Net Terms for Wholesale: Net 30, Net 60 Explained

How Net Terms Work

The mechanics of net terms are straightforward. A buyer places an order. You ship the order and send an invoice with a payment due date based on the agreed terms. If the terms are Net 30, the buyer has 30 days from the invoice date to pay. If the terms are Net 60, they have 60 days. The buyer receives the goods, begins selling them, and pays your invoice from the revenue those sales generate.

The most common net terms in wholesale are Net 30 (payment due 30 days from invoice, the most widely offered term for established accounts), Net 60 (payment due 60 days, common for larger retailers and chain accounts), Net 15 (payment due 15 days, sometimes offered as an intermediate step before granting full Net 30), and 2/10 Net 30 (the buyer gets a 2 percent discount if they pay within 10 days, otherwise the full amount is due in 30 days). The 2/10 Net 30 structure is a popular compromise because it incentivizes early payment while still offering the buyer flexibility to pay later at full price.

From the seller's perspective, net terms mean you are extending credit to your buyers. You have paid for inventory, paid for shipping, and delivered goods to a buyer who has not yet paid you. Your cash is tied up for the length of the net terms period. If you ship a $5,000 order on Net 60 terms, that $5,000 in receivables does not become cash in your bank account for two months. This is why cash flow management is so critical for wholesale businesses, you need enough working capital to fund the gap between shipping orders and receiving payment.

When to Offer Net Terms

Do not offer net terms to every buyer from day one. New buyers should pay upfront (credit card or ACH at checkout) for their first one to three orders. This proves they are a legitimate business that actually pays, and it protects your cash flow while you build the relationship. After a buyer has placed two to three orders with on-time prepayment and you have verified their business (resale certificate, physical location or active website, business registration), you can offer Net 30 as a relationship benefit.

The decision to offer terms should be based on the buyer's creditworthiness, not just their eagerness. A buyer asking for Net 60 on a $10,000 order before they have placed a single order with you is a red flag. Start new accounts with prepaid terms, graduate them to Net 15, then Net 30, then Net 60 as their order history and payment reliability prove out. This graduated approach limits your exposure while giving reliable buyers the terms they need.

Industry norms matter. In some product categories like food and beverage, health and beauty, and general merchandise, Net 30 is so standard that refusing to offer it will cost you accounts. In other categories like handmade goods and artisan products, prepaid or cash-on-delivery terms are more common. Research what your competitors offer and match or exceed their terms for accounts that qualify.

Managing Credit Risk

The risk with net terms is non-payment. A buyer who goes out of business, runs into cash flow problems, or simply decides not to pay leaves you with an accounts receivable balance that may never convert to cash. Managing this risk requires a structured credit evaluation process, clear credit limits, and consistent collections procedures.

For new accounts requesting terms, run a basic credit check using a business credit service like Dun and Bradstreet, Equifax Business, or CreditSafe. These services provide business credit scores, payment history data, and risk ratings for $30 to $100 per report. A business with a strong credit history and a D&B PAYDEX score above 70 is generally low risk for Net 30 terms. A business with no credit history or a poor score should stay on prepaid terms until they build a payment track record with your company.

Set credit limits that cap the maximum outstanding balance a buyer can carry at any time. A new Net 30 account might start with a $2,000 credit limit, meaning they can place orders on terms up to $2,000 in total outstanding invoices. As they pay consistently over 6 to 12 months, increase the limit to match their purchasing patterns. If a buyer hits their credit limit, additional orders require prepayment until outstanding invoices are paid, which prevents any single account from accumulating dangerous levels of receivable exposure.

Tools for Managing Net Terms

Manual invoicing and payment tracking becomes unmanageable beyond 10 to 20 active wholesale accounts. Software tools automate invoice generation, payment reminders, aging reports, and collections workflows.

QuickBooks and Xero are the most common accounting platforms for small wholesale businesses and include invoicing, payment tracking, accounts receivable aging, and automated payment reminders. Both integrate with ecommerce platforms and payment processors for reconciliation.

Dedicated B2B payment platforms like Resolve, Behalf, and Credit Key specialize in wholesale net terms. These platforms evaluate buyer credit, underwrite net terms, and guarantee payment to the seller. You get paid immediately (or within a few days) when the order ships, and the platform collects from the buyer on the agreed terms. The cost is 2 to 4 percent of the invoice value, which is similar to credit card processing fees but eliminates all credit risk and cash flow delays. For wholesale businesses where net terms are consuming working capital or creating collection headaches, these platforms are a significant operational improvement.

Faire, the largest wholesale marketplace, includes built-in net terms for buyers. When a buyer orders on Faire with Net 60 terms, Faire pays the seller immediately (minus commission) and assumes all payment risk. This is one of Faire's most attractive features for sellers, as it eliminates the cash flow delay and credit risk of traditional net terms, though the 15 to 25 percent marketplace commission is the tradeoff.

Handling Late Payments

Late payments are an inevitable part of wholesale. Even reliable buyers occasionally pay late due to internal accounting delays, cash flow timing, or simple oversight. Your response to late payments should be systematic, not emotional. Send an automated payment reminder 5 days before the due date (a friendly heads-up), a follow-up reminder on the due date, and a past-due notice 7 days after the due date that mentions late fees if applicable.

Include late payment terms in your wholesale agreement. Common provisions include a 1.5 to 2 percent monthly interest charge on past-due balances, suspension of future orders until the past-due balance is paid, reversion to prepaid terms for accounts with repeated late payments, and a collections escalation timeline (30 days past due triggers a phone call, 60 days triggers a formal demand letter, 90 days triggers collections agency referral).

For chronically late payers who are otherwise good accounts, consider switching them to 2/10 Net 30 terms with a meaningful early payment discount, which incentivizes on-time payment without losing the account. For accounts that are genuinely uncollectible (bankrupt, non-responsive, disputed), write off the bad debt and use it as a tax deduction. Maintaining detailed records of your collection efforts supports the tax deduction and strengthens your case if you pursue legal action through small business legal channels.