Net D billing as a freelancer

Question

I recently started doing freelance work for a small-to-medium sized company. Per the terms of the agreement, on April 1 I submitted an invoice for all of my hours for March. We never discussed due date on invoices, but in my experience I usually get a check in the mail after 2-3 weeks at the most, and I simply put "due on receipt" for every invoice I create.

On April 26th, having not received payment yet, I sent a brief and friendly email asking about the status of the invoice and payment. I was told the company "pays at 30".

I understand the premise of "net D" billing, in the context of one business giving another business a specified period of time to pay before it's considered late. As a contractor though I don't understand why a company would sit on an invoice for 30 days before sending payment. What would be the purpose of this other than "that's our policy"?

Answer 1

That's 30 days they accrue interest on the money, and otherwise take advantage of having the funds available before they need to relinquish anything to you.

It may not seem like a lot of money. However, if you saw $5 laying the the street, wouldn't you pick it up? That's why keeping the funds to gain interest on them is of merit.

If you wanted something shorter than Net 30, you should have negotiated that in the contract. I, personally, always use Net 15. My invoices state "due upon receipt" then detail late fees accrued after 15 days (contract also details late fees after 15 days).

Without any agreement, then they could wait as long as they wanted until you were prepared to take some further action. Most good business will do Net 30 though. It is kind of standard.