The time duration a seller allows a buyer to pay for goods or services after delivery, typically expressed in days (e.g., Net 30, Net 60).
The credit period (or payment terms) is the window between invoice date and payment due date. Common terms include Net 15, Net 30, Net 45, and Net 60. Some businesses offer early payment discounts like '2/10 Net 30' — meaning 2% discount if paid within 10 days, otherwise full amount due in 30 days. Setting the right credit period balances customer satisfaction with cash flow needs. Too generous = cash flow strain; too strict = lost customers.
A wholesaler offers 'Net 30' terms. If an invoice is dated April 1, payment is due by May 1. If the customer pays on April 15, they paid 15 days early. If they pay on May 10, they are 9 days overdue.
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Standard is Net 30 for B2B. For new customers, start with Net 15 or request advance payment. For trusted long-term clients, Net 45 or Net 60 may be appropriate. Always perform credit checks before extending terms.
It means: Take a 2% discount if you pay within 10 days, otherwise the full amount is due in 30 days. For a ₹1,00,000 invoice, paying within 10 days saves ₹2,000. This incentivizes faster payment.
Money owed to a business by its customers for goods or services delivered but not yet paid for.
A commercial document issued by a seller to a buyer, detailing the products or services provided, quantities, prices, and payment terms.
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
Money owed to a business that is unlikely to be collected and is written off as an expense, reducing both accounts receivable and profit.
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