Net 30 vs Net 60 vs Net 90: which terms to offer
Every extra 30 days of terms is another month of your cash sitting in someone else's shop. Here is what each term costs you, when it is worth it, and how to say no without losing the order.
In short
- Net 30 is the default for small trade buyers; Net 60 is for large, established accounts; Net 90 is rare and usually a sign the buyer is using you as a bank.
- Doubling the term roughly doubles the cash tied up and the loss if the buyer fails.
- Trade terms and credit limits are two dials: longer terms with a lower limit can keep exposure where it was.
- Early payment discounts are expensive loans in disguise; reminders and collection are cheaper.
What the terms mean
- Net 30
- The full invoice is due 30 days after the invoice or order date. The most common trade term for small and mid-sized buyers.
- Net 60
- Due 60 days after. Common with larger retailers, distributors and buyers with their own long payment cycles.
- Net 90
- Due 90 days after. Mostly seen with very large retailers and in some seasonal trades. Three months of your cash per order.
- 2/10 Net 30
- A 2% discount if paid within 10 days, otherwise the full amount in 30. A discount for early payment that costs the supplier about 36% a year.
- Due on receipt
- Payable as soon as the invoice is issued. Effectively pay-upfront with an invoice.
Side by side
| Net 30 | Net 60 | Net 90 | |
|---|---|---|---|
| Cash tied up per $10,000 of monthly orders | about $10,000 | about $20,000 | about $30,000 |
| Loss if the buyer fails with everything open | 1 month of orders | 2 months | 3 months |
| Typical credit limit | 1 to 2 months of orders | 2 to 3 months | 3 to 4 months |
| Chance the buyer's situation changes before paying | Low | Medium | High |
| Who asks for it | Most trade buyers | Larger retailers, distributors | Very large retailers, some seasonal trades |
| Our view | Default | Earned, with a limit and a review date | Only with a credit report and ideally insurance |
Worked example
What 30 extra days costs
A fashion label ships $15,000 a month to a boutique chain. On Net 30 the label has about $15,000 outstanding at any time. On Net 60 it is $30,000, and on Net 90 it is $45,000. The extra $15,000 at each step is stock the label has paid for, shipped and not been paid for.
If the label borrows at 10% to fund that, Net 60 costs it $1,500 a year in interest on this one account and Net 90 costs $3,000. If the chain fails, the loss at Net 90 is three times the loss at Net 30. The order is the same size either way.
| Monthly orders | $15,000 |
|---|---|
| Outstanding on Net 30 | $15,000 |
| Outstanding on Net 60 | $30,000 |
| Outstanding on Net 90 | $45,000 |
| Extra interest cost of Net 90 at 10% | $3,000 a year |
When Net 60 makes sense
A buyer who orders in large, predictable batches, pays reliably and has published accounts you can read is a reasonable Net 60 risk, particularly if the alternative is losing the account to a competitor who will offer it. The conditions: a limit sized to the longer term, a credit report on file, a review date in writing and, for the largest accounts, trade credit insurance.
A buyer who asks for Net 60 because they are short of cash is a different matter. Longer terms do not fix a buyer's cash flow; they move the problem onto your balance sheet.
When to say no to Net 90
Net 90 is appropriate for a handful of very large retailers whose payment runs genuinely take that long, and for seasonal trades where the buyer sells through before paying. For everyone else, three months is long enough for a business to change hands, change direction or close. If you offer it, do so with a credit report, a limit no larger than one order, insurance where you can get it, and the right to charge interest from day 91 written down.
Negotiating terms
Weak position
- 'What terms would you like?'
- Agreeing Net 60 with no limit because the order is large.
- Offering a discount for early payment to shorten the term back.
- No review date, so Net 60 becomes permanent.
Strong position
- 'Our standard terms are Net 30. For accounts over $10,000 a month we offer Net 60 after three months of trading.'
- Longer terms traded for a lower limit, a credit report or a saved card.
- A review date written into the agreement.
- Due-date collection from the saved card so the term is the term.
Early payment discounts, honestly
2/10 Net 30 sounds small: 2% off for paying 20 days early. Annualised, you are paying 2% for 20 days of money, which is about 36% a year. If you would not borrow at that rate, do not lend at it. Discounts do get some buyers to pay early, but a reminder five days before the due date and a text on the day get most of them to pay on time for nothing.
If you want to reward a good buyer, raise their limit. It costs you nothing while they keep paying.
Setting terms in Shopify
Terms are set per company location, so one buyer can be on Net 30 and another on Net 60 without any custom work. Set the default on each location, override on an order when you need to, and require a saved card at checkout so due-date collection can enforce the date you agreed. The Net 30 setup guide has the steps.
Questions
Is Net 30 counted from the invoice date or the order date?
It depends on your terms. In Shopify the due date is calculated from when the order is placed or the invoice is sent, depending on your setting. Say which in your trade terms.
Can I offer Net 30 to new buyers?
Yes, with a low limit, or take the first order upfront and open terms from the second. Both are normal.
What are standard wholesale payment terms?
Net 30 is the most common for small and mid-sized trade buyers. Larger retailers often expect Net 60. Net 90 is uncommon outside very large accounts and seasonal trades.
Can I move a buyer from Net 60 back to Net 30?
Yes, with notice. Tie it to something: a late payment, a limit increase, or a review date you agreed at the start. Change the term on the company location in Shopify and tell the buyer in writing.
Does a longer term mean a bigger limit?
Usually, because the buyer will have more invoices open. The alternative is to keep the limit and accept that they can order less often. Either is fine as long as everyone knows which.
Related
Setting credit limits
How to decide credit limits and payment terms for wholesale buyers: order value, trade references, credit checks, starting limits and when to review.
Read moreOffering Net 30 on Shopify
A step-by-step guide to offering Net 30 payment terms to wholesale buyers on Shopify, from company setup and trade terms to reminders and collection.
Read moreDue-date collection
Collect Shopify B2B net terms invoices automatically by charging the buyer's saved card on the due date, with advance notice and automatic retries.
Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
Install on Shopify