Navigating B2B Trade Credit Terms: Net-30, Net-60, Net-90 and Beyond

Offering trade credit is a common practice to stay competitive. But not all payment terms are created equal. Credit managers must carefully choose terms that balance being attractive to customers with protecting the company’s financial health. Below, we explore popular standard terms (Net-30, Net-60, Net-90) and less conventional arrangements (dynamic discounting, milestone payments, Net-10 EOM, 2/10 Net-30), discussing their benefits, drawbacks, and where they’re most effective. The goal is to help you think critically about which terms make sense for your business and customers.

Standard Net Payment Terms (Net-30, Net-60, Net-90)

Net payment terms – expressed as “Net X” – give the buyer X days from invoice to pay the full amount. Across most industries, Net-30 (payment due in 30 days) is considered a standard baseline. However, depending on the industry and client relationships, longer terms like Net-60 or Net-90 might be offered. It’s important to align with industry norms; offering terms far longer than competitors could mean you’re essentially giving free financing to customers while terms that are too short might be seen as too aggressive and lead to lost deals..

Net-30 (30-Day Terms)

Net-30 means the invoice must be paid within 30 days of the invoice date. This is widely used as a default in B2B transactions. The benefits of Net-30 include relatively quick conversion of sales to cash, helping maintain a healthier cash flow and lower Days Sales Outstanding (DSO). The shorter credit period limits your exposure – if a customer’s financial condition worsens, you’ve only extended 30 days of credit risk. Net-30 is also generally palatable to customers; it’s short enough to protect the seller but still gives buyers a month to manage their own cash cycle.

Net-60 (60-Day Terms)

Net-60 gives buyers two months to pay. Why offer 60 days? In some sectors, especially when dealing with larger buyers or slow-turn inventory, 60-day terms are an accepted norm. Many chemical and industrial suppliers, for instance, face extended payment cycles of 45 to 90 days as standard. Offering Net-60 can be a way to win business with big customers who demand more time to pay or whose own cash flows (e.g. lengthy production cycles) necessitate longer credit. From a customer relationship standpoint, Net-60 can demonstrate flexibility and partnership, making your company a more appealing vendor to customers who need the extra time..

Net-90 (90-Day Terms)

Net-90 is a three-month credit term and is generally the maximum you see in common practice (some exceptions aside). It’s usually offered only in specific situations – often when dealing with very large customers or as an industry standard for certain sectors. For instance, the construction industry often sees 90-day payment periods on projects, and some large retail or manufacturing buyers might push for Net-90 from their suppliers.. In fact, some industries (like pharmaceuticals or big-box retail) have shifted to Net-90 as a standard for vendors, essentially forcing suppliers to accept longer terms to maintain the business.

The benefit of Net-90, from a sales perspective, is that it can help win large contracts – it’s a concession that may secure or maintain a lucrative customer relationship. It gives customers maximum flexibility for their cash flow. However, the drawbacks are significant. Your company will be financing that receivable for a quarter of a year, which can impact your own ability to invest or pay your bills. It also concentrates risk: if something goes wrong (e.g. customer bankruptcy or disputes), the impact on your aged receivables is large. Risk exposure grows with time – the longer the period, the more chances for default or economic shifts. Many suppliers only agree to Net-90 for very trustworthy clients with solid payment histories. As a credit manager, if you must extend Net-90, ensure you have strong credit controls: robust credit checks, perhaps trade credit insurance, and close monitoring of that account.

2/10 Net-30: Early Payment Discount for Faster Cash

One traditional way to encourage quicker payment (while still officially offering Net-30 terms) is the 2/10 Net-30 arrangement. This means the buyer has 30 days to pay, but if they pay within 10 days they can take a 2% discount on the invoice. For example, on a $50,000 invoice, paying by day 10 would allow the customer to deduct 2% (i.e. pay $49,000). If they miss that 10-day window, the full $50,000 is due by day 30.

Benefits: For the seller, the hope is to speed up cash receipts. Many customers will try to take advantage of the 2% discount, which means you get paid in 10 days instead of 30 – a significant improvement in cash flow and reduction in credit exposure time. This can lower your DSO and reduce the risk of non-payment (since less time is outstanding). It can also be a way to reward good customers for prompt payment, strengthening the relationship. From the buyer’s perspective, a 2% discount for paying 20 days early is enticing – it’s equivalent to a very high annualized rate of return on their cash (about 36% annualized interest savings). In fact, 2/10 Net-30 is considered a win-win in many transactions: the supplier gets liquidity and the buyer saves money.

Drawbacks: The obvious cost to the seller is the reduction in revenue. A 2% discount eats directly into your profit margins. Essentially, you are paying (in the form of a discount) to get the money faster – it’s the cost of quicker cash. If your margins are thin, 2% can be substantial. (You can partially offset this by changing the discount to 1/10 Net-30) You must decide if the trade-off is worth it (often it can be, especially if the alternative is borrowing money to bridge the cash gap). Another consideration is that not all customers will utilize the discount. Some may ignore it and just pay in 30 days – in which case you didn’t speed up the cash at all (and you don’t lose the 2% either). Others might take the discount but still pay late, which is a frustrating scenario that credit managers need to watch for and prevent (by enforcing that unearned discounts are not taken).

Dynamic Discounting: Flexible Early Payment Incentives

Dynamic discounting is a more modern and flexible twist on early payment discounts. Instead of a fixed discount like 2% for paying by day 10, dynamic discounting allows the discount to vary depending on how early the payment is made. In a dynamic discounting program, a supplier might say: “Our standard terms are 60 days, but we’ll offer a discount for early payment. The sooner you pay, the larger the discount.” This often requires a platform or arrangement where the buyer and seller can choose an early payment date and calculate the appropriate discount. In practice, the buyer can decide to pay at any point before the due date in exchange for a prorated discount.

Benefits: Dynamic discounting is very flexible and can create a true win-win scenario. The supplier gains significant control over cash flow – you might accelerate a lot of payments during a period when you need cash by offering attractive discounts, or you might hold off if cash flow is fine. It improves liquidity by turning accounts receivable into cash faster, optimizing the cash conversion cycle. Buyers benefit by reducing their costs: they only pay earlier when it makes sense for them (e.g. if they have excess cash earning little interest, they’d rather take a supplier discount). It’s essentially negotiable finance between buyer and seller. Importantly, dynamic discounting doesn’t lock either party into a rigid 10-day window; even paying a few days early might earn some discount. This strengthens supplier-customer relationships – it shows you’re willing to be flexible and work with customers on terms that help both sides. Additionally, from a risk perspective, if more customers pay early, your exposure period shrinks and the risk of non-payment decreases.

Net-10 EOM (End-of-Month Terms)

“Net-10 EOM” stands for “Net 10 days, End of Month.” Under this term, the payment is due 10 days after the end of the month in which the invoice (or goods) is delivered. In other words, all purchases made in a given month must be paid by the 10th day of the following month. This is a bit different from a flat Net-30 or Net-60; it ties the due date to a calendar schedule rather than a fixed number of days from each invoice.

How it works: Suppose you ship goods on April 5 with Net 10 EOM terms – the invoice would be due on May 10. An invoice for goods shipped on April 28 would also be due May 10 (10 days after April 30). So depending on the timing, the buyer effectively gets anywhere from 10 days to as long as 40 days to pay, but all invoices within the month come due together on the tenth of next month. Often, companies that use Net-EOM terms have a practice of monthly billing cycles – sometimes with a cutoff date mid-month. (For example, some buyers treat anything shipped after the 20th as if it were next month’s invoice, meaning it effectively gives a few extra days.)

Benefits: For the seller, Net-10 EOM can simplify collections because you know that, say, on the 10th of each month, you should receive payments for all last month’s sales. It creates a regular cadence to cash flow which can be easier to manage than tracking dozens of individual invoice due dates. It’s also a way to offer customers some credit, but still encourage fairly prompt payment after each month-end. If customers order frequently throughout the month, they might prefer to settle one consolidated payment in the next month rather than multiple payments. This term is common in wholesale and distribution settings where a buyer might receive many shipments over a month – the seller essentially provides an ongoing credit line during the month, then asks for payment of the balance by the 10th of next month. Net-10 EOM is also slightly stricter than Net-30 in the worst case (if a purchase is on the last day of the month, it’s due in 10 days), which can be good for the seller’s cash position while still giving a reasonable window for the buyer on average. It balances well if the buyer’s accounts payable process is geared toward monthly cycles – many companies do a big payment run once a month, so aligning with that (e.g. all invoices due on the 10th) can actually make it easier for them to pay on time.

Milestone-Based Payments

Not all B2B sales are a simple “deliver goods now, pay in X days” scenario. In industries like construction, custom manufacturing, capital equipment, or software development, you often see milestone-based payment terms. Milestone payments break a contract or order into several payment stages tied to progress milestones. For example, a construction materials supplier for a big project might structure payments as: 30% due upon the initial shipment of materials, 50% due when the materials are installed on-site, and 20% due after final inspection. Or a software firm might get 30% up front, 40% at a beta delivery, and 30% upon project completion..

Benefits: Milestone payments are excellent for managing risk and cash flow in long-duration projects. For the seller, it means you’re not waiting until the very end to get paid for a large job – you receive cash as the work progresses, funding your costs along the way. This reduces the chance of doing a huge amount of work (or delivering a lot of product) only to face non-payment at the end. Each partial payment also serves as validation that the buyer is satisfied with progress so far, which can strengthen the ongoing relationship and trust. It also shares the cash flow burden between buyer and seller more evenly throughout the project. For the buyer, milestone terms provide assurance that they only pay as they receive value; it can improve their cash flow planning by spreading out payments, and ensures the supplier has incentive to hit each milestone. In volatile industries, it limits exposure for both parties at any given time. Overall, it aligns payment with performance.

Balancing Cash Flow, Customer Relations, and Risk

Choosing the right trade credit terms is a strategic decision. There is no one-size-fits-all answer – the “best” terms depend on your industry norms, your company’s cash flow capacity, and the creditworthiness and expectations of your customers. A few guiding thoughts for credit managers:

• Know Your Industry Norms: As discussed, what’s standard in one industry may be unusual in another. Offering Net-90 when everyone else offers Net-30 could either be a competitive advantage or an unnecessary burden. Conversely, if 60-day terms are the norm and you only offer 30, you might lose sales.
• Assess Customer Impact: Different terms can either strengthen or strain customer relationships. Longer terms (Net-60/90) can be a selling point for customers who need the flexibility – it might help you win deals and build loyalty because you’re easing their cash constraints. However, long terms might also attract customers who are slower payers or in weaker financial positions, so be sure you trust the partner if extending far.
• Monitor Cash Flow Closely: Every extension of terms is essentially an interest-free loan to your customer. As a credit manager, model the cash flow implications. If you switch a major account from Net-30 to Net-60, how much more cash will be tied up at any given time? Can your company afford that, or will you need to borrow to cover the gap? Tools like DSO calculations and aging reports are your best friends. If you implement early discounts, track how many customers take them – is your cash position improving as expected, and how much are those discounts costing you? Dynamic discounting in particular might require forecasting: if a lot of customers decide to pay early in a quarter to get discounts, you could end up with a revenue shortfall (albeit with more cash on hand). Balance these factors in your budgeting.
• Manage Credit Risk: Longer terms = higher credit risk, pure and simple. The more time passes, the greater the chance something goes wrong. For any extended terms (60 days and beyond, or milestone payments where a lot is at stake over time), ensure you have mitigation in place.
• Customize Terms When Feasible: Not all customers need to have the same terms. It’s often wise to tier your credit terms based on customer segments or risk profiles. For example, new or small customers might start on Net-30 until they build a payment history, whereas strategic accounts or those in low-risk industries might get Net-60. You might offer early payment discounts to customers who have a history of taking advantage of them, and not bother for those who never do.

By understanding the pros and cons of each type of credit term, you can craft a credit policy that supports your company’s financial objectives while also meeting customer need