Net Terms

A payment agreement between a buyer and supplier specifying when payment is due. Net 30 means payment is due 30 days after delivery. Net 60 means 60 days. Standard for B2B trade.

Negotiating net terms with suppliers is a form of free financing. If you can sell inventory before paying your supplier, your cash conversion cycle is negative and the business essentially self-funds its growth.

A wholesale buyer purchases £10,000 of stock on Net 60 terms. She sells the products at retail within 20 days and collects £25,000 in cash. She then pays her supplier on day 60. She used the supplier's capital for 60 days at zero interest.