What are net terms?

‍

Net terms are the payment terms specified on a supplier invoice or sales contract that define when the full invoice amount must be paid. "Net 30" means payment is due within 30 days of the invoice date. "Net 60" means 60 days. "Net 90" is 90 days.

‍

Net terms are one of the primary levers in working capital management — on the AP side, longer terms improve DPO and preserve cash; on the AR side, shorter terms reduce DSO and accelerate collections.

‍

How net terms are negotiated

‍

Payment terms are negotiated as part of the commercial relationship between buyer and supplier. Larger buyers typically have more leverage to negotiate longer payment terms. In some markets — particularly in India and Southeast Asia — standard terms can vary significantly by industry, with government and large enterprise buyers often expecting Net 60 or Net 90 while SME suppliers may only offer Net 15 or Net 30.

‍

Some agreements include early payment discount provisions — for example, "2/10 Net 30" means a 2% discount is available if the invoice is paid within 10 days, otherwise the full amount is due in 30.

‍

Net terms in finance operations

‍

In practice, net terms only improve working capital if they are actually enforced. AP teams that pay before terms expire are leaving cash on the table. AR teams that don't proactively collect when terms are breached are effectively extending credit for free.

‍

Finance automation platforms that track payment due dates, trigger reminders, and optimise payment runs against available discounts and terms make net terms management a systematic process rather than a manual one.

‍

Related: Days Payable Outstanding (DPO) · Days Sales Outstanding (DSO) · Working Capital Management · Payment Run