Net 30 has become such a default in B2B commerce that many businesses offer it to every new customer without much thought, simply because it's what everyone else seems to do. But payment terms are a real credit decision with real cash flow consequences, and extending the same terms to a brand-new, unproven customer that you'd extend to a five-year relationship with a strong payment history is a common and avoidable mistake.
Payment Terms Are a Form of Lending
Every time a business ships product or delivers a service before payment arrives, it's effectively extending a short-term loan to the customer, funded out of the business's own working capital. Framing payment terms this way changes the conversation: a business wouldn't lend money to a stranger without checking their creditworthiness, and the same caution should apply before extending 30, 60, or 90 days of unsecured credit to a new customer.
Run Basic Credit Checks Before Extending Terms
For B2B customers, a simple business credit check (through services like Dun & Bradstreet, Experian Business, or industry-specific credit groups), trade references from other suppliers, and a review of how long the business has been operating all provide useful signal before deciding on terms. This doesn't need to be an elaborate underwriting process for smaller transactions, but skipping it entirely for larger orders or new relationships leaves a business making credit decisions blind.
Consider Requiring Deposits or Prepayment for New Relationships
A common middle ground is requiring payment upfront or a partial deposit for a customer's first one or two orders, then transitioning to standard net terms once a payment history is established. This limits exposure during the riskiest period of a relationship — before the business has any actual data on whether the customer pays reliably and on time.
Match Terms to the Size and Risk of the Transaction
Not every sale needs the same terms; a small recurring order carries far less risk than a single large order that would create a significant cash flow gap if it went unpaid late or at all. Consider tiered terms based on order size, with smaller orders getting standard terms and larger orders requiring either a credit check, a deposit, or shorter payment windows.
Understand What Different Terms Actually Signal and Cost
Net 30 isn't the only option, and shorter terms like net 15 or even due-on-receipt are increasingly common and accepted, particularly from smaller suppliers who can't absorb long payment delays. Offering early payment discounts (such as 2/10 net 30, meaning a 2% discount if paid within 10 days) can accelerate cash flow from customers who are able to pay faster, at a cost worth calculating against the value of that improved cash flow.
Put Terms in Writing and Reference Them on Every Invoice
Payment terms need to be clearly stated in a signed agreement or purchase order, not just assumed or mentioned verbally, and every invoice should restate them along with the due date and any late payment penalties. Ambiguity about terms is one of the most common reasons payment disputes drag on longer than they should.
Revisit Terms as the Relationship Develops
Credit decisions shouldn't be permanent; a customer who consistently pays on time can reasonably be offered longer terms or higher credit limits over time, while a customer with a pattern of late payment should have terms tightened or be moved back to prepayment, regardless of how long the relationship has existed. Treating payment terms as a static, one-time decision misses the ongoing information a business accumulates about each customer's actual payment behavior.
Extending generous payment terms by default, without any credit evaluation, is one of the more common ways growing businesses end up with cash flow problems despite strong sales. Matching terms to actual risk, rather than habit, protects the business without necessarily costing it the sale.
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