Net 90
Net 90 (Payment Terms): Meaning, Examples, and When to Use It
Net 90 are invoice payment terms that give a customer up to 90 calendar days from the invoice date to pay the full balance. Net terms are a form of trade credit: the seller delivers goods or services now and collects cash later. You’ll see Net 90 in enterprise procurement, construction, agencies, and B2B supply chains where buyers negotiate longer credit windows.
How Net 90 Works
- Invoice issued: The supplier completes delivery and sends an invoice with the term “Net 90.”
- Due date: Add 90 days to the invoice date (e.g., invoice on March 1 → due on May 30). Some contracts specify “receipt of invoice” or “acceptance” instead of invoice date—match your contract language.
- Collections: AR teams monitor the balance, send reminders, and reconcile payment when funds arrive.
Net 90 vs. Net 30 / Net 60 / Net 120
All are net terms; the number is simply the days until payment is due. Net 30 and Net 60 are more common for SMBs, while Net 90 or Net 120 typically appear with large buyers, long delivery cycles, or complex acceptance criteria. Longer terms help buyers’ cash flow but increase the seller’s DSO (Days Sales Outstanding) and credit risk.
Early-Pay Discounts
Net 90 is often paired with an optional early payment incentive, like “2/10, Net 90”—the customer may take 2% off if they pay within 10 days; otherwise the full amount is due in 90 days. This can accelerate cash collection without changing list price.
Pros and Cons
- Benefits for buyers: Smoother working capital, ability to resell or use inventory before paying, administrative convenience on large projects.
- Trade-offs for sellers: Higher AR carrying costs, potential for late payments or disputes, and greater reliance on credit assessment and dunning.
When to Offer Net 90
- You sell to creditworthy enterprises with established AP processes.
- Deliverables span projects/milestones (e.g., construction, manufacturing, custom software).
- You price in the financing cost or use tools like invoice factoring / supply-chain finance to bridge cash flow.
Practical Example
A $50,000 B2B order invoices on January 5 under Net 90. The due date is April 5. If terms read “2/10, Net 90,” the buyer can pay by January 15 for $49,000 (2% discount) or pay $50,000 by April 5. The supplier’s AR tracks the receivable, sends reminders at 30/60/80 days, and escalates per the collections policy if unpaid after day 90.
Best Practices for Sellers
- Contract clarity: Spell out the start event (invoice date vs. receipt/acceptance), late fees, and dispute windows.
- Credit checks & limits: Set credit limits, require POs, and review buyer risk periodically.
- Automate AR: Use an invoicing platform to send smart reminders, reconcile payments, and export data to your general ledger.
- Offer options: Provide early-pay discounts or online payment methods (ACH/card) to speed cash in.
Related Terms
Payment terms, net terms, invoice payment, accounts receivable, credit policy, cash flow, DSO, early payment discount, Net 30, Net 60, Net 120.
Net 30 vs Net 60 vs Net 90 (Mini Comparison)
“Net” terms specify how many days after the invoice date payment is due. Compare cash-flow impact, use cases, and examples:
Net 30
- Due: 30 days after invoice date.
- Best for: SMB sellers, shorter delivery cycles.
- Seller impact: Lower DSO, stronger cash flow.
- Buyer benefit: Limited working-capital relief.
- Typical industries: Agencies, SaaS, wholesale/distribution.
- Example: Invoice Jan 5 → Due Feb 4.
- Common incentive: 2/10, Net 30 (2% discount if paid in 10 days).
Net 60
- Due: 60 days after invoice date.
- Best for: Mid-market/enterprise buyers, longer approval cycles.
- Seller impact: Higher AR carrying costs; tighter credit control needed.
- Buyer benefit: Better cash-flow flexibility than Net 30.
- Typical industries: Manufacturing, retail procurement, B2B services.
- Example: Invoice Jan 5 → Due Mar 6.
- Common incentive: 1/15, Net 60 (1% if paid in 15 days).
Net 90
- Due: 90 days after invoice date.
- Best for: Large buyers with strict AP processes or milestone-based projects.
- Seller impact: Highest DSO/credit risk; consider limits, factoring, or supply-chain finance.
- Buyer benefit: Maximum working-capital relief.
- Typical industries: Enterprise procurement, construction, complex services.
- Example: Invoice Jan 5 → Due Apr 5.
- Common incentive: 2/10, Net 90 (2% if paid in 10 days).
Tips: Define the start event (invoice date vs receipt/acceptance), add late-fee terms, and automate reminders. For longer terms, price in financing costs or offer early-pay discounts.
FAQs Net 90
Payment is due in full 90 calendar days after the invoice date (or other contract-defined start, like receipt/acceptance).
Less common for small vendors; more typical with large buyers and longer procurement cycles. Many SMBs prefer Net 30–60 due to cash-flow strain.
No. Net 90 is a lawful commercial term, provided it’s mutually agreed and complies with applicable late-payment or prompt-pay laws in your jurisdiction. (Consult counsel for local rules.)
They’re net terms with 30 or 60 days to pay, respectively—shorter windows than Net 90.
“Net” means the full (net) amount is due; the number equals days until the due date.
Payment due 180 days from the start event. Extremely long terms significantly raise AR risk/carrying costs.
Payment due within 30 days (Net 30). It’s widely used among SMBs for healthier cash flow.
Payment due 120 days after the start event; typically negotiated by large enterprises with suppliers.
