Payment terms are the conditions under which a vendor completes a sale. The payment terms cover:
- When payment is expected
- Any conditions on that payment
- Any discounts the buyer will receive
Payment terms can apply to any party in the sale, from the wholesaler to the individual consumer.
Common Invoice Payment Terms
- PIA – Payment in advance
- Net 7 – Payment seven days after invoice date
- Net 10 – Payment ten days after invoice date
- Net 30 – Payment 30 days after invoice date
- Net 60 – Payment 60 days after invoice date
- Net 90 – Payment 90 days after invoice date
- EOM – End of month
- 21 MFI – 21st of the month following invoice date
- 1% 10 Net 30 – 1% discount if payment received within ten days otherwise payment 30 days after invoice date
- COD – Cash on delivery
- Cash account – Account conducted on a cash basis, no credit
- Letter of credit – A documentary credit confirmed by a bank, often used for export
- Bill of exchange – A promise to pay at a later date, usually supported by a bank
- CND – Cash next delivery
- CBS – Cash before shipment
- CIA – Cash in advance
- CWO – Cash with order
- 1MD – Monthly credit payment of a full month’s supply
- 2MD – Monthly credit payment of a full month’s supply plus an extra calendar month
- Contra – Payment from the customer offset against the value of supplies purchased from the customer
- Stage payment – Payment of agreed amounts at stage
Discount Payment Terms
- Accumulation discounts – Discounts for large purchases
- Coupons – These have certain terms, such as a certain quantity has to be purchased or if the customer is past a certain age
- Disability discount – Offer to customers with a disability
- Discount card – Issuing cards that give certain customers or any customer a discount
- Educational or student discount – Usually given to students, but may go to educators
- Employee discount – Offered to employees
- Forward dating – Moving the invoice date forward so that the payment is made after receipt of goods
- Military discount – Offered to members of the military and family members
- Partial payment discount – When a seller needs cash flow, he may offer a partial discount
- Preferred payment method discount – Some retailers give customers a lower price if they pay with cash. This saves the fee the retailer pays on credit cards.
- Prompt payment discount – The wholesaler or manufacturer gives a discount to the retailer at the list price or catalogue price. This sometimes applies to promotions.
- Rebates – A refund mailed to the purchaser after a purchase
- Sliding scale – This discount is calculated on a person’s ability to pay. This is common with non-profit organizations.
- Seasonal discount – Usually this is given during a slack period when sales are down.
- Toddler discount, child discount, or kid discount – This covers free or discounted prices for children under a certain age. There is usually a requirement that an adult pay full price.
- Trade discount – Payments for functions such as shelf stocking, warehousing or shipping
- Trade-in credit – A discount for something that is returned
These examples of payment terms show the wide variety of terms that can be offered by the vendor.