Last updated: March 2, 2026
In this detailed guide, we cover all the essentials your business should understand about net terms (also referred to as credit terms). We take a closer look at digital net terms platforms, outline the benefits and drawbacks of payment terms, and walk you through how to implement a successful payment terms program.
Net terms refer to deferred payment agreements that allow customers extra time to pay for goods or services. These terms specify the number of days a customer has to pay after receiving an invoice—for instance, "Net 30" means payment is due within 30 days.
In essence, net terms act as a grace period before the payment deadline. To encourage early payment, some businesses offer discounts to customers who pay before the due date.
Common net terms include 15, 30, or 60 days, although some companies may extend this to 90 days—typically for large retailers or long-standing, reliable clients with strong payment histories.
Net terms are a cornerstone of B2B payment terms and trade credit. When a supplier extends net terms to a buyer, they are essentially providing short-term financing without charging interest. This arrangement benefits both parties: the buyer gets time to generate revenue from the purchased goods before paying, and the seller gains a competitive edge by making it easier for customers to buy. Net terms are most commonly found in industries where invoice-based billing is the norm, such as manufacturing, wholesale distribution, and professional services.
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 from the invoice date. Net 15 is less common than longer terms, but it is sometimes used in industries where rapid cash turnover is essential, such as food service and perishable goods. It is also a practical option for businesses working with new customers where trust has not yet been fully established.
Net 30 payment terms: This means an invoice is due in 30 days. Net 30 is arguably the most widely used payment term across all B2B industries. It strikes a practical balance—giving buyers enough time to process invoices through their accounts payable workflow while still allowing sellers to collect cash relatively quickly. For example, a wholesaler shipping inventory to a retail store might issue a Net 30 invoice, giving the retailer time to sell some of the goods before payment is due.
Net 60 payment terms: This means an invoice is due in 60 days. Net 60 terms are commonly used in industries involving larger purchases or longer project timelines, such as construction, commercial equipment, and professional consulting. Offering Net 60 can be attractive to larger clients who require more time to process payments internally, though it does require the seller to have enough working capital to carry the receivable for two months.
Net 90 payment terms: This means an invoice is due in 90 days. Net 90 is the longest standard payment term and is typically reserved for large-scale B2B transactions, government contracts, or well-established customer relationships. For instance, a manufacturer supplying parts to a major automotive company might agree to Net 90 terms due to the buyer's volume and long procurement cycle. While Net 90 can help win large accounts, it puts significant strain on the seller's cash flow, so it should be offered cautiously.
| Term | Payment Window | Best For | Seller Cash Flow Impact | Risk Level |
|---|---|---|---|---|
| Net 15 | 15 calendar days | Small orders, new customers, perishable goods | Minimal — fast cash collection | Low |
| Net 30 | 30 calendar days | Most B2B transactions, standard industry default | Moderate — manageable with stable revenue | Low to moderate |
| Net 60 | 60 calendar days | Large orders, established clients, project-based work | Significant — ties up working capital | Moderate |
| Net 90 | 90 calendar days | Enterprise clients, government contracts, high-volume deals | Heavy — may require financing to offset | High |
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.
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.
It is important to note that net terms almost always count calendar days, not business days. This means weekends and holidays are included in the payment window. For example, if an invoice is dated March 1 with Net 30 terms, the payment is due by March 31 — regardless of how many weekends or holidays fall in between. If the due date lands on a weekend or holiday, many businesses consider the next business day as the effective due date, though this should be clarified in your invoice payment 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. 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.
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.
Many businesses that offer net terms also provide early payment discounts as an incentive for customers to pay before the due date. The most common early payment discount is expressed as 2/10 Net 30. This notation means the buyer will receive a 2% discount on the invoice total if they pay within 10 days. If they do not pay within the first 10 days, the full invoice amount is due within 30 days.
Here is how to read the notation: the first number (2) is the discount percentage, the second number (10) is the number of days the buyer has to capture the discount, and "Net 30" is the standard payment deadline for the full amount.
Suppose your company issues an invoice for $50,000 with 2/10 Net 30 terms on March 1. If your customer pays by March 11 (within 10 days), they receive a 2% discount: $50,000 × 0.02 = $1,000 saved. They would only owe $49,000. If the customer pays between March 12 and March 31, no discount applies and they pay the full $50,000.
For the seller, offering this discount is often worthwhile because it accelerates cash collection and reduces the risk of late payment. For the buyer, capturing a 2% discount for paying just 20 days early translates to an annualized return of approximately 36.5% — making it a financially sound decision whenever cash is available.
| Discount Term | What It Means | When to Use It |
|---|---|---|
| 1/10 Net 30 | 1% discount if paid within 10 days; full amount due in 30 days | When you want to encourage early payment without a large margin impact |
| 2/10 Net 30 | 2% discount if paid within 10 days; full amount due in 30 days | The most common early payment discount — ideal for general B2B use |
| 3/10 Net 30 | 3% discount if paid within 10 days; full amount due in 30 days | When accelerating cash collection is a top priority |
| 2/10 Net 60 | 2% discount if paid within 10 days; full amount due in 60 days | For industries with longer payment cycles, like construction or manufacturing |
Early payment discounts are a win-win strategy that helps sellers improve Days Sales Outstanding (DSO) while giving buyers a meaningful cost savings. If your business offers net terms, coupling them with an early payment discount can incentivize faster payments and reduce the risk of overdue accounts.
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:
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.
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.
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.
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?
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.
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.
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.
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 ensuring 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 a 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.
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.
One way to alleviate this cash flow gap is to work with a net terms financing partner that advances payment to you upfront while your customer pays on their agreed schedule. This approach lets you offer competitive terms without putting your own working capital at risk.
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.
Selecting the right net terms is not a one-size-fits-all decision. The payment terms you offer should reflect your industry norms, your company's cash flow position, and the creditworthiness of your customers. Here is a step-by-step framework to help you decide:
Start by understanding what your competitors and peers are offering. Net 30 is the most common default across industries, but some sectors have different norms. For example, construction and government contracting often use Net 60 or Net 90, while food service and perishable goods suppliers may stick to Net 15 or even shorter windows. Staying close to your industry average keeps you competitive — offering terms that are too long may signal financial weakness, while terms that are too short may drive customers to competitors with more flexible options.
Before setting your terms, take a hard look at your current cash flow. Ask yourself: can your business absorb a 30, 60, or 90-day wait before receiving payment? If your own operating expenses, payroll, and supplier obligations require faster cash inflow, you may need to offer shorter terms or pair longer terms with a net terms financing solution that advances payments to you immediately. A useful metric to track is your Days Sales Outstanding (DSO), which tells you on average how long it takes to collect payment after a sale.
Not every customer deserves the same payment terms. A new customer with no payment history might start on Net 15 or Net 30, while a long-standing customer with a strong track record could earn Net 60 or Net 90. Before extending longer terms, conduct a business credit check to assess their ability to pay. This helps you avoid extending credit to higher-risk buyers who are more likely to pay late or default entirely. Many businesses use a credit risk management system to automate this process.
You do not have to offer the same net terms to every customer. Many successful businesses use a tiered approach based on customer profile. For example, new customers might start on Net 30 with a lower credit limit. As they build a payment history with your company, you can extend longer terms (such as Net 60) and higher credit limits. This graduated approach rewards good payment behavior while protecting your cash flow from new or unproven buyers.
Once you've selected your baseline net terms, consider adding an early payment discount (like 2/10 Net 30) to encourage faster payments. This can significantly reduce your average collection period while also giving your customers a financial incentive to prioritize your invoices. At the same time, clearly communicate what happens if payments are late — whether that means late fees, interest charges, or a review of the customer's credit terms going forward.
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:
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.
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:
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:
In the vast majority of cases, net terms are calculated using calendar days, not business days. This means weekends and public holidays count toward the payment window. For example, Net 30 means 30 consecutive calendar days from the invoice date. Some businesses may specify business days in their contracts, but this is the exception rather than the rule. Always clarify in your sales agreement whether the terms refer to calendar days or business days to avoid confusion.
When a customer misses the payment deadline, the consequences depend on the terms outlined in your agreement. Many businesses charge a late payment fee, typically expressed as a percentage of the overdue amount per month (for example, 1.5% per month). Other businesses may simply send payment reminders and follow up with their accounts receivable process. In more severe cases — especially with repeat offenders or large overdue balances — you may need to engage a debt collection agency or pursue legal remedies. The key is to have a clearly stated late payment policy in your contract before extending credit.
Your invoice payment terms should be clearly stated on every invoice you send. A standard format is to include a "Payment Terms" field that reads, for example, "Net 30" or "2/10 Net 30." You should also include the invoice date and the specific due date so there is no ambiguity. If you offer an early payment discount, state both the discount terms and the full-payment deadline clearly. For example: "Payment Terms: 2/10 Net 30 — 2% discount if paid by [date]; full amount due by [date]." Many invoice automation tools will calculate and display these dates automatically.
"Due on receipt" means the buyer is expected to pay immediately upon receiving the invoice. There is no grace period or deferred payment window. Net terms, by contrast, give the buyer a specific number of days (such as 30, 60, or 90) to pay after the invoice date. "Due on receipt" maximizes cash flow speed for the seller but can be a barrier to sales, especially for buyers who rely on deferred payment to manage their own working capital. Many businesses use "due on receipt" for smaller transactions or one-time sales, while offering net terms for ongoing B2B relationships.
Yes, net terms are often negotiable, especially in B2B transactions where the buyer has significant purchasing volume or a strong payment history. Buyers with consistent on-time payments and larger order sizes typically have more leverage to negotiate longer terms, higher credit limits, or better early payment discounts. If you are a buyer looking to extend your terms from Net 30 to Net 60, come prepared with data on your order volume and payment track record. If you are a seller, be open to negotiation but ensure any extended terms align with your cash flow capacity — or work with a net terms management platform that can absorb the risk on your behalf.
EOM stands for "end of month" and is a variation of standard net terms. When you see "Net 30 EOM," it means payment is due 30 days after the end of the month in which the invoice was issued. For example, if an invoice is dated March 15 with Net 30 EOM terms, the payment would be due April 30 (30 days after the end of March). EOM terms are sometimes used to standardize due dates across multiple invoices, making it easier for accounting departments on both sides to track and reconcile payments. However, because EOM terms can extend the actual payment window beyond what standard net terms would provide, sellers should factor this into their cash flow planning.
Manually managing net terms — from credit applications to invoice tracking to collections — is time-consuming and error-prone. A digital net terms platform can automate every step of this workflow. Platforms like Resolve handle business credit checks, set credit limits, process payments, send automated reminders, and even advance payment to sellers upfront so you don't have to wait 30, 60, or 90 days. Automating your net terms reduces administrative overhead, minimizes bad debt risk, and lets your team focus on what matters most — growing your business and serving your customers.
We hope this guide has provided a clear understanding of what net terms are, along with their main advantages and potential drawbacks. If net terms are a standard practice in your industry, it makes sense to align with them. If they aren't common, introducing them can help you stand out, attract more customers, and drive business growth.
Although net terms give your buyers additional time to pay, they also lengthen your own repayment cycle. Preparing for this impact on cash flow is critical to maintaining strong working capital and keeping your Days Sales Outstanding (DSO) under control.
To make things easier, you may want to work with a partner like Resolve Pay. They help minimize risk, optimize your financial workflows, and accelerate cash flow. Interested in getting started? Try offering net terms on your own terms—begin with a free trial today.