retailers.