Net Terms Guide: What are 30/60/90 Net Terms? (2023)

What are net conditions?

This is a comprehensive guide to understanding net terms (also known as credit terms), their benefits, and implementing an effective payment terms program.

In the simplest sense, net terms are deferred payment terms offered to customers who want longer periods of time to pay for their goods and services.

Essentially, net terms give your customer a grace period before an invoice is due. Some companies may even offer a discount for customers who want to pay their bill before the due date (as an incentive for people to pay their bills early). When companies talk about net terms, this usually refers to a period of 30 or 60 calendar days before the invoice amount is due. In some cases, companies can even offer a 90 calendar day grace period for an invoice to be due. This is typically offered to very large companies (e.g. large retailers) or loyal customers who have a strong payment history with the company.

What do net 30/60/90 terms actually mean?

When you see the term “Net 30/60/90” (credit terms) on your invoice, it means the number of days an invoice is due from the invoice date.

  • 30 net means that the invoice is due in 30 days
  • Net 60 terms mean that the invoice is due in 60 days
  • 90 terms net mean that the invoice is due in 90 days

When is the first day of the "net" period?

The start date varies by company. Some companies may count the date an invoice is postmarked (postal delivery day) or sent (email) or even the date the goods and services are delivered. This information is usually made available to the customer beforehand. Normally, everyone agrees on the billing terms when the sales contracts are finalized.

When should I use net terms?

If you want the full amount of your invoice to be paid as quickly as possible (also known as “due on receipt” or “due on delivery”), offering net terms probably doesn't make sense for your business.

Unfortunately, for some companies, customers have expectations of net terms that are largely determined by their industry. The timing of net terms varies by industry.

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Some may even offer 45 net terms, while others typically have 90 net terms.

By staying close to your industry average, you can remain competitive in your net bid. Offering terms longer than average may indicate that a company is unnecessarily providing (essentially) free financing to customers. Maturities that are too short can mean they are too aggressive and need the money quicker. Learn why new businesses oftenOffer 30 net accounts to build business credit.

Is offering net terms similar to a credit card?

Offering payment terms is very different from offering credit card payments to your merchants. Unlike credit card payments, the purchasing entity typically does not incur late payment fees as long as their account is repaid within the net terms they have signed. Keep in mind that some net terms can be 60 or 90 days and longer without incurring any additional interest or late fees.

On the other hand, a credit card usually accrues interest after a month. Because of this, offering terms is seen as a competitive selling tool for many businesses, especially when it is not common in their industry.

Net Terms Guide: What are 30/60/90 Net Terms? (1)

What are digital net terms platforms?

Most companies typically bid and manage their net terms internally in a manual process. A team of staff is hired to perform all steps associated with the Net-Terms process, including:

  • Review of loan application forms
  • Calling trade references (Learn how trade references work)
  • Assessing a customer's creditworthiness to determine how long a payment period to offer and how much credit to give
  • Manage and send invoices
  • Tracking claims and collecting payments on late invoices
  • Reconciliation of incoming payments with invoices and accounts receivable in the accounting system
  • Send unpaid invoices to collection agencies

As you can see, managing your Net-Terms process involves many steps!

For this reason, many companies want to automate their Net Terms program and reduce risk.

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As a supplier of goods and services, you can now understand why managing just the credit check process would take up a lot of your internal accounting, sales, and AR team time. They have to ask the customer to fill out an (often lengthy) credit application, call trade references, and even make a credit limit decision (when they may not have the necessary expertise).

Even if you could have enough staff in-house to manage all of these steps, there are still risks involved in the process. Floating net credit to your customers ties up your liquidity. For this reason, many companies choose to implement and use a digital net pricing solution instead.

Net-Terms solutions like Resolveare popular because they manage the entire Net-Terms process for you. Yes, from the credit check to the net terms financing and payment processing to the invoicing of payment reminders. learn more aboutOffer net terms online.

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

There are many reasons to offer net terms despite all process steps. Offering trade credit attracts new customers, helps grow your business, and even adds a competitive edge that leads to stronger customer loyalty.

Generate more sales

Offering net terms allows customers (typically small and medium-sized businesses) to buy from you when they otherwise couldn't. If their payments to you aren't due immediately, it removes barriers to purchase and this gives them a chance to sell their goods and services before they pay you.

Small and medium-sized businesses are usually more willing to buy on credit than pay with cash right away. Some customers may even rely on credit for all of their purchases. Offering net terms brings in these customers. It is important to state your specific bill payment terms when entering into sales contracts with these customers. If you decide to offer longer payment terms, be sure to include the invoice amount, due date, and payment options on your purchase agreement and all invoices. It is important to note that net terms are usually offered interest-free, so remember to clarify this in your sales contract as well.

Get an edge over competitors

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

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Build customer loyalty

Giving customers leeway contributes to customer loyalty. This shows that you understand their situation and want to build a win-win relationship with them. Net terms can be a gateway to new customers who will remain loyal to you for a longer period of time. New customers may get free financing, but when your business can provide good customer service, quality products and deals, and competitive pricing on top of net terms, that's what really builds strong customer loyalty.

However, keep in mind that while net terms can lead to long-term customer loyalty, you may need to offer an additional competitive advantage if your competitors offer the same terms. Consider other incentives such as B. the coupling of net conditions with an incentive for early payment. Something as simple as that could be the advantage you use to retain your customers. Not only are early payment plans a great way to retain customers, but they also give you the opportunity to receive full payment of your receivables sooner.

Disadvantages of offering 30/60/90 net terms

While offering net terms offers many benefits, there are also some challenges that you need to be aware of. Your billing and payment cycle will be longer, you will incur more overhead as you require additional resources to administer this program, and you must be prepared for additional risk (since customers may not pay at all). It can also create additional work and complexity when reconciling payments with your accounting software (e.g. QuickBooks Online) or invoicing software. But for many companies, the benefits outweigh the costs, which is why net terms are such a common business proposition.

Decreased payment speed as customers take longer to check out

With net conditions, the repayment takes longer. This may not be obvious, but it could affect your profit margin as you may not be able to get early rebates from your own suppliers if your working capital is tied up in your accounts receivable. As your payment cycle lengthens, your internal processes may need to be modified to accommodate payment deferral terms. For example, if customers take 30 or 60 days to make payments, you most likely need internal resources to track and remind your customers when invoices are due or overdue. The timing of when your customer pays you ultimately impacts your working capital. To expedite payments, consider offering a percentage rebate or early payment discount on their liabilities if they make the payment before the due date.

Higher risk as some customers may default on payments

Understandably, small business owners do not want to take any financial risks by offering conditions. In the worst case, some customers do not pay their due bills at all. This may sound a bit extreme, but non-payment on net terms is unfortunately common for higher-risk accounts. However, this risk can be offset by accepting the increase in bad debts and properly managing bad debts. If you're experiencing a lot of write-offs, it may be a sign that your credit assessment and credit decision programs need to be reviewed and redesigned. A high loss rate indicates that you allow certain customers to pay on certain terms, even if they are not creditworthy.

If you're having a difficult time with debt collection, there are still ways for you to collect your receivables andDecrease your DSO (Days Sales Outstanding). Simply sending customers reminders and notices can be enough to initiate the payment process and begin collecting the amounts owed. In some cases (particularly disputes over the goods delivered), some customers may choose to pay only part of the total outstanding amounts. At some point, you may even consider outsourcing your debt collection to collection agencies. If you choose to go this route, make sure you carefully review the fees involved. Some agencies only charge a fee if the agency successfully collects overdue amounts, while other companies charge a fee even if the collection is unsuccessful.

The stress on working capital contributes to changes in cash flow

Offering net terms means some of your cash is tied up in inventory and accounts receivable while you await payment. You've essentially sold the product - but you don't have the money to show it. Depending on the health of your business, you may encounter liquidity 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 business while you wait for your client to pay you. Offering net terms can lead you to ask for supplier terms to stabilize your own cash flow and reduce capital requirements.


Lost resources due to back-end office processes

Processing and managing net terms creates more administrative overhead and adds more steps to your back-end processes than you probably realize. The company's requirements (AR) are becoming more complex. Your team needs to analyze loan applications,Verification of commercial references, set net terms for each customer and manually track invoices, discounts, late payments and reconcile collections.

Even simple steps like tracking who you're billing and who you're offering net 30, 60, or 90 day transit times add complexity. Internal resources must be dedicated to investing time and keeping track of all individual conditions with each customer. Each of your customers who receive net terms causes additional administration time for each workflow.

Looking for the silver lining? Fortunately, many of the manual accounts receivable steps and workflows surrounding net terms, collections, and credit management can now be outsourced. There are many solutions for:

  • credit risk management
  • B2B collection software
  • Integrated claims
  • B2B payment solutions
  • Commercial Credit Insurance
  • and evenFinancing on net terms

Best practices for automated accounts receivablecan alleviate a company's process problems and simplify the provision of net terms. Automation allows you and your team to focus on your core competencies, such as: B. Increasing 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, all new entrants are likely to do the same to remain competitive. It is common for net terms to be offered in the following types of companies:

Invoice-based companies

Any company that invoices by sending an invoice instead of requiring prepayment can offer net terms. Note, however, that some companies may also send invoices that are "due upon receipt" and do not have a deferred payment option. Look at what other companies typically offer in your industry to determine if you should offer net terms or not.

B2B company

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

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  • Archipelago lighting, a leading manufacturer of LED lighting, tripled its revenue and reduced back-office processes by 50% when it streamlined its internal pricing process
  • GB manufacturing, a manufacturer of commercial washing machines, optimized payment terms and receivables management
  • Tern bikes, a growing e-bike company, increased its sales orders and eliminated the need for additional staff by outsourcing its credit management and receivables tracking


Suppliers (of parts and consumables to be used by another company) usually offer net terms. Examples of suppliers offering conditions and the associated benefits:

  • SDi-Feuer, a distributor of security and fire alarm test equipment, increased margins and reduced its credit approvals by two weeks
  • Trenchless supply, a trenchless equipment supplier, reduced AR exposure and improved customer relationships by making its credit management more efficient
  • DocShop Pro, a medical supply store, has made its conditions more efficient by using a digital net conditions solution


We hope this guide has given you a better understanding of net terms and their many benefits and challenges. Remember, if offering terms is standard in your industry, we encourage you to offer them. If conditions are not standard in your industry, proactive bidding can differentiate you, attract new customers, and grow your business.

Net terms give your customers a grace period to pay from the invoice date, and while this has benefits, implementing terms results in a longer payback cycle. Strategically preparing for this longer cash flow cycle will help maintain strong working capital and reduce DSO. Consider outsourcing the management of yourNet terms to a partner like Resolve Pay, which also reduces your risk, streamlines your financial operations, and improves your financial speed.


What is 30 60 90 net terms? ›

What is Net 30-60-90 Day Terms? Net 30-60-90 day terms is a simple way of offering a business a payment plan. They pay one third of the invoice in 30 days, another third of the invoice in 60 days, and the final third of the invoice in 90 days.

What is net 30 vs net 60 vs net 90? ›

It refers to a payment period, meaning the customer has a 30-day length of time to pay the total amount of their invoice. Other common net terms include net 60 for 60 days and net 90 for 90 days. Some businesses expect payment much sooner, so you may also see net payment terms of 10, 14, or 15 as well.

What is net 30 or 60 terms? ›

Net terms dictate how long a customer has to remit payment upon receipt of an invoice. For instance, net 30 means the customer has 30 days to settle their account, net 60 allows for 60 days, etc.

What does net 90 payment terms mean? ›

The term Net 90 means that a merchant expects to receive payment in full from a buyer within 90 days. Only the largest businesses with many revenue sources can afford to have such long payment terms without interest.

How do you write net terms? ›

For example, if you wanted to offer your client net 60 terms with a 5 percent discount if they pay within 15 days, you would write that out as “5/15 net 60.”

What is net 60 payment terms example? ›

If the vendor offers a prompt payment discount to the customer, the payment term on the invoice may be 2/10 net 60 or 1/10 net 60. 2/10 net 60 and 1/10 net 60 mean the customer must pay the invoice within 10 days to receive a 2% or 1% discount, respectively, or pay the full invoice amount within 60 days.

What do net terms mean? ›

Net Terms. "Net" means that the full amount is due for payment. Thus, terms of "net 20" mean that full payment is due in 20 days. The term may be abbreviated to "n" instead of "net".

What are standard net 30 payment terms? ›

In the U.S., “net 30” refers to a very common payment term that means a customer has a 30-day length of time (or payment period) to pay their full invoice balance. Net 30 payment term is used for businesses selling to other businesses, and the 30 days includes weekends and holidays.

What are net 30 payment terms? ›

What is net 30? Net 30 is a term used on invoices to represent when the payment is due, in contrast to the date that the goods/services were delivered. When you see “net 30” on an invoice, it means that the client can pay up to 30 calendar days (not business days) after they have been billed.

What does 2 30 net 90 mean? ›

If you see the term “Net 30/60/90” on your invoice (credit terms), this means the number of days an invoice is due from its invoice date. Net 30 means the invoice is due in 30 days. Net 60 terms mean the invoice is due in 60 days. Net 90 terms mean the invoice is due in 90 days.

How do you ask for net 30 terms? ›

Rather than writing 'discount for early payment', be specific. For example, if it's net 30, state something like '10% discount if paid before day 10'; '5% discount if paid before day 20' and so on. And don't be afraid ask for late-payment terms. If they sign and agree to the deal, well, well done!

How do I apply for net 30 terms? ›

You can get a net-30 account by applying for a credit account with a company that offers term payments. Your credit line and payment terms can depend on your business' finances, credit history, and relationship with the supplier or vendor.

Does net 60 include weekends? ›

Note: Net 60 includes all calendar days, including weekends and holidays, unless otherwise specified.

What does 2 30 net 60 mean? ›

5/10, 2/30, Net 60

Under these payment terms, the customer gets a 5% discount if they pay within 10 days or a 2% discount if they pay within 11-30 days. Otherwise, full payment is due within 60 days of the invoice date.

What does terms net 15 mean? ›

Net 15 on an invoice shows that a client should pay you in full 15 days from when they receive the invoice. Just like net 10, net 15 is short enough for companies with limited cash flow. Consider using these short terms for late-paying and new customers' invoices.

What is 30 days credit terms? ›

For example net 30 days credit term means the customer's payment is due within 30 calendar days of the date that goods or service is delivered.

What does 2 20 net 60 mean? ›

3/20 net 60 means 3% discount if a customer pays within 20 days of the invoice date. Otherwise, the net amount is due within 60 days of the invoice date.

What does 2 10 net 60 mean? ›

Essentially, it is a payment plan that gives the purchaser the option to take a 2% discount if they pay the invoice within 10 days. If the purchaser decides to wait and pay the full amount, they will have a total of 60 days to make the payment.

What does 5 30 net 60 mean? ›

Typically, when you receive or send out a bill, there will be some notice of when payment is due. One way to spell this out is with a notation like "net 30" or "net 60," which means the net balance on the bill is due in 30 days, 60 days or whatever number is indicated.

What are examples of net terms? ›

Net 30/60/90

Net 30 means it's due in 30 days, net 60 in 60 days and net 90 in 90 days. These are the most commonly used net terms, though they vary depending on the business or industry. For example, some may offer net terms up to 180 days, while others offer as little as a week.

What is net terms 120? ›

Net 120-Day Account means an Account which is due and payable 120 days after the original invoice date relating thereto.

What are the different types of net terms? ›

The most common net terms are Net 30 (30 days until full payment is due), Net 60 (60 days until full payment is due), and Net 90 (90 days until full payment is due).

Does net 30 include weekends? ›

Net 30 always includes calendar days (i.e., weekends, holidays, and business days).

What do terms 1/10 net 30 mean? ›

The 1%/10 net 30 calculation is a way of providing cash discounts on purchases. It means that if the bill is paid within 10 days, there is a 1% discount. Otherwise, the total amount is due within 30 days.

What do the terms 3/10 Net 60 mean? ›

Take 1% discount if pay in 10 days, otherwise pay in 60 days. 7.3% 2/10 Net 60. Take 2% discount if pay in 10 days, otherwise pay in 60 days.

What is net 30 day payment terms? ›

Net 30 is a term used on invoices to represent when the payment is due, in contrast to the date that the goods/services were delivered. When you see “net 30” on an invoice, it means that the client can pay up to 30 calendar days (not business days) after they have been billed.

What does 2 net 90 mean? ›

Standard net 90 terms require that invoice balances are paid in full and received by the vendor within 90 days of the invoice date or another triggering event date indicated on the invoice. The invoice date is usually the shipping date. Examples of early payment discount terms are 2/10 net 90 or 2/20 net 90.

What do credit terms 3/10 net 30 mean? ›

3/10 net 30 means a 3% discount if a customer pays within 10 days. Otherwise, the total amount is due within 30 days of the invoice date.


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