Having a net-30 account with your vendors can be practical for your business in many ways. The most notable advantage is the ability to pay your invoices later, which gives you more time to collect from your customers and increases your cash flow. Here we will explain what a net-30 account is, why it is useful, where to find vendors, and how to get started.
What is a Net-30 Account?
A net-30 account is an account that gives you an extra 30 days to pay your invoice after you purchased the product. Essentially, it lets you buy the product now and pay for it later, rather than paying for it on the spot. Sometimes vendors will offer other lengths, such as 15 days, 60, or even 90.
Net-15, net-30, and net-60 are the most common. Sometimes vendors will not extend a net-30 account until a business has made several purchases to demonstrate their ability to pay responsibly. When vendors do establish net-30 accounts with businesses, they will not typically check personal credit scores unless the business is brand new.
Why is a Net-30 Account Useful?
Net-30 accounts are useful for many reasons, for both accounts receivable and payable, but here are three reasons why they are useful from an accounts payable perspective.
- Increases cash flow. The most obvious advantage of a net-30 account is that it enables an increase in cash flow. Balancing accounts payable and receivable is difficult when your clients or customers don't pay promptly. Having net-30 accounts (or net-60) with your vendors eases that burden, helps keep cash flowing, and gives you more time to collect from your customers without using a credit card or line of credit.
- Vendors report to crediting agencies. Most vendors that offer net-30 accounts will report your payment to business credit agencies, such as Dun & Bradstreet, Experian Business, and Equifax Small Business. Paying these net-30 invoices on time or early can dramatically increase your business credit report, which will help you procure business loans with better terms.
- Discounts offered for early payments. Many vendors offer discounts (like 5% or 10%) to businesses that pay before the 30-day term. While that may not seem like a lot, a 5% to 10% discount can add up to huge savings over the years.
Where Can I Find A Net-30 Vendor?
Before you search for a different vendor, ask your current one if they will begin a net-30 account with you. This can be as simple as them notating on your invoice that payment is due 30 days after the invoice date. If you want them to report your payments, they need to become a data furnisher, and smaller establishments may not be willing to go through the process.
If you want to find a new vendor that reports to business credit bureaus, a search online will show you the vendors that do. Here are a few vendors that offer net-30 accounts and report to credit agencies.
- Crown office supplies. They offer a wide variety of office supplies from computers to snack food.
- Central Restaurant Products. Central offers all sorts of restaurant products from cooking equipment to furniture and everything in between.
- Uline. Uline offer a vast amount of products from packaging and shipping, to janitorial supplies, to warehouse supplies, and much more.
- Grainer. Grainer sells office and janitorial supplies as well as industrial tools, fabrication tools, and plumbing products.
- Quill. Everything from office supplies, safety equipment, healthcare supplies, and more can be found at Quill.
What Should I Do Before Applying for a Net-30 Account?
Every vendor will have slightly different requirements and stipulations, but many will ask for your EIN and your DUNS number. Applying for an EIN is simple and can be done on the IRS website. Applying for your Dun & Bradstreet data universal numbering system (DUNS) number is relatively quick as well. Consider incorporating your business if you are a sole proprietor or register as a fictitious name with your state.
How Can I Get Other Financial Assistance?
Opening a net-30 account with your vendor(s) gives you extra time to pay, may provide you with discounts, and can increase your business credit score. If you need financial assistance for your small business, join thousands of businesses that receive small business grants and loans updates, twice per week on our app. We also have 1-to-1 business coaching opportunities if you would like monthly support for your business. You can learn more here.