Trade credit glossary

The words that come up when you sell on terms, defined in plain English. Each one links to the guide or feature that goes into detail.

Updated 16 October 2026 · 6 min read

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Terms and payment

Net terms: An agreement that the buyer pays the full invoice a set number of days after the invoice or order date. Net 30 means 30 days. Also called trade credit, payment terms or an account. See Shopify B2B net terms.
Net 30, Net 60, Net 90: The three most common net terms. Net 30 is standard for small trade buyers; Net 60 for larger accounts; Net 90 is rare and risky. Compared in Net 30 vs Net 60 vs Net 90.
Due on receipt: Payment is due as soon as the invoice is issued. In practice, pay-upfront with an invoice attached.
Due on fulfilment: A Shopify payment term where the invoice falls due when the order is fulfilled rather than when it is placed. Useful for made-to-order goods.
Fixed date terms: A Shopify payment term where you choose the exact due date on the order, for example the end of a season.
Pro forma: An invoice issued before goods are shipped, to be paid before dispatch. The usual arrangement for a new buyer's first order before terms are opened.
Early payment discount: A reduction for paying before the due date, written as 2/10 Net 30: 2% off if paid within 10 days, otherwise the full amount in 30. Costs the supplier roughly 36% a year on the money.
Deposit: Part of the order value paid at checkout with the balance due later. Different from net terms, where the whole amount is due later. Our sister app Balance Due handles deposits on Shopify.

Credit control

Credit limit: The most a buyer is allowed to owe you at one time, including invoices not yet due. Checked against the open balance plus the new order before checkout. See credit limits.
Exposure: The total a buyer currently owes you, or the total all buyers owe. What you would lose if they all failed today.
Credit hold: Stopping a buyer from placing new orders on terms, usually because an invoice is overdue past a grace period or the account is over its limit. Also called a stop list or account stop. See credit holds.
Grace period: The number of days after the due date before a hold is applied. Fourteen days is common; seven for weekly accounts.
Soft limit and hard limit: A hard limit blocks checkout when exceeded. A soft limit lets the order through and flags it for review.
Credit application: The form a buyer completes to ask for terms: legal entity, contacts, bank, trade references and the terms requested. See the credit application guide.
Trade reference: Another supplier the buyer names who can confirm how promptly they pay. Two is usual for a small account.
Trade credit insurance: Insurance that pays out if a buyer fails to pay, usually used for a few large accounts rather than many small ones.
Retention of title: A clause in trade terms under which goods remain the supplier's property until paid for, which can help recover unpaid-for stock if the buyer fails.

Collections

Payment reminder: A message asking for payment of a specific invoice, sent before or after the due date. A sequence of them, by email and text, is the core of a collection process. See payment reminders.
Dunning: The older word for a scheduled sequence of payment reminders that get firmer as an invoice ages.
Due-date collection: Charging the card a buyer saved at checkout for the invoice amount on the due date, with notice beforehand. See due-date collection.
Vaulted card: A payment card saved securely by Shopify at checkout so it can be charged later. The merchant never sees the card number.
Pay-now page: A page where a buyer can see every open invoice and pay one or all of them by card. Linked from every reminder and statement. See statements and pay-now page.
Statement: A document sent to one buyer listing every open invoice, payments received and the total due. Many accounts teams only pay against statements.
Remittance advice: A note from the buyer saying which invoices a payment covers. Useful for matching bank transfers to orders.
Payment plan: A written agreement to clear an overdue balance in instalments on set dates, usually with the account on hold until it is complete. See when a customer will not pay.
Letter before action: A formal letter stating the debt, the deadline and the next step, sent before a court claim. Expected in England and Wales before issuing proceedings.
Statutory demand: A formal UK demand for an undisputed debt that can precede a winding-up petition against a company. Powerful, and only for undisputed debts of £750 or more.
Write-off: Recording a debt as uncollectable and removing it from the receivables. A decision, with a reason, rather than a drift.

Reporting

Accounts receivable: The total your buyers owe you at a point in time. Every unpaid invoice, current or overdue. Often shortened to AR or receivables.
Aging report: A table of unpaid invoices grouped by how many days past due they are: current, 1-30, 31-60, 61-90 and over 90. One row per buyer. See how to read an aging report.
Aging bucket: One of the day ranges in an aging report. An invoice moves to the next bucket as it gets older.
Days sales outstanding (DSO): The average number of days it takes to collect payment on credit sales: receivables ÷ credit sales × days in the period. See DSO explained.
Share past due: Everything past due divided by everything outstanding. The headline health figure for a receivables book; under 25% is healthy for most small wholesalers.
Concentration: How much of the late money sits with one buyer. High concentration means the risk is one account, not the process.
Bad debt: An invoice that will not be paid, usually because the buyer has failed or disappeared. The cost that limits and holds exist to prevent.

UK late payment law

Statutory interest: Interest a UK business can charge on a late business-to-business invoice under the Late Payment of Commercial Debts (Interest) Act 1998: 8% a year above the Bank of England base rate. See UK late payment interest.
Reference rate: The Bank of England base rate used for statutory interest, fixed for each half-year: the rate on 31 December for debts late in January to June, and on 30 June for July to December.
Fixed compensation: A fixed sum per late invoice under the same Act: £40 for invoices under £1,000, £70 up to £9,999.99, £100 for £10,000 or more.
Small Business Plan: UK government proposals of July 2025 to cap payment terms at 60 days, make statutory interest mandatory and give the Small Business Commissioner powers to fine persistent late payers. Proposals at the time of writing; check GOV.UK.

Shopify B2B

Company: A Shopify B2B record for a business customer, with one or more locations and contacts. The unit Terms Due sets limits on.
Company location: A delivery address and account within a company, with its own catalog, payment terms and contacts. Shopify payment terms are set here.
Company contact: A person who can order for a company. Terms Due sends reminders to the contacts you choose.
B2B catalog: A set of products and prices assigned to a company location. Shopify's wholesale price list.
Checkout validation: A rule that runs inside Shopify checkout before an order is created and can stop it with a message. The mechanism Terms Due uses for credit holds.
Draft order: An order created by the merchant in Shopify admin and sent to the buyer to pay or accept. Terms Due flags rather than blocks these.

Questions

Is trade credit the same as net terms?

Yes, in everyday use. Trade credit is the practice of letting a business buyer pay later; net terms are the specific arrangement, such as Net 30.

What is the difference between a credit hold and a credit limit?

A limit caps how much a buyer can owe. A hold stops them ordering on terms, usually because an invoice is overdue or the limit is exceeded.

What is a good DSO?

Close to your terms. On Net 30, up to about 36 days is healthy.

Shopify B2B net terms

How Shopify B2B payment terms work on every plan in 2026, what Shopify does and does not do when invoices go overdue, and how to add credit control.

Reading an aging report

What an accounts receivable aging report is, how the aging buckets work, how to read it and what to do about each bucket, with a worked example.

How Terms Due works

How Terms Due tracks balances, enforces credit limits at checkout, sends reminders and collects Shopify B2B net terms invoices, step by step.

Stop chasing wholesale invoices by hand

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