Net 30 or Net 60? How to choose payment terms for wholesale
A retailer asks for Net 60. Your instinct says no, but they order well and you would rather not lose them. So you agree, and two months later you are wondering why the bank balance looks worse than the sales figures.
Payment terms are the least examined number in most wholesale businesses. They get set once, copied from whatever the first big customer asked for, and never revisited — even though they decide how much of your own money is permanently parked in other people's warehouses.
Here is what the numbers actually mean, what the law allows, what a longer term really costs you, and how to decide.
What Net 30 actually means
Net 30 means the full amount is due 30 days after the invoice date. Net 60 means 60. The word "net" simply means no discount is being offered — it is the plain amount, as opposed to terms like 2/10 net 30, which we come back to below.
The part that causes arguments is not the number. It is when the clock starts.
- From the invoice date. The usual reading, and the one you want. Your buyer's 30 days start the day you issue the document.
- From receipt of the invoice. Common in larger organisations. If the invoice takes five days to reach the right inbox, you have quietly granted Net 35.
- End of month terms. Written as "Net 30 EOM" or "30 days end of month". The clock starts at the end of the month in which the invoice was issued. An invoice on 2 September is not due on 2 October but on 31 October — nearly Net 60 wearing a Net 30 label.
The law sets a ceiling you may not know about
Payment terms are not purely a matter of negotiation. In the EU, Directive 2011/7/EU on combating late payment sets limits that apply whether or not anyone mentions them.
- Business to business: the payment period should not exceed 60 days. It can go beyond that only if both sides expressly agree and the term is not grossly unfair to the creditor.
- Public authorities: 30 days, extendable to 60 only in specific cases such as healthcare.
- Statutory interest: the European Central Bank reference rate plus eight percentage points, running automatically from the day after the due date. No reminder is required to start it. For the second half of 2026 that works out at 10.40% a year.
- Recovery costs: a flat €40 is owed on every late invoice, on top of interest, and reasonable costs beyond that can be claimed as well.
You may have read that the EU was about to cap everything at 30 days. The Commission did propose exactly that in September 2023, as a regulation replacing the directive. Member states blocked it and the proposal has not survived. The 2011 directive and its 60-day rule remain the operative law.
In the United Kingdom, the Late Payment of Commercial Debts (Interest) Act 1998 works similarly: interest at eight percentage points above the Bank of England base rate, plus a fixed recovery sum that scales with the size of the debt. In the United States there is no general rule for B2B transactions at all — the Prompt Payment Act binds federal agencies, not private buyers. Whatever your contract says is what applies.
Most merchants never invoke any of this, and that is a reasonable commercial choice. But knowing that interest accrues automatically changes the tone of the conversation on day 75. You are not asking for a favour.
What a longer term actually costs you
The cost of Net 60 is not abstract. Take a business invoicing €40,000 a month on Net 30. At any given moment roughly one month of sales is outstanding — about €40,000 of your money sitting in other people's businesses. Move everyone to Net 60 and that figure roughly doubles to €80,000.
That €40,000 difference is money you have to find somewhere. Either it comes out of your own reserves, in which case you are financing your customers for free, or it comes from an overdraft, in which case you are paying interest for the privilege of being paid late.
The number to watch is days sales outstanding — your average receivables divided by daily sales. It tells you how long, on average, it actually takes to get paid, as opposed to how long your terms say it should. The gap between the two is usually the interesting part. If your terms say 30 and your DSO is 47, your real terms are Net 47, and you should either enforce the 30 or price for the 47.
How to choose
Start at Net 30 by default
It is the most common term in wholesale, buyers expect it, and it does not need justifying. Longer terms should be something you grant deliberately, not the starting position.
Reserve Net 60 for accounts that earn it
Larger retailers and chains often genuinely cannot pay faster — their approval process is slow and their own terms are dictated by group policy. If the volume justifies it, Net 60 is a legitimate concession. Treat it as a concession: something given in exchange for order size, a commitment, or a better price on your side.
Make new customers earn terms at all
The riskiest invoice you will ever issue is the first one to a business you have never traded with. Prepayment or card on the first two or three orders costs you very little goodwill and removes most of your bad debt risk. Shopify B2B lets you set payment terms per company, so this is a setting rather than a policy document.
Shorten terms where you carry the inventory risk
If you are making to order, holding stock or paying suppliers upfront, you are already financing the transaction once. Financing it a second time through long payment terms is how profitable businesses run out of cash.
Early payment discounts: do the arithmetic first
The classic offer is written 2/10 net 30: take 2% off if you pay within 10 days, otherwise the full amount is due at 30.
It sounds modest. It is not. You are giving up 2% of the invoice to be paid 20 days sooner. Annualised, that is roughly 37% — 2 divided by the remaining 98, multiplied by the 18 twenty-day periods in a year. Almost no business has a cost of capital anywhere near that.
That does not make early payment discounts wrong. If you are genuinely short of cash, 37% may be cheaper than the alternatives, and there is real value in a customer who reliably pays on day 8. But offer it as a deliberate decision, not because it looked like a small number.
A gentler version: 1/10 net 30 costs about 18% annualised and still moves a surprising number of payments forward.
The number matters less than the enforcement
Here is the uncomfortable part. Most merchants agonise over whether to offer 30 or 60 days, then undermine the decision entirely by how they handle the invoice.
- The invoice goes out late. An invoice issued five days after the order turned Net 30 into Net 35 before anyone did anything wrong.
- Nobody watches the due date. If you find out an invoice is overdue because you happened to look, you will find out weeks after it happened.
- The first reminder comes too late. A short note a few days before the due date prevents far more late payments than a firm letter afterwards. Most buyers are not refusing to pay — the invoice is sitting unapproved in a queue, and a nudge moves it to the top.
Tighten those three and Net 60 with discipline will beat Net 30 without it, every time. Loosen them and it does not matter what the contract says.
A workable policy
If you want something to copy:
- New customers: prepayment for the first two orders
- Established customers: Net 30, due date printed as a date
- Key accounts above an agreed annual volume: Net 60, reviewed once a year
- Reminder three days before due, then at 7, 14 and 30 days overdue
- Terms suspended, not renegotiated, once an account is more than 60 days overdue
Write it down and apply it to everyone. The value of a payment terms policy is not the specific numbers — it is that you stop deciding case by case while a customer is on the phone.