For lighting and LED distributors, offering net payment terms isn't just a courtesy—it's a strategic imperative in a competitive B2B landscape. These deferred payment agreements, where Net 30, 60, or 90 indicates the number of days a customer has to pay an invoice, function as a powerful sales accelerator.
However, they also introduce significant cash flow complexity and credit risk that can strain even well-managed operations. The solution lies not in avoiding net terms—businesses that offer them can help drive more sales than those that don't—but in managing them intelligently.
Modern platforms like Resolve's B2B net terms service transform this challenge into a growth opportunity by handling credit assessment, advancing up to 90% of invoice value upfront on approved invoices, and managing collections, so you can extend credit without the cash flow crunch.
Net payment terms are the backbone of B2B commerce, acting as a form of interest-free trade credit that allows your customers to receive goods or services today and pay for them at a later date. For wholesale lighting distributors, this is particularly relevant given the project-based nature of much of the industry.
A contractor might need a full shipment of commercial LED fixtures for a new office build-out but won't receive payment from the property owner for another 60 days. Net 30, 60, or 90 terms enable that contractor to purchase from you immediately, keeping their project on schedule.
The "Net" in Net 30 simply means the full balance is due within 30 days of the invoice date. Similarly, Net 60 allows 60 days, and Net 90 provides a 90-day window. The countdown commonly starts on the invoice date, which is the date you issue the bill, though it can sometimes be tied to the delivery date or project completion; confirm with your contract terms. This system is foundational to B2B relationships, fostering trust and enabling larger, more complex sales.
Smooth payment terms are essential for keeping the entire supply chain moving in the lighting industry. When you offer net terms, you're not just selling light fixtures; you're providing a crucial piece of your customer's working capital solution.
For an LED supplier, the Net 30 cycle typically looks like this:
This simple workflow becomes a powerful sales tool. Many B2B buyers, especially smaller contractors, have a cash conversion cycle that is longer than their own payment obligations.
According to the JPMorgan Chase Institute's research on small business cash flows, the median small business has about 27 days of cash buffer (liquidity reserves), making a 30-day window from their suppliers a critical lifeline. By offering this, you directly solve a cash flow problem for your customer, building loyalty and locking in their business.
Calculating the exact due date for a net term invoice is a simple but critical task. Mistakes can lead to late payments, customer disputes, and strained relationships.
The basic formula is: Due Date = Invoice Date + Number of Net Days
For example:
It's important to clarify whether you are counting calendar days or business days. In the vast majority of B2B contracts, the count is in calendar days. This means weekends and holidays are included in the 30, 60, or 90-day window.
To prevent these errors, it's best practice to state the exact due date directly on the invoice itself, in addition to the "Net 30" label. This removes all ambiguity for the customer.
While Net 30 is the industry standard for many transactions, the nature of the lighting business often necessitates longer terms. Large-scale commercial, industrial, or municipal projects can have much longer payment cycles. A city lighting retrofit project, for instance, may not release funds to the contractor for 90 days after completion, who in turn cannot pay their supplier until they are paid.
This is where Net 60 and Net 90 terms become essential for LED light bulb suppliers and distributors. Offering these extended terms can be the deciding factor in winning a major contract. However, the risk and cash flow impact are significantly higher.
Extended terms should not be offered universally. They are best reserved for:
The longer the payment window, the greater the risk of default, dispute, or simply delayed payment. According to 2023 payment data from Chaser, globally, 87% of businesses experience overdue invoices, and this risk only compounds over 60 or 90 days. To manage this, distributors must implement a robust credit management process.
This is where a service like Resolve's net terms management becomes invaluable. It provides smart credit checks and can advance up to 90% of the invoice value upfront, shifting most credit risk to the provider subject to program terms and conditions. You get paid immediately, and Resolve assumes the majority of the risk of late or non-payment.
The world of payment terms extends beyond simple Net 30/60/90. For distributors of specialized products like LED headlights, which often serve the automotive aftermarket and OEM sectors, a mix of terms can be used strategically.
For a new customer in the automotive lighting space, you might start with a COD or prepayment policy for the first few orders. Once they have established a track record of reliability, you can transition them to Net 30 terms to encourage larger, more frequent orders. This hybrid approach balances risk and growth.
Offering net terms is a form of trade credit, and it provides a host of strategic benefits that go far beyond a single transaction.
Extending credit is a powerful signal of trust. It demonstrates a belief in your customer's business and its future, which fosters a deeper, more collaborative relationship. This trust is a key differentiator in a competitive market. According to business payment analysis, extending credit fosters longer-term business connections, leading to higher customer retention and lifetime value.
When customers don't have to pay immediately, they are psychologically and financially freer to place larger orders. A contractor who might have split a large lighting order into two or three smaller, paid-in-full shipments can now buy everything they need for a project in one go. This directly boosts your sales and reduces your own processing and shipping costs per unit sold.
To safely unlock these benefits, you need to understand who to trust with credit. Resolve's business credit check service delivers instant, data-rich credit decisions, allowing you to quickly and confidently approve creditworthy customers and grow your sales pipeline without taking on undue risk.
The primary downside of offering trade credit is the risk of bad debt. A customer may go out of business, face a cash flow crisis, or simply choose to delay payment. This is a significant concern, with U.S. companies paying small businesses an average of nine days late in the first half of 2024.
Traditional trade credit insurance can be complex and expensive, often involving lengthy applications and high premiums that eat into your margins. A more modern, streamlined approach is non-recourse invoice advancement.
Non-recourse financing, like Resolve's better-than-factoring solution, functions as a built-in risk mitigation tool. With this model, Resolve takes on the credit assessment, credit decision, and the majority risk of late payments or defaults, subject to exclusions such as fraud or disputes. If your approved customer fails to pay, you are generally not on the hook to repay the advance you received. This is a far more efficient and cost-effective form of protection than traditional insurance, especially for businesses that are already offering net terms as a core part of their sales strategy.
Managing net terms manually is a recipe for inefficiency and error. According to 2024 B2B payments research, nearly 51% of companies perform up to half of their payment operations manually, and finance teams can spend up to 14 hours per week just managing accounts receivable.
For lighting distributors juggling hundreds of SKUs and customers, automation is not a luxury—it's a necessity for scaling.
An AI-powered platform like Resolve's accounts receivable automation solution streamlines the entire workflow. It can:
This automation reduces DSO, frees up your finance team to focus on strategic tasks, and provides a more professional, consistent experience for your customers.
The fundamental challenge of net terms is the cash flow gap they create. You have to pay your own suppliers, employees, and operating expenses today, but you won't receive payment from your customer for 30, 60, or even 90 days. This gap can be crippling, especially for growing businesses.
For an industry already under pressure—the LED and lighting industry has faced DSO pressures in recent periods—this gap can stall growth or even threaten solvency.
The solution is to convert your accounts receivable into immediate cash. A B2B payments platform like Resolve's allows you to receive up to 90% upfront on approved invoices. This means that for that $10,000 Net 30 invoice, you could have $9,000 in your bank account within a day of billing. This immediate liquidity allows you to:
By decoupling your cash flow from your customer's payment schedule, you remove the primary barrier to offering generous net terms.
Not every customer deserves the same credit limit. A new, small contractor should not have the same purchasing power on credit as a large, established national builder.
A sound credit policy involves a tiered approach:
This dynamic, data-driven approach ensures you are maximizing sales opportunities with low-risk customers while protecting yourself from potential losses with higher-risk ones.
Successfully offering net terms requires a disciplined, well-communicated policy.
Your payment terms must be clearly stated in three places:
Your policy should also clearly outline any late fees, interest charges on past-due balances, and your dispute resolution process.
Communication is key. When you onboard a new customer, walk them through your payment process. Let them know when they can expect their invoice and what their payment options are (e.g., ACH, credit card, check via a branded portal). For larger or first-time orders, a simple confirmation email can prevent misunderstandings.
For e-commerce storefronts, Resolve's Net Terms for Ecommerce solution allows customers to apply for net terms at checkout, with instant approvals available for qualifying purchases, subject to underwriting criteria. This creates a seamless, modern buying experience that directly increases conversion rates and average order value, proven to be a powerful tool for B2B sales growth.
Net 30 means the full invoice amount is due 30 days from the invoice date. 2/10 Net 30 offers a 2% discount if paid within 10 days; otherwise, the full amount is due within 30 days.
Yes. A B2B payments platform with upfront advances works. Resolve underwrites buyers and advances up to 90% of the invoice within 24 hours, turning Net 60–90 sales into near-immediate cash and helping you compete for larger contracts.
Send automated payment reminders per your credit agreement. For significantly overdue accounts (60-90+ days), you may escalate to collections. If using a non-recourse service like Resolve, their team handles collections and you're protected from financial loss if the customer defaults.
Use an invoice advancement service. Platforms that pay you up to 90% of your invoice value within 24 hours of billing eliminate the cash flow gap, giving you the sales benefits of flexible terms while enjoying near-immediate payment.
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.