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Collections

Net terms

How long a customer has to pay after an invoice is issued. Net 30 means thirty days.

Net terms set the payment deadline: Net 30 is thirty days from the invoice date, Net 60 is sixty.

Terms are a financing decision. Every day of terms is a day you fund the customer’s working capital, and it shows up directly in DSO. Enterprise buyers negotiate them hard, and sales teams concede them easily because the cost lands in a different function.

Terms only work if they are enforced. An invoice past its terms is not a communication problem, it is an ageing problem, and it needs a collections process rather than another polite email.

Related terms

  • DSO (Days Sales Outstanding) The average number of days it takes to collect payment after invoicing.
  • Ageing (AR ageing) Outstanding receivables grouped by how overdue they are, usually in 30-day buckets.
  • Collections The process of recovering invoices that are past due, from reminders through to escalation and write-off.
  • Invoice The document that states what a customer owes for a period, line by line, with tax and totals.