Definition (canonical)
Payment terms are the agreed conditions under which a buyer pays an invoice — most importantly how many days after issue or delivery the money is due. "Net 30" means full payment within 30 days. Terms decide who finances the transaction in the meantime: every day of deferral is credit the seller extends for free.
Terms are a financing decision, not paperwork
Between invoice and payment, someone's working capital carries the deal. Long terms are effectively an interest-free loan from seller to buyer — which is why large buyers push net 60 or net 90, and why sellers with weak bargaining power silently become their suppliers' bank. Reading terms through this lens changes negotiations: a price concession may cost less than 30 extra days multiplied across a year of orders. The EU late-payment framework caps standard B2B terms and grants statutory interest and recovery fees, tools small firms use too rarely.
The vocabulary you will meet
Net N — payment within N days. 2/10 net 30 — a classic early-payment discount: 2% off if paid in 10 days, else full in 30; annualized, that discount is worth roughly 36% — extraordinarily expensive credit for the buyer who skips it, extraordinarily attractive for a seller who needs cash. EOM — end of month; CIA/CBD — cash in advance / before delivery; milestone terms — payments tied to project stages, standard in services and construction.
Negotiating terms that protect you
Sellers: anchor short (14 days) and trade extensions for something — volume, prepayment share, price. New counterparty? Start with prepayment or shorter terms until trust is verified. Automate escalation: reminder before due date, statutory interest after. Buyers: negotiate terms openly rather than paying late — chronic lateness is visible in registers and prices you out of good suppliers. When the gap will not close, factoring converts terms into cash for a fee.
FAQ
Do longer terms mean more sales? Often yes — terms are a sales tool. Price the credit you are extending instead of giving it away unknowingly.
When does the clock start? Define it: invoice date, delivery date or acceptance. Ambiguity here causes half of all payment disputes.
Are 90-day terms legal? Regimes differ; in the EU, standard B2B terms beyond 60 days must not be grossly unfair to the creditor. Long terms remain negotiable, not automatic.
Related: Invoice · Cash Flow · Factoring · Working Capital Reviewed: 2026-07-15 · Sources: EU late payment directive