Payment terms define when and how a buyer must pay a supplier, using the trigger agreed in the contract — and they are often a low-cost form of working-capital financing for a team with recurring supplier purchases.
Net 30 often means payment is due 30 days from invoice date, but the agreed trigger may differ. Confirm when the clock starts, whether a valid invoice or acceptance is required, and how disputes affect payment. Longer terms can reduce working-capital pressure, although prices, fees and discount opportunities also matter.
Quick answers
What are the most common payment terms? COD (Cash on Delivery), Net 15, Net 30, Net 60, 2/10 Net 30 (2% discount if paid within 10 days, full amount due in 30), EOM (End of Month), and CIA (Cash in Advance). The agreed terms should appear in the purchasing record.
What does 2/10 Net 30 mean? The supplier offers a 2% discount if you pay within 10 days of the invoice date. If you do not take the discount, the full amount is due in 30 days. The implicit cost of skipping the discount is 37.2% annualized — often worth taking if you have the cash or a credit line below that rate.
How do payment terms affect cash flow? Longer terms give you more time to sell inventory and collect revenue before the supplier invoice is due. Net 60 instead of Net 30 means 30 extra days of float on every order — provided the price and other conditions are comparable.
Can I negotiate better payment terms? Yes. Suppliers extend better terms to buyers with reliable payment history, consistent volume, and low credit risk. Start by paying on time for 3-6 months, then ask. Offer volume commitments or longer contracts in exchange for extended terms.
What does CIA mean in payment terms? CIA means cash in advance: the buyer pays before the supplier ships. CIA is common for new buyers, custom goods, international orders, or higher-risk accounts. It protects the supplier but is expensive for the buyer because cash leaves before inventory can be sold. Moving from CIA to COD, Net 15, or Net 30 is a meaningful working-capital win.