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Finance & Payments

Payment Terms

Payment terms are the conditions agreed between buyer and supplier setting when and how an invoice must be paid.

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Payment terms cover the due period — such as net 30 or net 60 days — along with any early-payment discounts, deposits, currency, method of payment and penalties for late payment. They are usually agreed during negotiation and recorded on the purchase order and contract, then applied consistently on each invoice.

Terms are a genuine lever, not just admin. Longer terms improve the buyer's cash flow but can strain the supplier; early-payment discounts trade a small price cut for faster cash. Balancing the two — often through supply chain finance — keeps the relationship healthy while protecting working capital on both sides.

Frequently asked questions

What are payment terms?
Payment terms are the agreed conditions for paying an invoice — the due period, any early-payment discount, deposits, method and late-payment penalties.
Why do payment terms matter?
They directly affect cash flow for both sides. Longer terms help the buyer's working capital; early-payment discounts reward faster payment with a small price reduction.

Go deeper

Payment terms calculatorB2B trade financing

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