Payment Terms
Also called: credit terms, trade terms
What is Payment Terms?
Payment terms state when an invoice must be paid and under what conditions — days allowed, early payment discounts, and any interest on late payment. They are agreed before supply, not after.
Why Payment Terms matters
Terms decide your cash cycle. Selling on 45 days while buying on 15 means financing the gap yourself, which is exactly how growing businesses run out of money.
Payment Terms formula
Cash gap in days = Days sales outstanding − Days payable outstanding
A positive gap is working capital you are funding.
How Payment Terms works in practice
State terms on the quotation and repeat them on the invoice with a specific due date rather than a vague number of days. Ambiguity always resolves in the payer's favour.
Frequently asked questions
Payment is due in full 30 days from the invoice date.