Supplier payment terms decide how long you have to pay — and that timing has a real effect on your cash flow. Understanding the common terms, and negotiating better ones, can free up working capital without costing you a cent. Here is what the terms mean and how to use them.
What are supplier payment terms?
Payment terms are the conditions under which you pay a supplier — mainly how long you have after delivery or invoice. Longer terms keep cash in your business longer; shorter terms or upfront payment tie it up sooner.
Common payment terms explained
| Term | Meaning |
|---|---|
| Net 30 / Net 60 | Full payment due in 30 (or 60) days |
| 2/10 Net 30 | 2% discount if paid within 10 days, otherwise full amount in 30 |
| COD | Cash on delivery — pay when goods arrive |
| Advance / prepaid | Pay before the supplier ships |
| End of month (EOM) | Due at the end of the month following invoice |
Why payment terms matter
Terms shape your working-capital cycle. If you pay suppliers in 30 days but sell your stock in 20, terms are working for you. If you pay before you sell, cash gets tight. Aligning what you owe (payables) with what you collect (receivables) is the heart of cash-flow management.
Early-payment discounts — do the math
A term like "2/10 Net 30" offers 2% off for paying 20 days early. That can be an excellent return on your cash — but only take it if the cash is not needed more urgently elsewhere. If cash is tight, keeping it may be worth more than the discount.
Negotiating better terms
Terms are negotiable. A reliable payment record and steady volume are your leverage to ask for longer terms or better discounts — see negotiating with suppliers. Then track them so you never miss a due date, see tracking supplier payments.
Manage terms with clear records
RushFlow records each supplier's terms and due dates and keeps a live payables view, so you always pay on the best day — capturing discounts and avoiding late fees.