What is Net Terms?
Net Terms is a core concept in modern B2B revenue. Here is a clear, accurate definition, why it matters, and how Ardovo handles it.
Short answer
Net terms specify how long a customer has to pay an invoice after it is issued, such as Net 30 for payment within 30 days. They are a form of short-term credit sellers extend to buyers. Longer net terms can help close deals but delay cash collection, so they are balanced against working-capital needs.
Key takeaways
- Define the payment window after invoicing, like Net 30.
- A form of short-term credit to the buyer.
- Longer terms ease buying but delay cash.
- Balanced against working-capital needs.
Why it matters
Net terms affect both deal-making and cash flow. Generous terms can win price-sensitive buyers, but they push out collection, so finance and sales must balance flexibility against cash needs.
How Ardovo handles it
Ardovo captures net terms on the deal and carries them into billing, so invoicing and collection reflect what was agreed. Rook can flag deals with unusually long terms that will strain cash timing.
Frequently asked questions
What does Net 30 mean?
Net 30 means the customer must pay the full invoice amount within 30 days of the invoice date. Net 60 and Net 90 extend that window to 60 or 90 days respectively.
Why do longer net terms matter to a business?
They delay when cash arrives, affecting working capital. A deal with Net 90 terms ties up revenue for three months, so businesses weigh the sales benefit against the cash-flow cost.