Updated on October 21, 2025
Net payment terms are the lifeblood of B2B commerce, yet they represent a delicate balancing act between driving sales and safeguarding cash flow.
With approximately half of B2B invoices overdue in the Americas (according to the Atradius Payment Practices Barometer), offering flexible terms is a competitive necessity—but only if implemented with the right risk management and cash flow acceleration strategies.
Platforms like Resolve's B2B Net Terms solution enable businesses to offer Net 30, 60, or 90-day terms while receiving up to 90% of the invoice value within 24 hours, transforming net terms from a cash flow liability into a growth engine. When setting payment terms, businesses must also ensure compliance with trade credit and financial reporting standards to avoid regulatory issues and maintain transparency.
Net payment terms define the number of calendar days a business customer has to pay an invoice after its date. Net 15 means payment is due in 15 days, Net 30 in 30 days, and so on. These terms represent trade credit—the interest-free, short-term financing suppliers extend to their buyers to facilitate larger purchases and smoother business operations.
Net 15 is a relatively short payment window, often used for lower-risk customers, established relationships, or industries with faster cash conversion cycles. It signals a tighter cash flow requirement for the seller while still providing the buyer some breathing room beyond immediate payment. It's less common than Net 30 but can be strategic for new customer onboarding or as a stepping stone to longer terms.
The standard net term ladder in B2B is as follows:
Many businesses also offer early payment discounts, such as "2/10 Net 30," which provides a 2% discount if the invoice is paid within 10 days, otherwise the full amount is due in 30. This powerful tool incentivizes faster payment from cash-rich buyers, effectively offering them a high annualized return while improving the seller's cash flow.
Offering net terms is a powerful signal of trust. It demonstrates that you understand your customer's cash flow challenges and are a partner in their success, not just a vendor.
Research from McKinsey shows that many B2B buyers would switch to a competitor offering a better purchasing experience, including more flexible payment terms. However, this trust must be balanced with prudent risk management to ensure the relationship remains healthy for both parties.
While often used interchangeably, it's important to distinguish between the technical definition of an invoice's payment terms and the broader concept of trade credit.
The payment terms on your invoice are a contractual agreement that dictates your cash conversion cycle—the time between when you spend money (on inventory, labor, etc.) and when you get paid. Offering Net 60 terms means you've agreed to wait two months for your money, which can create a significant cash flow gap, especially if your own suppliers expect payment on Net 15 or Net 30.
Payment terms are the specific, stated deadline on an invoice. Trade credit is the broader commercial practice of selling goods or services on account.
Your credit terms policy encompasses more than just the "Net X" window; it includes your credit approval process, credit limits per customer, late payment fees, collection procedures, and the authority levels for granting exceptions. A robust credit policy is essential for managing the inherent risks of extending trade credit.
Your choice of net terms directly impacts your Accounts Receivable (AR) and overall financial health. The goal is to manage your Days Sales Outstanding (DSO)—the average number of days it takes to collect payment after a sale.
Your AR balance is directly tied to your sales volume and your DSO. The basic formula is: AR Balance ≈ (Annual Credit Sales / 365) x DSO
If you offer Net 15 terms but your actual DSO is 25 days (due to late payments), your AR balance will be much higher than if you were collecting on day 15. A higher AR balance ties up working capital that could be used for growth, payroll, or inventory.
Simply put, shorter net terms like Net 15 create a structural ceiling for your DSO. While some customers will still pay late, starting from a 15-day baseline is far better for cash flow than a 60-day one. Most companies aim for a DSO that aligns with their industry benchmarks, which vary significantly by sector.
The primary challenge with any net term is the cash flow gap. Resolve's AI-powered accounts receivable automation platform directly addresses this by automating the entire workflow from invoice to payment. Its AI agents manage payment reminders and collections, helping to reduce DSO and accelerate cash flow, while its automated reconciliation ensures accuracy for any invoice structure.
Your net terms strategy shouldn't exist in a vacuum. It must be informed by your own position as a buyer.
If your suppliers give you Net 60 terms, you have more flexibility to offer your customers Net 30 or Net 45. However, if you must pay your suppliers in 15 days, offering Net 60 to your customers creates a 45-day cash flow gap you must finance. This mismatch is a common source of financial strain for growing businesses.
The ideal scenario is to have your Accounts Payable (AP) cycle be at least as long as your AR cycle. This alignment, known as matching your cash conversion cycle, is a cornerstone of healthy working capital management. Before setting your customer terms, review your own vendor agreements to understand your true cash flow runway.
A one-size-fits-all approach to net terms is a recipe for either lost sales or excessive risk. The most effective strategy is to segment your customers.
Net 15 is a prudent starting point for new customers until you have established a track record of on-time payments. It's also suitable for customers with lower credit scores, in volatile industries, or for one-off, smaller transactions. Net 30 is appropriate for established, reliable customers with a solid payment history.
You should categorize your customers into tiers (e.g., Platinum, Gold, Silver) based on a combination of factors:
Each tier can then be assigned a maximum credit limit and a standard net term.
In wholesale distribution, you might offer a new, small retailer Net 15 with a $5,000 limit, while a large, established chain with a strong credit history gets Net 45 with a $250,000 limit. To enable this risk-based segmentation, you need reliable data. Resolve's free business credit check tools require only a company name and address to deliver a data-rich credit decision, empowering you to make informed, tiered offers.
Extending net terms without a formal credit assessment is financially dangerous. A structured credit approval process is your first line of defense against bad debt risk.
Your credit limit for a customer should be established through a risk-based approach that considers their available working capital, credit history, and your relationship. Credit professionals recommend setting limits that align with the customer's payment capacity and your risk tolerance.
According to credit professionals, major red flags include a customer who rushes your credit decision, refuses to provide standard financial information or trade references, or has a gut feeling that "something is iffy" about their application. These intuitive warnings are often correct and should be heeded.
Your workflow should include:
Businesses should also verify that their credit approval and data-handling processes comply with local data protection laws and credit reporting regulations.
Managing net terms manually is a full-time job that's prone to error and delay. Modern automation is no longer a luxury; it's a necessity for competitiveness.
Automation handles the repetitive, time-consuming tasks that bog down your finance team: generating and sending invoices, sending timely payment reminders, posting cash, and reconciling accounts. This frees your staff to focus on strategic analysis and customer relationships.
An effective system doesn't send generic reminders. AI can analyze a customer's past payment behavior to tailor the timing and tone of a reminder. A customer who always pays on day 32 might get a gentle reminder on day 25, while a chronic late payer might get a more direct message on day 30. Resolve's platform uses AI agents to automate these nuanced workflows, reducing friction and improving collection rates.
Your AR system should be fully integrated with your accounting software to eliminate manual data entry and ensure a single source of truth. Resolve offers built-in integrations with leading platforms like QuickBooks, NetSuite, and Xero, ensuring that every transaction is automatically synced and reconciled.
Automation also helps maintain an auditable record of all transactions, supporting compliance with accounting standards and financial transparency requirements.
Even with the best intentions, businesses often fall into predictable traps when managing net terms.
This is the most dangerous mistake. The cost of a bad debt far outweighs the cost of a credit check. Always vet new customers before extending any credit.
Applying terms inconsistently can damage relationships and lead to perceptions of unfairness. Your credit policy must be applied uniformly, with clear, documented reasons for any exceptions.
An AR aging report is your early warning system. Review it weekly to identify accounts that are slipping into the 31-60 day or 61-90 day buckets before they become a serious problem.
If a payment is late, what's the next step? Your policy should define a clear, escalating process for collections, from a friendly email to a phone call to a formal demand letter. Resolve's net terms management solutions automate this entire process, from initial credit checks to collections management, reducing the time you spend on receivables and helping you get paid faster.
The ultimate solution to the cash flow paradox of net terms is to get paid immediately while your customer still gets their full payment window. This is the promise of modern invoice financing.
Traditional factoring is often recourse-based (you're on the hook if the customer doesn't pay), requires you to factor your entire ledger, and can be a complex, relationship-damaging process that involves notifying your customers. Modern, non-recourse financing is a superior alternative.
With a non-recourse provider like Resolve, you can receive an advance of up to 90% of your invoice value within 24 hours of issuing it to an approved customer. The provider then assumes the risk of collecting from your customer on Net 30, 60, or 90. This gives you the working capital you need to operate and grow, while your customer enjoys the flexible terms they expect.
The key benefit of non-recourse financing is risk transfer. If your customer defaults, you do not have to repay the advance. This is a game-changer for managing bad debt risk. Resolve's modern alternatives to factoring provide this non-recourse protection with a flat, transparent fee structure, offering a far simpler and more professional experience than legacy factoring.
For B2B ecommerce, net terms must be a seamless part of the online buying journey to reduce cart abandonment and boost conversion.
The option to "Pay by Invoice" or "Apply for Net 30" should be a prominent, one-click option at checkout, alongside credit card and ACH. The application process should be streamlined to trigger a rapid credit decision for eligible applicants.
Your net terms solution must plug directly into your existing ecommerce platform. Resolve's flexible APIs and integrations work seamlessly with all major platforms, including Shopify, BigCommerce, Magento, and WooCommerce, allowing you to embed Net 30, 60, or BNPL options directly into your existing checkout flow.
After checkout, your customer should be directed to a professional, branded payment portal where they can view their invoice, make a payment (via ACH, credit card, wire, or check), and manage their account. This white-label experience keeps your brand front and center while providing a convenient payment method.
There is no universal "right" net term. The optimal choice is deeply contextual.
In wholesale distribution, Net 30 is the common baseline, with volume discounts or longer terms (Net 45/60) negotiated for top-tier customers. A distributor of janitorial supplies might offer Net 15 to a new small business client and Net 60 to a large, established hotel chain with a proven payment history.
SaaS companies often operate on a subscription model, but for annual contracts or professional services, they may invoice for the full year upfront with Net 30 terms. The high customer lifetime value in SaaS justifies a more flexible initial credit policy to win the long-term relationship.
The construction industry is notorious for long payment cycles. A supplier of raw materials might offer Net 90 terms to a general contractor to align with the project's payment milestones, which are often tied to the property owner's own financing schedule.
Your net terms strategy is not static. It must evolve with your business, your customers, and the market.
Your monthly AR review should include:
Compare your actual DSO to your stated net terms. If you offer Net 30 but your DSO is 45, you have a problem. Track this gap over time to measure the effectiveness of your credit and collections policies.
Tighten terms for customers showing deteriorating payment patterns or for your own business during a cash crunch. Loosen terms for your most reliable, high-value customers as a loyalty reward, or to match a new competitor's aggressive offer. A powerful B2B payment platform provides the real-time dashboards and AR insights needed to make these proactive adjustments confidently.
Regular reviews should include not only financial metrics but also checks for compliance with evolving trade and credit regulations.
Net 15 means the customer has 15 calendar days from the invoice date to pay the full amount. Net 30 extends this window to 30 days. The key difference is the impact on your cash flow; Net 15 provides a shorter collection cycle and less risk of late payment, while Net 30 is more common and may be necessary to remain competitive in many B2B markets.
The AR turnover ratio is calculated as Net Credit Sales / Average Accounts Receivable. It measures how many times your company collects its average AR balance during a period. A higher ratio indicates efficient collections and a shorter cash conversion cycle, which is a sign of strong liquidity and operational health.
For new customers, it's prudent to start with a shorter term like Net 15 or even require a deposit or prepayment for the first few orders. This allows you to establish a payment history and assess their reliability before extending more generous Net 30 or longer terms. This cautious approach protects your business from the risk of bad debt with an unknown entity.
The most effective way is to use a non-recourse invoice financing service. These services, like Resolve's solution for sellers, advance you up to 90% of your invoice value within a day, while you still offer your customer their full Net 30 or Net 60 term. The financing provider assumes the collection risk, so you get your cash immediately without impacting your customer relationship.
This post is to be used for informational purposes only and does not constitute formal legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Resolve assumes no liability for actions taken in reliance upon the information contained herein.