Q:

What are some common payment terms?

A:

Quick Answer

According to AccountingTools, common payment terms include one or more of the following components: net, discount and end of month. Payment terms are rules a supplier or seller imposes on a buyer.

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Full Answer

A bill or invoice typically provides payment terms to indicate when the payment is due and whether a discount applies. Terms using "net" mean that the full amount is due. For example, "net on receipt" means the payment is due as soon as the buyer receives the goods or services. "Net 30" means the full payment is due within 30 days of the invoice date.

Discount terms indicate whether the seller is offering a discount in certain conditions. "Cash discount 1%" means the seller discounts the invoice amount by one percent if the buyer pays in cash. "Early payment discount 10%" is similar; the seller discounts the invoice amount by 10 percent if the buyer pays before the due date. Discount and net terms are often combined, as in "2% 10 net 30." This term indicates that the seller is offering a two-percent discount for a payment made within 10 days; otherwise, the payment is due within 30 days.

The term "EOM" stands for "end of month" and means that the buyer must pay the bill within a specified number of days following the end of the month. For example, "net 10 EOM" indicates the payment is due within 10 days after the end of the month.

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