Net payment terms specify the number of days a customer has to pay an invoice in full from the invoice date.

Net 30 means payment is due 30 days after invoice date—industry standard for B2B transactions, used by 60% of businesses.

Net 60 extends payment to 60 days—common for larger clients with established credit or complex approval processes, government contracts often require Net 60 or longer.

Net 90 allows 90 days—typically reserved for strategic clients or industries with long cash conversion cycles (construction, manufacturing).

Calculation example: invoice dated March 1 with Net 30 terms is due March 31 (or April 1 if using 30 days rather than end-of-month). "Net" means the full invoice amount is due with no deductions allowed.

Payment term variations: Net 15 for faster payment (used by 15% of small businesses), Net 45 as middle ground, or Net 120 for government/institutional buyers.

Choosing terms: Net 30 balances cash flow with customer relationships, shorter terms (Net 15) improve cash position 33% but may lose price-sensitive customers, longer terms (Net 60+) win competitive bids but strain working capital.

Industry norms: retail/e-commerce Net 15-30, professional services Net 30, manufacturing Net 45-60, construction Net 60-90.

Invoice due date calculation depends on the reference point specified in payment terms: (1) Date of Invoice—most common, due date = invoice date + payment days, March 15 invoice + Net 30 = due April 14; (2) Receipt of Invoice—starts when customer receives it, protects buyers from mail delays, adds 3-7 days to typical payment period, requires proof of delivery; (3) End of Month (EOM)—payment period starts on last day of invoice month regardless of issue date, March 5 invoice + Net 30 EOM = due April 30, benefits late-month invoices; (4) Following Month (Prox)—payment due specified days into next month, "Net 30 Prox" means 30 days after end of invoice month, March 15 invoice due April 30; (5) Receipt of Goods (ROG)—starts when customer receives delivery, common for physical products, protects against shipping delays, March 10 invoice + 5-day shipping + Net 30 ROG = due April 14.

Business day vs calendar day: some terms exclude weekends/holidays from count, typically specified as "30 business days" vs "30 days." Calculation tools: most accounting software auto-calculates due dates based on terms, manual calculation requires careful date counting.

Best practice: clearly state reference point on invoice to avoid disputes—"Net 30 from invoice date" leaves no ambiguity.

"2/10 Net 30" is an early payment discount term meaning: take 2% discount if paid within 10 days, otherwise full amount due in 30 days.

Format: Discount % / Discount Days / Net Days.

Calculation example: $10,000 invoice dated March 1—pay by March 11 and deduct $200 (2% discount) for $9,800 payment, or pay full $10,000 by March 31.

Annualized cost of foregone discount: 36.7% APR—calculation: (2% ÷ 98%) × (365 ÷ 20 days early) = 37.2%, making it financially smart for customers to take the discount even if they must borrow funds (typical business loan ~8-12% APR).

Common variations: 1/10 Net 30 (1% discount), 2/15 Net 45 (larger businesses), 3/10 Net 60 (aggressive incentive), 2/10 EOM (discount available for 10 days from month-end).

Seller benefits: improves cash flow by 20-30 days average, reduces collection costs, decreases bad debt risk.

Buyer benefits: saves 2-3% on purchases (equivalent to 24-37% annual return), strengthens supplier relationships, improves vendor terms.

Implementation: clearly mark discount terms on invoice, automate calculation in accounting system, strictly enforce discount deadline (partial payments after deadline get no discount).

Usage: 40% of B2B invoices offer early payment discounts, most effective for high-margin products (>30% margin) where 2% discount is affordable.

Late payment impacts cascade across business relationships and finances: (1) Late Fees—typical 1.5% per month (18% APR) on overdue balance, $10,000 invoice 30 days late incurs $150 fee, some states cap late fees at 10-18% annually, must be specified in original agreement to be enforceable; (2) Credit Terms Reduction—chronically late payers (3+ late payments) lose Net 30 privilege, moved to Net 15 or prepayment, damages future purchasing flexibility; (3) Service Interruption—vendors may suspend services or shipments after 60 days past due, especially for subscription or ongoing services; (4) Collection Actions—90+ days overdue triggers collection agency referral (keeping 25-50% of recovered amount) or legal action; (5) Credit Score Impact—for businesses, 60+ days late reports to commercial credit bureaus (Dun & Bradstreet, Experian), lowers business credit score 50-100 points, affects future financing terms; (6) Relationship Damage—vendors remember payment patterns, late payers get slower service, no preferential pricing, last priority during shortages.

Cost analysis: paying $10,000 invoice 30 days late costs $150 late fee + relationship damage + potential credit impact worth thousands in higher future financing costs.

Industry data: 64% of invoices paid late (averaging 13 days past terms), late payments cause 50,000 small business closures annually due to cash flow crisis.

Best practice: communicate payment delays proactively before due date, request extension in writing, maintain vendor relationships by explaining situation and committing to specific payment date.

Proven strategies to accelerate payment (listed by effectiveness): (1) Electronic Invoicing—email invoices arrive instantly vs 3-7 days mail delay, include "Pay Now" button linking to online payment portal, reduces average payment time by 7-14 days, adoption accelerates payment 30%; (2) Early Payment Discounts—2/10 Net 30 terms convince 40% of customers to pay 20 days earlier, cost 2% but improves cash flow timing worth more than discount cost; (3) Payment Method Diversity—accept credit cards (pay 2.5% fee but get instant payment), ACH transfers (1-2 day settlement), digital wallets (PayPal, Venmo for small invoices), businesses offering 3+ payment methods collect 45% faster; (4) Clear Payment Terms—state "Net 30 from invoice date" not just "Net 30," include due date calculation on invoice, specify late fees upfront, clarity reduces payment delays 25%; (5) Automated Reminders—send reminder 7 days before due date, follow-up on due date, polite escalation 3 days after, automated systems reduce overdue invoices 60%; (6) Progress Billing—invoice milestones for long projects rather than waiting for completion, improves cash flow and reduces risk, common for >90-day projects; (7) Deposit Requirements—collect 25-50% upfront for new customers or large orders, reduces collection risk and improves working capital.

Technology: accounting software (QuickBooks, Xero) automates reminder sequences and online payment processing.

Results: implementing 3+ strategies typically shortens collection period from 45 days to 28 days average, improving cash position by 38%.

International transactions add complexity requiring adjusted payment calculations: (1) Transit Time—cross-border mail takes 7-21 days vs 3-5 days domestic, many companies use "Net 30 from receipt" instead of invoice date to account for shipping delays, or switch to electronic delivery to eliminate transit time; (2) Bank Processing—international wire transfers take 2-5 business days vs 1-2 days domestic, ACH doesn't work cross-border requiring SWIFT or other systems, factor extra processing time into payment planning; (3) Currency Considerations—specify payment currency on invoice (USD, EUR, GBP), note exchange rate and date, decide who bears currency risk, currency fluctuations between invoice and payment date can cost 2-5% without hedging; (4) Business Day Differences—countries observe different holidays (Chinese New Year, Diwali, Ramadan), payment processing pauses during recipient's holidays, specify "business days in payee country" vs absolute calendar days; (5) Legal Jurisdictions—payment terms enforceability varies by country, some require shorter terms (France mandates 60-day maximum for B2B), late payment laws differ internationally, specify governing law in payment agreement; (6) Documentation Requirements—customs paperwork affects "receipt of goods" calculations, some countries require certified invoices, factor 5-10 additional days for international documentation.

Best practices: Net 45-60 standard for international vs Net 30 domestic, use electronic invoicing to eliminate mail delays, specify all terms in writing (currency, exchange rate, business days definition, late fees), consider letter of credit for large transactions (guarantees payment but adds cost and complexity), or factor invoices (sell receivables at 2-5% discount for immediate cash).