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Payment-terms glossary

What are net terms?

Payment timing expressed as a number of days - with the starting event and exceptions made explicit.

Format
glossary
Sections
05
Updated
11 Aug 2026
In brief

Net terms state the period a customer has to pay an invoice, such as Net 15 or Net 30. The number indicates days, but the agreement should also define when counting begins, how weekends or holidays are handled and whether an early-payment discount applies. Net terms set an expected due date; they do not prove delivery, acceptance or payment.

01

What do Net 15, Net 30 and Net 60 mean?

Net 15 generally means the full invoice amount is due 15 days after the agreed starting event; Net 30 and Net 60 follow the same pattern. The start may be invoice date, receipt date or another contractually defined trigger.

Writing only ‘Net 30’ while teams assume different starting events creates avoidable disputes. Put the calculated due date on the invoice and preserve the governing customer term.

  • State the number of days.
  • Define the starting event.
  • Show the calculated due date.
  • Keep approved exceptions visible.

See where terms appear in what is an invoice.

02

How do you calculate a due date?

Identify the contractual start date, add the stated calendar-day period unless the agreement says otherwise, then apply any defined weekend, holiday or local rule. Use the same method in the invoice and follow-up system.

For example, an invoice dated 1 August with Net 30 terms is commonly due on 31 August when counting 30 calendar days from the invoice date. The agreement controls where a different method applies.

  • Start date: 1 August
  • Term: 30 calendar days
  • Illustrative due date: 31 August
  • Confirm contractual exceptions.

Apply reusable customer terms through online invoicing.

03

What does 2/10 Net 30 mean?

The notation commonly offers a 2% discount if the customer pays within 10 days, while the full amount remains due within 30 days. The start event and eligibility rules still need to be defined.

On a $10,000 invoice, the illustrative discounted amount is $9,800 if payment qualifies. If it does not, the full $10,000 is due by the Net 30 date. Tax and accounting treatment should be confirmed for the actual transaction.

  • Invoice amount: $10,000
  • 2% illustrative discount: $200
  • Qualifying payment: $9,800
  • Otherwise due: $10,000 by day 30

Use due dates in payment reminders.

04

Which term is appropriate?

Choose terms from the customer agreement, delivery model, working-capital needs and market context rather than copying a default from another business. Short terms may improve timing but can be unrealistic where customer approval is complex; long terms increase the period the balance remains open.

A term is only useful when both parties understand it and the business can apply it consistently. An unauthorised salesperson or invoice preparer should not silently change the agreed date.

  • Customer agreement
  • Approval and delivery cycle
  • Currency and jurisdiction
  • Authority to grant an exception

Understand how dates feed an AR aging report.

05

How do net terms affect receivable follow-up?

The due date separates an open-but-not-due invoice from an overdue one. Reminders, aging and collection actions should use that date together with delivery, dispute and payment evidence.

A customer should not receive an overdue message because the system used the invoice date as the due date or ignored an approved term change. Preserve the original term, current approved term and reason for any amendment.

  • Before due: confirm delivery and readiness.
  • At due: verify payment state.
  • After due: select the appropriate reminder or resolution path.

Follow the open amount in accounts receivable.

Continue in context

invoice generator.

Common questions

Clear answers without the detour.

What does Net 30 mean on an invoice?

Net 30 generally means the full invoice amount is due 30 days after the agreed starting event. The agreement should identify whether that event is the invoice date, receipt date or another trigger. Showing the actual calculated due date prevents ambiguity. Net 30 does not mean the invoice is overdue immediately or that payment has been received.

Are net terms counted in calendar days or business days?

They are commonly interpreted as calendar days, but the contract or stated policy should control. Define the counting method and how weekends or holidays affect the date instead of relying on assumption. Put the resulting due date on the invoice and use that same date in aging and reminders so customer communication remains consistent with the agreed term.

What does 2/10 Net 30 mean?

It commonly means the customer may deduct 2% when eligible payment is made within 10 days, while the full amount is due within 30 days. On a $10,000 invoice, that would be $9,800 during the discount window and $10,000 afterward. The agreement must define the starting event, eligibility and any transaction-specific treatment.

Are longer payment terms always better for the customer?

Not automatically. Longer terms delay the due date, but pricing, eligibility, purchasing policy and supplier capacity may all be affected. The suitable term reflects a negotiated commercial relationship rather than a universal rule. Businesses should model the period their balance remains open and ensure anyone granting an exception has the authority to change the agreed customer term.

Can payment terms be changed after an invoice is issued?

They can be changed when the parties and authorised internal owners agree, but the amendment should be explicit. Retain the original term, revised due date, reason and approving person rather than silently overwriting the invoice history. Aging, reminders and collection actions should then use the approved current date while preserving enough context to explain the change later.