Buying and selling

What are payment terms? Net 30, credit days, examples

Definition

Payment terms: Payment terms are the agreed rules for when and how a customer pays, such as due on receipt or within 30 days of the invoice date.

Also called: Credit terms, Credit period, Credit days, Net 30, Due date

What payment terms mean

Payment terms tell a customer when payment is due and how to pay. Due on receipt means pay now. Net 30, or 30 days credit, means pay within 30 days of the invoice date. Some businesses add a discount for paying early, such as 2% off within 10 days, or charge interest on late payment.

Business customers often get 7 to 90 days of credit, and terms are usually set customer by customer, based on trust and order size. A new retailer may start on advance payment and move to 15 days once they have paid on time for a few months.

Payment terms with micro and small suppliers

If you buy from a micro or small enterprise registered under the MSMED Act, 2006, the law limits how long you can take. Payment is due by the date agreed in writing, which cannot be more than 45 days from accepting the goods, or within 15 days if nothing was agreed. If you pay late, you owe compound interest at three times the RBI bank rate, and the supplier can take the claim to the state's MSE Facilitation Council. Keep the terms you agree with such suppliers within 45 days.

Setting and following up payment terms

Clear terms only help if everyone can see them. A few habits make the difference:

Print the due date on every invoice, not just the terms, and say what it counts from, such as 30 days from invoice date.
Set terms per customer instead of giving everyone the same 30 days.
Follow up a few days before the due date, not weeks after it.
Shorten terms, or ask for an advance, for customers who are often late.

Worked example

Working out a due date

A Coimbatore pump-parts maker invoices a dealer ₹1,18,000 on 10 October 2026 on 30-day terms, so the due date is 9 November 2026. The dealer pays ₹50,000 on 25 October, leaving ₹68,000 due on 9 November; from 10 November that balance is overdue. On the buying side, if its castings supplier is a registered micro enterprise and they agreed 45 days, a delivery accepted on 1 October must be paid by 15 November.

In managemate

In managemate, each customer and supplier has payment terms: due on receipt, or 7, 15, 30, 45, 60 or 90 days. When you issue an invoice, its due date is the invoice date plus the customer's terms, and a supplier bill's pay-by date defaults from that supplier's terms. Invoices show Due in a number of days, Due today or Overdue by a number of days; overdue invoices rise to the top with a WhatsApp reminder ready to send, and bills due this week appear in Today's plan on the dashboard. Part payments and advances are recorded against the invoice or order. managemate does not charge interest on late payments or apply early-payment discounts.