Managing Net 30/60/90 Payment Terms

Payment terms are the agreement between you and your wholesale customers about when invoices must be paid. Net 30 means payment is due 30 days from invoice date. Net 60 gives 60 days. Some large retailers demand Net 90 or longer.

The cash flow implication is significant: if you invoice £100,000 on Net 60 terms, you will not receive that cash for two months. Meanwhile, you have paid your suppliers (often on Net 30 or shorter terms), paid your warehouse staff, and incurred packaging and delivery costs. This timing gap — the cash conversion cycle — is the primary working capital challenge for wholesale businesses.

AskBiz calculates your cash conversion cycle in Finance → Working Capital → Cash Conversion Cycle.

In AskBiz, payment terms are imported from Xero or QuickBooks per invoice. Each invoice's due date is calculated from the terms assigned to that customer in your accounting platform.

If you manage terms manually (not via Xero/QuickBooks), go to Customers → Trade Accounts → [account] → Settings → Payment Terms and enter the agreed terms for that account. AskBiz will then calculate due dates and overdue status from those terms.

You can set different terms for different accounts — for example, Net 30 for most accounts, Net 14 for new accounts (until credit history is established), and Net 60 only for your largest, most reliable accounts.

Offering Net 60 or Net 90 terms is not free — it is a form of trade finance that costs you money. AskBiz quantifies this cost:

Financing cost of extended terms = Outstanding balance × Cost of capital (%) ÷ 365 × Days outstanding

Example: £50,000 outstanding at Net 60, cost of capital 8% → £50,000 × 8% ÷ 365 × 60 = £658 in financing cost per invoice cycle.

For large accounts on long terms, these financing costs add up to thousands per year — a cost that should be factored into the account's profitability analysis and potentially recovered through a small price premium for extended terms.

Go to Finance → Working Capital → Terms Cost Calculator to model this for your accounts.

Improving your payment terms — even slightly — has a compounding positive effect on cash flow.

Tactics for improving terms:

• Early payment discounts: offer 1–2% discount for payment within 7 days (e.g. 2/7 Net 30). The discount cost is typically lower than your financing cost for the extended period.
• Direct debit: offer accounts the option to pay by direct debit on the due date — removes the payment friction that causes many late payments
• Shorter terms for new accounts: start new accounts on Net 14 and extend to Net 30 after 6 months of reliable payment
• Performance-based terms: if an account's payment behaviour deteriorates, revert their terms — a formal policy communicated upfront is easier to enforce than a one-off conversation

AskBiz tracks payment behaviour for each account, giving you the data to support these conversations.