In the manufacturing sector, payment terms are more than just administrative details—they're strategic levers that directly impact your cash flow, customer relationships, and sales growth.
Net 30, 60, and 90 terms represent the backbone of B2B trade credit, allowing your customers to receive goods and pay later while you maintain competitive advantage.
However, extending credit without proper safeguards can create significant cash flow gaps. Resolve's B2B Net Terms solution simplifies this complexity by handling credit assessment, underwriting, and collections while advancing up to 100% of your invoice value within 24 hours on approved invoices (subject to agreement/program terms).
Key Takeaways
- Net terms are standard in manufacturing: 31% of companies use 45-day terms, 30% use 30-day terms, and 27% use 60-day terms, making extended payment periods an industry norm for competitive operations
- Cash flow risk is real: A significant share of U.S. B2B invoices are paid late, creating working capital challenges for manufacturers
- Early payment discounts offer high returns: Terms like 2/10 Net 30 can represent approximately a 36.7% annualized return on cash for customers who pay early
- Industry benchmarks matter: Manufacturing companies often average around 40–50 days DSO (Days Sales Outstanding), and construction commonly sees extended terms and slow payment cycles (often 60–90+ days)
- Partial payments are increasingly common: Split/partial payments are increasingly used in B2B rather than lump-sum settlements
- Bad debt is a significant concern: Overdue invoices and write-offs remain a concern; in the U.S., average write-offs are typically in the low single digits, per leading payment practices studies
- Modern solutions eliminate traditional risk: Non-recourse financing platforms can provide upfront payment while you extend flexible terms to customers without assuming credit default risk
What Are Net 30 Terms and How Do They Work?
Net 30 terms represent a standard trade credit arrangement where customers have 30 calendar days from the invoice date to pay the full amount owed. Similarly, Net 60 provides 60 days and Net 90 extends to 90 days. These terms function as short-term, interest-free credit that manufacturers extend to their B2B customers, allowing them to receive and potentially sell goods before making payment.
Why Net Terms Matter for Manufacturers
For manufacturers, offering net terms is often essential for remaining competitive. According to industry research, "business owners who offer net terms are able to drive more sales than those that do not because they're able to sell to clients that have cash flow problems.
In other words, they use trade credit to gain a competitive advantage over their peers who refuse to be as flexible." This is particularly crucial in manufacturing where customers may have their own production cycles and cash flow constraints.
The choice of payment terms directly impacts your cash conversion cycle and working capital management. While Net 30 is considered the standard fallback across most industries, manufacturing companies frequently operate with extended terms. In fact, 31% of manufacturing and service companies use 45-day payment terms, while 30% use 30-day terms, indicating that manufacturers regularly extend beyond the basic Net 30 framework.
How to Implement Net Terms Effectively
When implementing net terms, clarity is paramount. Your invoices must clearly state the payment terms, including:
- The invoice date (not shipment date)
- The exact due date calculation
- Any early payment discounts offered
- Late payment penalties or interest charges
- Accepted payment methods
Net terms are typically calculated from the invoice date unless the contract specifies otherwise (e.g., delivery/acceptance date or EOM). This prevents disputes over when the payment clock actually starts.
Where Resolve Fits In
Resolve's B2B Net Terms platform transforms how manufacturers offer net terms by eliminating the traditional cash flow gap. Instead of waiting 30, 60, or 90 days for customer payment, Resolve advances up to 100% of your invoice value within 24 hours on approved invoices while your customer maintains their extended payment period.
This proprietary system uses AI models to evaluate thousands of buyer data points for dynamic credit decisions, allowing you to offer competitive terms without sacrificing your cash flow. For approved invoices/customers, advances are non-recourse for credit default risk; exclusions (e.g., disputes or fraud) may apply per agreement.
How to Calculate Net 30 Days: Step-by-Step Guide
Calculating net payment terms correctly is essential to avoid payment disputes and ensure timely collections. The calculation seems straightforward but contains nuances that can trip up even experienced accounts receivable teams.
Net 30 Calculator Formula
The basic formula for Net 30 calculation is: Due Date = Invoice Date + 30 Calendar Days
For example:
- Invoice dated January 15 = Due February 14
- Invoice dated January 31 = Due March 2 (since February has only 28/29 days). In leap years, the due date would be March 1.
Important considerations:
- Calendar days vs. business days: Net terms typically use calendar days, not business days, unless explicitly stated as "Net 30 business days"
- Month-end (EOM) terms: Some invoices use "Net 10 EOM" meaning payment is due 10 days after the end of the month in which the invoice was issued
- Weekend and holiday adjustments: If the due date falls on a weekend or holiday, payment is typically due the next business day
Common Calculation Mistakes
Manufacturers frequently make these calculation errors:
- Using shipment date instead of invoice date: The payment clock starts when you invoice, not when you ship
- Confusing business days with calendar days: Net 30 means 30 calendar days, which equals approximately 22 business days
- Ignoring month-end variations: February's shorter length can cause confusion
- Failing to account for holidays: Major holidays can delay actual payment processing
Best Practices for Clear Terms
To prevent calculation confusion:
- State the exact due date on every invoice (not just "Net 30")
- Include your payment terms policy in customer contracts
- Send payment reminders 7–10 days before the due date
- Use automated systems that calculate and display due dates consistently
Common Payment Terms Examples for Manufacturing
Manufacturing payment terms extend far beyond simple Net 30/60/90 structures. Understanding the full spectrum of options allows you to tailor terms to different customers and situations.
Standard Industry Terms
Common payment term structures in manufacturing include:
- Net Terms Variations:
- Net 30: Standard across most industries
- Net 45: Used by 31% of manufacturing companies
- Net 60: Used by 27% of manufacturing companies
- Net 90: Less common in manufacturing; often seen in construction
- Early Payment Discounts:
- 2/10 Net 30: 2% discount if paid within 10 days, otherwise full payment due in 30 days (annualized return ≈ 36.7% for early payers;
- 1/15 Net 45: 1% discount if paid within 15 days, otherwise full payment due in 45 days
- Immediate Payment Terms:
- COD (Cash on Delivery): Payment required at time of delivery
- Due Upon Receipt: Payment expected immediately upon invoice receipt
- Prepayment: Payment required before production or shipment
Custom Payment Structures
Manufacturing often requires specialized payment arrangements:
- Milestone Payments (common for large custom orders or equipment manufacturing):
- 30% deposit to begin work
- 30% upon completion of major milestones
- 40% upon final delivery and acceptance
- Progress Billing (used for long-term projects or contracts):
- Monthly invoices based on work completed
- Final payment upon project completion
- Seasonal Terms (adjusted for customer's business cycles):
- Extended terms during customer's slow season
- Shorter terms during peak season
Where Resolve Fits In
Resolve's Accounts Receivable with AI-Powered Automation handles the complexity of diverse payment structures seamlessly. The platform provides automated reconciliation for any invoice structure—net terms, COD, or due upon receipt—ensuring accuracy and efficiency across your entire receivables lifecycle.
AI agents manage workflows and automate payment reminders, while the system accepts ACH, wire, credit card, or check payments through a branded payment portal. This flexibility allows manufacturers to offer appropriate terms for each customer relationship while maintaining streamlined internal processes.
COD vs Net Terms: Which Payment Terms Work Best?
The choice between Cash on Delivery (COD) and net terms represents a fundamental strategic decision that balances cash flow security against sales growth potential.
Benefits of COD
COD offers immediate cash flow benefits:
- Eliminates credit risk: No exposure to customer default
- Simplifies accounting: No accounts receivable management required
- Improves cash conversion: Immediate cash for inventory replenishment
- Reduces administrative costs: No need for credit checks or collections
However, COD can significantly limit your market reach. Many B2B customers simply cannot operate with immediate payment requirements, especially those with their own extended payment cycles from their customers.
When to Offer Net Terms
Net terms are appropriate when:
- Competitive necessity: Your industry standard includes extended payment terms
- Customer relationships: Established customers with proven payment history
- Sales growth: You're trying to win new customers or increase order sizes
- Market positioning: You want to be perceived as a flexible, customer-focused supplier
The research is clear: businesses offering net terms can drive more sales than those requiring immediate payment by providing trade credit as a competitive advantage. However, this comes with the responsibility of proper credit management and collection processes.
Strategic Hybrid Approaches
Many successful manufacturers use tiered payment terms:
- New customers: Start with COD or Net 15, then graduate to longer terms
- Creditworthy customers: Offer Net 30/60/90 based on credit assessment
- High-risk customers: Require deposits or shorter terms
- Strategic customers: Offer extended terms to maintain key relationships
This approach allows you to balance risk management with sales growth objectives.
Setting Up Trade Credit for Your Manufacturing Business
Establishing a formal trade credit program is essential for managing the risks associated with extended payment terms while maximizing the sales benefits.
Credit Application Process
A robust credit application should collect:
- Business legal name and address
- Tax ID and business registration details
- Bank references and financial statements
- Trade references from other suppliers
- Authorized signatories for the account
However, modern solutions can dramatically streamline this process. Resolve's Business Credit Check requires only your customer's business name and address to deliver instant, data-rich credit decisions within 24 hours. This eliminates the friction of traditional credit applications while providing deeper insights than traditional bureaus through proprietary algorithms and expert analysis.
Risk Management Strategies
Effective trade credit management includes:
- Credit Limits:
- Set initial limits based on credit assessment
- Gradually increase limits based on payment performance
- Review and adjust limits quarterly
- Ongoing Monitoring:
- Track payment patterns and DSO by customer
- Monitor customer financial health indicators
- Adjust terms proactively based on risk changes
- Diversification:
- Avoid over-concentration with any single customer
- Maintain a balanced portfolio of payment terms
- Regular portfolio reviews to identify emerging risks
Industry Benchmarks
Manufacturing companies should track these key metrics:
- DSO (Days Sales Outstanding): Industry averages often fall around 40–50 days
- Aging Report: No more than 15–20% of receivables should be over 60 days
- Bad Debt Ratio: Should remain below 2% of total sales
- Collection Effectiveness: At least 85% of receivables should be collected within terms
Invoice Terms That Protect Your Cash Flow
Your invoice terms serve as the legal foundation for your payment expectations and collection rights. Properly structured terms can significantly reduce payment delays and disputes.
Essential Invoice Clauses
Every manufacturing invoice should include:
- Clear Payment Terms:
- Exact due date calculation methodology
- Accepted payment methods and remittance instructions
- Early payment discount details (if applicable)
- Late payment penalties and interest charges
- Dispute Resolution:
- Time limits for invoice disputes (typically 10–15 days)
- Required documentation for disputes
- Process for resolution and payment of undisputed amounts
- Legal Protections:
- Right to suspend future shipments for late payments
- Interest charges on overdue amounts (check state usury laws)
- Collection costs and attorney fees for delinquent accounts
- Governing law and jurisdiction for disputes
Collection Best Practices
Effective collection processes include:
- Automated Reminders:
- 7-day pre-due reminder
- Same-day due date notification
- 1-day, 7-day, and 14-day overdue reminders
- Escalation to phone contact after 15 days overdue
- Payment Flexibility:
- Multiple payment methods (ACH, credit card, wire, check)
- Partial payment acceptance with clear allocation rules
- Payment plan options for temporarily distressed customers
- Relationship Management:
- Separate collection communications from sales relationship
- Proactive communication about potential payment issues
- Regular account reviews with key customers
Where Resolve Fits In
Resolve's Net Terms Management platform automates the time-consuming tasks of payment reminders, servicing, and collections while advancing up to 100% on approved invoices.
The white-label payment portal accepts ACH, check, and credit card payments, giving customers multiple convenient payment options. Resolve's system handles credit assessment using proprietary financial databases and algorithms, with quiet pre-approval checks available to maintain customer relationships.
Trade Credit Insurance: Do Manufacturers Need It?
Trade credit insurance protects against customer default, but modern alternatives may offer better value for manufacturers.
Insurance vs Alternative Solutions
- Traditional Trade Credit Insurance:
- Requires premiums based on sales volume
- Has coverage limits and exclusions
- Involves claims processes that can be lengthy
- May not cover all customer types or geographies
- Costs often around 0.2%–0.6%+ of insured sales, varying by coverage and risk
- Modern Non-Recourse Financing:
- Pay only when you use the service (per invoice)
- No monthly premiums or annual contracts
- Immediate advance payment eliminates credit default risk on approved invoices
- Covers approved customers without complex claims processes
Cost-Benefit Analysis
When evaluating protection options, consider:
- Trade Credit Insurance Costs:
- Often around 0.2%–0.6%+ of insured sales
- Deductibles and co-insurance requirements
- Administrative overhead for claims management
- Non-Recourse Financing Costs:
- Transparent per-invoice fees (e.g., from 3.5% for 30-day terms)
- Immediate cash flow improvement
- No claims process or administrative burden
For many manufacturers, Resolve's Better Than Factoring solution provides protection at a transparent cost. With non-recourse financing from 3.5% for 30-day net terms and up to 100% advance on approved invoices (subject to agreement), manufacturers avoid hidden fees while receiving upfront payment. This approach transforms credit risk management from an insurance product into a cash flow optimization tool.
When Insurance Makes Sense
Trade credit insurance may still be appropriate when:
- You have a highly diversified customer base across many countries
- You regularly extend credit to customers not covered by alternative financing
- Your business model involves very long payment terms (beyond 90 days)
- You have regulatory requirements for insurance-based protection
Supply Chain Finance Options for Extended Terms
Extended payment terms like Net 60 and Net 90 create significant working capital challenges that require sophisticated financing solutions.
Financing Net 60 and Net 90 Terms
The cash flow gap created by extended terms can be addressed through:
- Invoice Factoring:
- Sell invoices to a factor at a discount
- Receive immediate cash (typically 70–90% upfront)
- Factor handles collections and assumes some credit risk
- Can be recourse or non-recourse
- Supply Chain Finance:
- Buyer's bank or third party finances supplier invoices
- Supplier receives early payment at buyer's credit rate
- Buyer maintains extended payment terms
- Requires buyer participation in the program
- Dynamic Discounting:
- Offer tiered discounts for early payment
- Customer chooses when to pay based on their cash position
- Creates win-win scenario for both parties
- Requires sophisticated payment platform
Choosing the Right Solution
The optimal financing solution depends on your specific situation:
- For Maximum Cash Flow:
- Non-recourse invoice advancement provides up to 100% upfront on approved invoices
- Eliminates collection responsibility
- Best for manufacturers with concentration risk
- For Cost Minimization:
- Dynamic discounting offers low effective cost
- Maintains direct customer relationships
- Requires customer willingness to pay early
- For Strategic Relationships:
- Supply chain finance leverages buyer's credit rating
- Strengthens supplier-buyer partnerships
- Best for large strategic customers
Where Resolve Fits In
Resolve's B2B Payments Platform provides a comprehensive solution for extended terms financing. The platform allows you to receive up to 100% upfront on approved invoices while letting customers pay on 30, 60, or custom terms. This LLM-powered system ensures every transaction is synced and reconciled automatically, with QuickBooks integration for seamless bookkeeping. The branded payment portal accepts multiple payment methods, giving customers flexibility while protecting your cash flow.
Automating Net Terms Management with Modern Tools
Manual net terms management creates inefficiencies and delays that directly impact your DSO and cash flow. Modern automation tools can transform this critical function.
Integration with ERPs
Effective automation requires seamless integration with your existing systems:
- Accounting Integration:
- Real-time sync with QuickBooks, NetSuite, Sage Intacct
- Automatic invoice creation and payment application
- Elimination of duplicate data entry
- Ecommerce Integration:
- Embedded net terms at checkout for online orders
- Real-time credit decisions during purchasing process
- Automatic invoice generation upon order completion
- Inventory Integration:
- Credit limit checks before order fulfillment
- Automatic hold placement for credit violations
- Real-time credit availability for sales teams
ROI of Automation
The benefits of automation include:
- Time savings by reducing manual AR processing
- Faster credit checks and customer onboarding
- Shorter payment cycles through consistent, automated reminders
- Fewer errors via consistent due-date calculation and policy enforcement
- Accurate aging reports and DSO calculations
Where Resolve Fits In
Resolve's Integrations with Financial Tech Stack fits directly into your B2B ecommerce and accounting stack with instant plug-ins and automated syncing. The platform offers checkout extensions that enable you to embed Net 30, 60, or BNPL into your existing ecommerce flow. With flexible APIs and technical support, Resolve can integrate with virtually any system, ensuring seamless data flow between your operations and financial management.
Net Terms Best Practices for Manufacturing Sales Growth
Strategic implementation of net terms can drive significant sales growth when aligned with your overall business objectives.
Optimizing Terms for Different Customers
Effective net terms strategies include:
- Customer Segmentation:
- Strategic Partners: Extended terms (Net 60–90) to strengthen relationships
- Growth Accounts: Competitive terms (Net 30–45) to increase market share
- New Customers: Conservative terms (Net 15–30) with credit monitoring
- High-Risk Accounts: Deposits or COD with gradual term extension
- Dynamic Term Adjustment:
- Increase credit limits based on payment performance
- Offer extended terms for larger orders or annual contracts
- Provide early payment discounts for customers with strong cash positions
Measuring Impact on Revenue
Track these key metrics to evaluate your net terms strategy:
- Sales Growth Metrics:
- New customer acquisition rate with net terms vs. COD
- Average order size by payment term category
- Customer retention rates by payment term structure
- DSO by customer segment
- Bad debt ratio by payment term
- Cash conversion cycle improvement
- Return on investment for credit extension
Where Resolve Fits In
Resolve's Net Terms for Ecommerce provides buy now pay later options proven to increase sales volume and customer retention. With instant approvals up to a defined limit (subject to underwriting) and up to 100% advance payment on approved invoices, manufacturers can offer competitive terms while eliminating credit default risk.
The white-label payment portal integrates seamlessly into existing ecommerce platforms, providing customers with flexible financing options at checkout while Resolve handles risk assessment and collections.
Frequently Asked Questions
How do I handle customers who consistently pay beyond net 30 terms?
For customers who consistently pay late, implement a graduated response: First, contact them to understand the reason for delays and establish a payment plan. If late payments continue, consider reducing their credit limit or requiring partial prepayment. For chronic late payers, switch to COD terms or require letters of credit. Since a significant share of U.S. B2B invoices are paid late, having clear policies for late payments is essential for maintaining cash flow.
Can I offer different payment terms to different customers within the same industry?
Yes, and you should. Payment terms should be based on individual customer creditworthiness, payment history, order volume, and strategic importance—not just industry standards. However, be prepared to justify differences if customers compare notes. Focus on objective criteria like credit scores, payment history with other suppliers, and financial stability rather than arbitrary distinctions.
What's the difference between recourse and non-recourse financing for net terms?
With recourse financing, you remain liable if your customer doesn't pay—you must repay the advance or repurchase the invoice. Non-recourse financing means the financing company assumes the credit risk, and you keep the advance even if the customer defaults. Resolve's non-recourse financing covers credit default risk on approved invoices; exclusions (e.g., disputes or fraud) may apply per agreement.
How do early payment discounts like 2/10 Net 30 actually work?
In 2/10 Net 30 terms, customers receive a 2% discount if they pay within 10 days; otherwise, they must pay the full amount within 30 days. This effectively gives customers a roughly 36.7% annualized return on their cash if they pay early (2% discount over 20 days). For manufacturers with strong cash positions, offering these discounts can accelerate cash flow and reduce DSO, while customers benefit from the high implicit return.
Should I include payment terms in my customer contracts or just on invoices?
Payment terms should be included in both your customer contracts and on every invoice. Contract terms establish the legal agreement, while invoice terms provide clear, specific guidance for each transaction. This dual approach prevents disputes and ensures customers understand their obligations. Make sure your contract terms align with your invoice terms to avoid confusion.
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.