What it means
When you buy goods or services on Net 60 terms, you do not need to pay immediately. Instead, the supplier issues an invoice, and your business has 60 days to settle the bill.
This practice is common in business-to-business commerce, where companies need time to process invoices, check deliveries, and generate their own revenue before paying suppliers. Offering or accepting these terms involves a trade-off.
For buyers, it preserves vital cash for other operational needs. For suppliers, offering 60 days to pay can attract larger corporate clients who demand extended terms, but it also creates a significant gap between delivering work and receiving money.
Because cash is tied up for two months, suppliers must ensure they have enough working capital to cover their own expenses, such as staff wages and rent, while waiting to be paid. Managing this gap carefully prevents cash flow crises.
In practice
Real-world examples.
Example
A freelance designer sends an invoice for 3,000 pounds on January 1st with Net 60 terms. The client keeps the money in their bank account and makes the full payment by March 2nd.
Example
A catering business delivers food for a corporate conference on May 1st. Under a Net 60 agreement, the client company processes the payment and clears the 4,500 pound invoice by June 30th.
Example
A manufacturing firm orders 10,000 pounds worth of steel parts on September 15th. The supplier grants Net 60 terms, allowing the manufacturer to build and sell its products before paying on November 14th.
Think of it
“Net 60 is like borrowing a library book for two months. You take the item home immediately to use, but you do not have to return it, or in this case pay for it, until sixty days have passed.
Formula
Calculation
Payment Due Date = Invoice Date + 60 Days
Example:
Invoice Date: 10 March
Calculation: 10 March + 60 Days
Payment Due Date: 9 May (assuming a non-leap year)Case study
Seen in the real world.
GreenSprout, a small company supplying organic office snacks, landed a major contract with a national retail chain. The retailer insisted on Net 60 payment terms. GreenSprout delivered 15,000 pounds worth of goods in January. Because their suppliers required payment within 30 days, GreenSprout faced an immediate cash crunch. They had to pay their farmers and packers in February, but the retailer would not pay until late March. To survive the gap, GreenSprout secured a small bank overdraft, using the unpaid invoice as security. While the large contract boosted annual revenue, the 60-day wait taught the founders a harsh lesson about working capital. They realised that sales growth does not equal cash in the bank, and they subsequently negotiated shorter payment terms for future smaller clients to keep their bank balance healthy.
Watch out
Common mistakes.
- Treating Net 60 as 60 business days rather than 60 calendar days.
- Forgetting to check if your own business cash flow can survive a two-month wait for payment.
- Failing to issue invoices promptly, which accidentally extends the waiting period even further.
Questions
People also ask.
Does Net 60 include any discounts for early payment?
Not automatically. Standard Net 60 simply means full payment is due in 60 days. However, suppliers sometimes combine it with a discount, such as 2/10 Net 60, which offers a two percent discount if paid in ten days.
What happens if a customer pays after the 60 days?
Suppliers often charge late fees or interest on overdue balances, provided this was agreed in the initial contract. Consistently late payments can also damage your credit rating with that supplier.
Why would a small business agree to Net 60 terms?
Many large corporations and government bodies refuse to buy goods unless suppliers accept extended payment terms. Small businesses often agree to Net 60 to win lucrative, high-volume contracts.
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