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calendar    Feb 28, 2023

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

Last updated: April 14, 2023

In this comprehensive guide, we explore everything your business needs to know about net terms (also known as credit terms). We deep dive into digital net terms platforms, explore the advantages and disadvantages of net payment terms, and explain how to launch an effective payment terms program.

What are net terms?

Net terms are deferred payment terms offered to customers who are seeking extended periods of time to pay for their goods or services.

These terms mandate how long a customer has to make a payment upon receipt of an invoice. For example, a net 30 invoice indicates that a customer has 30 days to settle their payment.

Essentially, net payment terms provide your customer with a grace period before an invoice is due. Some companies may even offer a discount for customers who choose to pay their bill before their net terms due date. This incentivizes people to pay their invoices ahead of time.

When businesses refer to net payment terms, this usually refers to a period of 15, 30 or 60 calendar days before the invoice amount is due. In some cases, companies may even offer up to 90 calendar days until an invoice is due. This is typically offered for very large companies – such as big box retailers or loyal customers – who have a strong payment history with the business.

Net 30/60/90 terms: What do they actually mean?

If you see credit terms that read “Net 30/60/90” on your invoice, this indicates the number of days an invoice is due from its invoice date. Businesses typically offer one of four net payment terms:

Net 15 payment terms: This means an invoice is due in 15 days Net 30 payment terms: This means an invoice is due in 30 days Net 60 payment terms: This means an invoice is due in 60 days Net 90 payment terms: This means an invoice is due in 90 days

Net 30 and Net 90 are the most common payment terms. But, depending on the industry you operate in, you may see more or fewer days available as part of your credit terms agreement. The length of your financing agreement is typically dependent on your relationship with the business offering payment terms, as well as your ability to negotiate.

When is the first day of the “net” period?

The start date varies by company. Some companies may count the date that an invoice is postmarked (day of mail delivery) or sent (email) or even when the goods and services are delivered. These details are usually made available to the customer beforehand. Typically, everyone agrees on the invoice terms when the sales agreements are made.

When should I use net terms?

If you require the full amount of your invoice to be paid as soon as possible (also known as “due on receipt” or “due on delivery”), offering net terms probably does not make sense for your business.

Unfortunately for some businesses, customers have expectations for net terms which are largely driven by its industry. Net terms timing by industry varies.

Some may even offer Net 45 terms while others typically Net 90.

Staying around your industry averages allows you to remain competitive on your net terms offer. Offering terms that are longer than the average may signal that a company is unnecessarily providing (essentially) free financing for customers. Terms that are too short, may mean they are too aggressive and in need of the cash faster. Learn why new businesses often offer net 30 accounts to build business credit.

Is offering net terms similar to a credit card?

Offering payment terms is very different than offering credit card payments to your merchants. Unlike credit card payments, the purchasing company will typically not incur any late payment fees as long as their account is paid off within the net terms agreement they have signed. Remember, some net terms can last 60 or 90 days and beyond, without incurring any additional interest or late fees.

On the other hand, a credit card will typically start charging interest after one month. This is why offering terms is seen as a competitive sales tool for many businesses, especially if it is not a norm in their industry.

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What are digital net terms platforms?

Most companies typically offer and manage their net terms in-house, through a manual process. A team of people is hired to conduct all the steps involved in the net terms process, including:

  • Reviewing credit application forms and reading Experian business credit reports
  • Calling trade references (learn how trade references work)
  • Assessing the creditworthiness of a customer to determine how long of a payment period to offer, and how much credit
  • Managing and sending invoices
  • Following up on accounts receivables and collecting payments on late invoices
  • Reconciling payments received to invoices and AR in the accounting system
  • Sending invoices that were not paid at all to debt collections agencies

As you can see, there are a lot of steps involved in managing your net terms process!

This is why many companies wish to automate and de-risk their net terms program.

As a supplier of goods and services, you can now understand why managing just the credit checking process would cost your internal accounting, sales, and AR team a lot of time. They must ask the customer to complete an (often long) credit application, call trade references, and even make a credit limit decision (when they may not have the expertise to do so).

Even if you were able to have enough staff in-house to manage all these steps, the process still comes with risk. Floating net terms credit to your customers ties up your cash flow. This is why many companies choose to implement and use a digital net terms solution instead.

Net terms solutions like Resolve are popular because they manage the entire net terms process for you. Yes, everything from credit checking, net terms financing, and payment processing to invoicing payment reminders. Learn more about offering net terms online.

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

There are many reasons to offer net terms despite all the steps involved in the process. Offering trade credit attracts new clients, helps grow your business, and even adds a competitive advantage which leads to building customer loyalty.

Generate more sales

Offering net terms allows customers (typically small businesses and medium-sized businesses) to purchase from you when they otherwise would not be able to. If their payments to you aren’t due immediately, barriers to purchasing are removed and this gives them the chance to sell their goods and services before paying you.

Small businesses and mid-sized businesses are generally more willing to buy on credit, than pay with cash immediately. Some customers may even depend on credit for all of their purchases. Offering net terms bring in these customers. It's important to outline your specific invoice payment terms when entering into sales agreements with these customers. If you decide to offer longer payment terms, remember to specify the invoice amount, payment due date, and payment options in your sales contract and all invoices. It’s important to note that net terms are usually offered interest-free, so remember to clarify this in your sales agreement too.

Gain an advantage over competitors

If you are a stable, larger business, your business may have an advantage over competitors who don’t offer net terms. If it is common for your industry to offer net terms, not offering them may put your company at a disadvantage. New clients will always gravitate toward the path of least resistance for any type of purchase. This means they will purchase on credit even if there's the possibility of incurring late fees or interest. This is why credit card use is so common in the business world. Many companies that proactively offer net terms will likely see more customers come their way. After all, who wouldn't like an extra 30 business days to pay?

Build customer loyalty

Giving customers leeway will help build customer loyalty. This shows that you understand their situation and want to build a win-win relationship with them. Net terms can be a door to new customers that will be loyal to purchasing from you for an extended period of time. New customers may come in for free financing, but if your company can provide good customer service, quality products and offerings, and competitive pricing on top of net terms, this is what truly builds strong loyalty with customers.

However, keep in mind that while net terms may lead to long-term customer loyalty, if your competitors are also offering the same terms, you may need to provide an additional competitive edge. Consider other incentives, such as coupling net terms with an incentive for early payment. Something as simple as this could be the edge that you leverage to keep your customers loyal. Early payment plans are not only a great way to gain customer loyalty, this 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 benefits to offering net terms, there are also a few challenges to be aware of. Your billing and payment cycle will become longer, you’ll incur more overhead as you require additional resources to manage this program, and be prepared for extra risk (as customers may not pay at all). This can also add additional work and complexity when reconciling payments to your accounting software (such as QuickBooks Online) or invoicing software. But for many businesses, the advantages outweigh the disadvantages, which is why net terms are such a standard business offering.

Decreased financial velocity as customers take longer to pay

Repayment will take longer if you offer net terms. This may not be obvious, but this could affect your profit margin, as you may not be able to secure any early discounts from your own suppliers if your working capital is tied up in your receivables. Since your payment cycle will extend, your internal operations may need to change to accommodate deferred payment terms. For instance, if customers are not making payments until after a 30 or 60-day period, you will most likely need internal resources to follow up and remind your customers when accounts are due, or past due. The timing around when your client pays you will ultimately affect your working capital. To speed payments up, you may wish to consider offering a percent discount or early payment discount off their payable if they remit payment before the due date.

Higher risk as some customers may default on payments

Small business owners do not want to take on the financial risk of offering terms, which is understandable. In the worst-case scenario, some customers may not end up not paying their account due at all. This may sound a bit extreme, but non-payment on net terms is, unfortunately, common on higher-risk accounts. However, this risk can be offset by enduring the rise of nonpayment and bad debts are managed properly. If you experience a lot of write-offs, this may be a sign that your credit checking and credit decisioning programs need to be reviewed and redesigned. A high loss rate indicates that you are allowing certain customers to pay on terms, even if they are not creditworthy.

If you are experiencing a difficult time with collections, there are still ways for you to collect your receivables and decrease your DSO (Days Sales Outstanding). Simply sending reminders and notices to customers can be enough to get the payment process rolling and start collecting the amounts you are owed. In some cases (especially when there are disputes about the goods delivered), some customers may choose to only pay a portion of the total amounts outstanding. At some point, you may even consider outsourcing your AR collections to debt collection agency. If you choose to go down this route, make sure you do your due diligence on the fees involved. Some agencies only charge a fee if the agency is successful in collecting past due amounts, while other companies charge a fee even if the collection is not successful.

Working capital strain contributes to changes in cash flow

Offering net terms means that some of your cash will be tied up in inventory and your accounts receivables while you’re waiting for payments to come through. You’ve essentially sold the product — but don’t have the cash in hand to show for it. Depending on the health of your business, you may run into cash flow problems. As a result, you may need to negotiate your own extended payment terms with your suppliers. You may need to ask for extended terms for your own company as you wait until your customer pays you. Offering net terms may lead you to ask for supplier terms, in effort to stabilize your own cash flow and ease capital requirements.

Lost resources due to back-end office processes

Processing and managing net terms create more administration and add more steps to your back-end processes than you probably realize. The company’s accounts receivables (AR) become more complex. Your team will need to analyze credit applications, review trade reference checks, set net terms for each customer, and manually track invoices, discounts, late payments, and reconcile collections.

Even simple steps such as keeping track of invoicing and who you are offering net 30 or 60 or 90-day terms, create more complexity. Internal resources must be dedicated to spending time and staying on top of all the customized terms with each customer. Each one of your clients who are given net terms creates additional administrative time for each workflow.

Looking for the silver lining? Thankfully, a lot of the manual accounts receivable steps and workflows around net terms, collections, and credit management can now be outsourced. There are plenty of solutions for:

Automated accounts receivables best practices can alleviate a company’s process pains and take the complexity out of providing net terms. Automation allows you and your team to focus on your core competencies, such as growing sales and building customer relationships.

Who offers net terms?

It depends on the industry but net terms are commonly used in B2B transactions. If most companies within an industry offer net terms, then any new entrants will likely do the same to remain competitive. It is common to see net terms being offered in the following types of companies:

Invoice-based businesses

Any business that bills by sending an invoice rather than requesting payment upfront, may offer net terms. However, note that some businesses may also send invoices that are “due upon receipt” with no option for deferred payment. Take a look at what other companies typically offer in your industry to determine whether you should offer net terms or not.

B2B businesses

Businesses that sell finished goods (or services) to other businesses (rather than a consumer) typically offer net terms. This is especially the case if their customers are smaller businesses (such as newer retailers or dealers) that may need this option more than more established organizations. This may include manufacturers, wholesalers, distributors, and even B2B marketplaces. Examples of B2B businesses that offer net terms:

  • Archipelago Lighting, a leading LED lighting manufacturer, tripled its revenue and cut down back-office processes by 50% when it streamlined their in-house terms process
  • GB Fabrication, a commercial laundry machine manufacturer, streamlined payment terms and accounts receivables management
  • Tern Bikes, a growing e-bicycle company, grew its sales orders and eliminated the need for additional staff by outsourcing its credit management and accounts receivable follow-up
  • GoMaterials, a leading B2B marketplace that sells landscape suppliers expanded their market into the USA by woring with Resolve to offer terms and manage all their B2B payments


Suppliers (of parts and supplies to be used by another business) typically offer net terms. Examples of suppliers that offer terms, and the benefits they incur:

  • SDi Fire, a security and fire alarm testing equipment distributor, grew margins and decreased its credit approvals by two weeks
  • Trenchless Supply, a trenchless equipment supplier, eased AR burdens and improved customer relationships when they made their credit management more efficient
  • DocShop Pro, a medical supplies supplier, made its terms more efficient by using a digital net terms solution
  • Elston Materials, Chicago's leading concrete and masonry suppliers, increased revenues by 20%


We hope this guide has provided you with a better understanding of net terms, as well as its many advantages and challenges. Remember, if it is a standard in your industry to offer terms, we encourage you to offer them. If terms are not standard in your industry, proactively offering them may set you apart from competitors, attract new customers, and grow your business.

Net terms provide a grace period from the invoice date for your customers to pay and although it has benefits, implementing terms will lead to a longer repayment cycle. Strategically preparing for this longer cash flow cycle will help maintain strong working capital and decrease DSO. Consider outsourcing the management of your net terms to a partner like Resolve Pay, which also decreases your risk, streamlines your financial operations, and improves your financial velocity. Learn how you can offer net terms on your terms with a free trial today.

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