Term Of Payment Definition
A term of payment is a negotiated agreement between a buyer and seller that establishes when an invoice for goods or services will be paid. The most common terms are ‘net 30,’ meaning the full amount is due 30 days after the invoice date, and ‘net 60,’ which gives the buyer 60 days to pay.
Some businesses offer discounts for early payment, typically within 10 days of the invoice date. For example, a company might agree to pay an invoice in full within 10 days and receive a 2% discount, or pay within 30 days and receive no discount.
In some cases, businesses may require that invoices be paid immediately upon receipt (‘due upon receipt’). This is often the case with utility bills and other types of invoices where service may be disconnected if payment is not received by a certain date.
The term of payment can be affected by many factors, including the type of business, the relationship between the buyer and seller, and industry norms. Some businesses may require that their invoices be paid immediately upon receipt while others may give their customers up to 60 days to pay. It’s important to understand the terms of payment before doing business with a new customer or supplier.
