Net Terms Guide: What Are Net 30/60/90 Terms?

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What does net 30/60/90 terms mean?

Net 30/60/90 (also known as credit terms) is the number of days until an invoice is due. Net 30 means the invoice is due in 30 days. Net 60 terms means the invoice is due in 60 days and so on. The start date can vary by company. Some companies may count the date that an invoice is postmarked (mail delivery) or sent (email). Net terms are often expected in business to business sales.

What are digital net terms platforms?

Did you know there are comprehensive net-terms-as-a-service products? Managing the credit checking process costs your AR team a lot of time. They have to get the customer to fill in the credit application, call the trade references, make a credit limit decision. Even then, it's not risk-free. Floating net terms credit introduces financial risk to your business. Digital net terms solutions like Resolve manage the entire net terms process for you. Everything from credit checking, net terms financing, to payment processing and payment reminders. Want to automate and de-risk your net terms program? Get in touch with Resolve, they specialize in helping b2b manufacturers, wholesalers, and resellers.

Advantages of offering net 30/60/90 terms or credit terms

There are many reasons to offer net terms (also referred to as trade credit), from attracting new clients, growing your business, adding a competitive advantage to building customer loyalty.

Generate more sales

Offering net terms will allow customers (typically small businesses) to purchase who otherwise wouldn’t. When payments aren’t due immediately, barriers to purchasing go down. These small businesses are generally more willing to buy on credit. For some customers, they may depend on credit for all of their purchases. Offering net terms ropes in some of these customers. It's important to outline your specific invoice payment terms on all invoices. If you are offering longer payment terms, specify the invoice amount, the payment due date, and payment options. Note that net terms are usually offered interest-free.

Gain an advantage over competitors

As a stable larger business, your business will have an advantage over competitors who don’t offer net terms. If it is common for some industries to offer net terms, not offering them puts a company at a disadvantage. New clients will gravitate toward the path of least resistance for purchasing anything. This means purchasing on credit even if there's the possibility of incurring late fees.

Companies like Hyperikon that offer net terms over those that don’t will likely see more customers come their way. Who wouldn't like an extra 30 business days to pay.

Build customer loyalty

Giving customers some leeway will help build customer loyalty. Net terms can be a door to new customers. New customers come in for free financing but if the company can provide good customer service, quality products, and competitive pricing on top of net terms, it can build strong loyalty with customers.

Net terms alone may provide some customer loyalty but if competitors are offering the same terms, a company will need to provide an edge (as mentioned above) to keep customers loyal.

Coupling net terms with an incentive for early payment may be just that edge that you could leverage to keep your customers loyal. Early payment plans are not only a great way to gain customer loyalty, it also provides an opportunity for you to receive full payment of your accounts receivables sooner.

Disadvantages of offering net 30/60/90 terms

While there are many positives to offering net terms, there are a few things to be aware of. Your billing cycle will become longer, some customers will not pay at all, and there is more overhead. It can also add complexity to your accounting software (quickbooks) or invoicing software. Small business owners may not want to take on the financial risk either. But for many businesses, the advantages outweigh the disadvantages.

Customers take longer to pay

Repayment will take longer if you offer net terms and may affect your profit margin. The payment cycle will extend, and your operations will need to change to accommodate a more extended payment cycle with a 30 or 60 day period. Deferring when your client pays will affect your working capital, as well. At first, working capital may significantly decrease, but once the payment cycle becomes routine, working capital should go back to previous levels. Be clear about any percent discount and outline when the invoice is payable.

New terms may need to be negotiated with suppliers since working capital may not initially be available. As your payment terms get extended due to offering net terms, supplier terms, in turn, may need to extend as well. Otherwise, the company may experience a cash flow crunch in which money is not available to meet immediate expenses.

Some customers may not pay at all

Even while offering an early payment discount, some customers will likely end up not paying at all. It might sound a bit extreme, but nonpayment on net terms is common. However, nonpayments should be a very small percentage of invoiced customers. If there are a lot of nonpayments, this is a sign that credit screening is poor. Customers that should not be paying on credit (because they do not qualify) are being allowed into the company’s credit program.

Nonpaying customers don’t mean it's the end of the line in regards to collecting your money. You can continue to send notices to these customers and eventually start reducing the amount they owe. Some of these customers may pay all or some of the reduced amount. At some point, you might consider hiring a collection agency. Some agency payment arrangements only charge a fee if the agency can collect past due amounts.

Poorer cash flow

Offering net terms means that much of your cash is tied up in inventory while you’re waiting for payment. You’ve sold the product but don’t have any cash to show for it. We alluded to this issue above. Adjusted supplier/vendor terms will handle the gap between making a sale and getting paid. As the company becomes used to the new billing cycle, it should be able to manage supplier/vendor billings without creating a cash flow problems.

More administrative duties

Processing net terms create more administration than paying upfront. Your accounts receivable (AR) will become more complex. You'll have to conduct trade reference checks, keep track of sent invoices, net terms for each customer, discounts, nonpayment, and collections. Much of your AR can be outsourced, which removes virtually all (AR) complexity out of the company and allows you to focus on your core competencies.

Even things a simple as keeping track if you were offering net 30 or 60 or 90 day terms makes things so much more complex as you suddenly now have to keep track of these distinct customized terms with each of your clients adds a lot of administrative time to your workflow. You will also need to keep track of invoicing all of your different customers on different cadences depending on when they signed their net terms agreement with you.

Who offers net terms?

It depends on the industry. If most companies within an industry offer net terms, then any new entrants will likely have to do the same to remain competitive. Of course, nothing keeps any business from offering net terms.

Invoice-based businesses

Any business that bills by invoice rather than upfront may offer net terms. As previously mentioned, if it is standard in your industry to offer net terms, you basically have no choice but to offer them. If net terms are not standard in your industry, offering them is generally a plus and can help your business grow.

B2B businesses

B2B businesses commonly offer net terms to smaller business clients. Most businesses deal on net terms. For B2B businesses, it is common to offer net terms.


Food and materials suppliers commonly like SDi Fire (see our case study) offer net terms. Just as you might offer net terms to your customers, suppliers and vendors also offer them for the same reasons — to attract and keep customers. If you are just starting to implement net terms, which will create a longer payment cycle, using suppliers who also offer net terms can help to offset your payment cycle and avoid a cash flow crunch.


Net terms provide a grace period from the invoice date for customers to pay. It is a great way to attract new customers and can help a business grow. Implementing net terms will create a longer billing cycle since customers will no longer pay immediately. Understanding this longer billing cycle and preparing for it, such as using suppliers that offer net terms, will help maintain working capital and avoid a cash flow crunch. Resolve's Net Terms can help you take care of all the details of offering net terms to your customers.

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