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The net terms on invoices your company receives aren’t just payment deadlines—they directly impact your working capital and vendor relationships.

Paul Kizirian, Executive Director for Treasury Consulting at J.P. Morgan, explains how invoice payment terms work, why accounts payable (AP) automation is key to capturing early payment discounts and shares strategies for optimizing working capital while meeting terms.

Net terms represent the payment timeline within trade credit agreements between vendors and buyers.

They’re commonly expressed as net 30, net 60 or net 90, and give buyers 30, 60 or 90 days, respectively, to submit payment for the net—or full—amount invoiced.

While net 30 is a particularly common invoice payment term, vendors and buyers tailor terms to their operational and cash flow needs.

A vendor that wants to incentivize faster payment may offer an early payment discount. For example, 2/10 net 30 means the buyer receives a 2% discount if they pay within 10 days. Otherwise, the full amount is due in 30 days. The buyer can’t claim the discount if they are slow to process invoices and cannot pay within the 10-day time frame.

Invoice payment terms influence working capital and supplier relationship management.

Shifting from net 30 to net 60 lets buyers hold cash twice as long, extending Days Payable Outstanding (DPO), which provides a direct working capital benefit. But it has the opposite effect on vendors by delaying their receivables, extending their Days Sales Outstanding (DSO). Vendors prefer to minimize DSO within their accounts receivable.

Negotiating terms should include discussing early payment discounts as a strategy that helps buyers and vendors balance their working capital needs.

“If the buyer can consistently capture discounts, the bottom-line savings can be significant. Terms are very important yet often overlooked,” Kizirian said.