NET terms are a financing decision wearing a payment-policy costume. When you offer NET 60 to a buyer, you are extending them a sixty-day, interest-free loan from your operating capital. Most mid-market wholesalers don’t think about it that way. They think about it as a competitive concession to close a deal. The math, predictably, gets ugly.
What NET terms actually cost you
Let’s say you ship $50,000 worth of goods on NET 60. Your COGS on that order is $35,000. From the day you ship to the day the invoice clears, you’ve put $35,000 of working capital out the door. If your cash conversion cycle is otherwise tight (you pay suppliers in NET 30), you’re net-negative for 30 days at $35K, you’ve effectively financed the buyer.
Across a year, if you do $1M in NET 60 wholesale at 70% COGS, you’re carrying $115K in financed receivables at any given moment ($1M × 70% × 60/365). At a 9% cost-of-capital (small business credit line), that’s about $10K/year you’re paying for the privilege of giving your buyers free credit.
That’s before late payments. Industry data shows ~15% of NET 60 invoices clear at 75+ days. Add 2–3 weeks of weighted-average drift to the math.
When NET 30 is the answer
NET 30 is the right default for almost everyone. It signals professional credit (immediate-pay-only reads as “I don’t trust you”) without crushing your working capital. Most mid-market buyers can clear NET 30 from their own AR cycle.
Use NET 30 when:
- The buyer is small to mid-market (sub-$50M).
- The relationship is new (under 12 months).
- You haven’t pulled a credit report or D&B history.
- Your own cash conversion cycle is tight.
When NET 60 makes sense
NET 60 is the right tool for two specific situations.
1. Strategic buyers you genuinely want to invest in. A buyer doing $500K+/year with you, with whom NET 60 is a competitive necessity to keep against a competitor offering the same. Treat the financing cost as a customer-acquisition expense and price it in.
2. Larger enterprise buyers whose internal AP cycle requires it. Many corporate AP departments run NET 60 by default; insisting on NET 30 just delays the same eventual payment cycle and adds friction. If your buyer is Fortune 1000, NET 60 is often non-negotiable on their side.
Both cases should come with: (a) a verified credit limit, (b) auto-block when the limit is hit, and (c) explicit late fees (1.5% per month is standard) so you don’t subsidize chronic slow-pay buyers indefinitely.
The mistake: NET as a sales close
The pattern we see most often: a sales rep offers NET 60 mid-negotiation to close a deal. The buyer accepts. The terms get coded into a spreadsheet. A year later, the buyer is doing $200K/year on terms that were never re-evaluated and that nobody at the operator can remember offering.
The fix is structural: NET terms should be set per buyer account at onboarding, with explicit credit limits, an automatic re-evaluation cycle, and a no-discretion enforcement layer at the order-placement step. If your platform makes terms invisible (Shopify largely does), you’ll drift.
NET 90 and beyond
Don’t. NET 90 only makes sense if your gross margin is genuinely above 60% and you’re paid for the financing in price (most operators aren’t). For everyone else, NET 90 is a slow leak.
If a buyer demands NET 90 and you have to offer it: charge a financing premium of 2–3% on the order, factor the receivable, and re-evaluate the relationship at 12 months. Don’t bake NET 90 into your standard playbook.
What this looks like on Mercantyl
Per-buyer NET terms with hard credit limits set in the buyer-account profile. Auto-block when the limit is hit; auto-fee on late payments. Re-evaluation reminders surface in the dashboard at 12 months. The terms exist in the platform, not in someone’s head.
Treat NET like the credit decision it is, not the courtesy it pretends to be.