Net 60 is a payment term on a business invoice that gives the buyer 60 calendar days to pay the full amount owed. The “net” refers to the total due after any adjustments such as returns or agreed rebates, and the “60” is the number of days in the payment window. In practice, it works as an interest-free, short-term line of credit built into the sale itself, letting the buyer hold onto cash for two months before settling with the seller.
The gross amount on an invoice is the full pre-adjustment total. The net amount is what remains after credits, returns, or negotiated rebates are subtracted. That net figure is the number the buyer needs to clear by the deadline. Sellers accept the longer wait because it attracts larger buyers and encourages repeat business; buyers benefit because a longer term directly improves their working capital position.1J.P. Morgan. How Net Payment Terms Affect Working Capital
How to Calculate the Payment Deadline
Under the Uniform Commercial Code, the credit period on shipped goods runs from the time of shipment, though postdating an invoice pushes that start date back by a corresponding number of days.2Legal Information Institute. UCC 2-310 Open Time for Payment or Running of Credit Most Net 60 invoices in practice use the invoice date as the starting point, since invoices go out at or near shipment. If your contract names a different trigger, such as the date you receive the goods, that agreement controls.
Count 60 consecutive calendar days from the day after the invoice date. Weekends and holidays count toward the total. If day 60 lands on a weekend or federal holiday, standard commercial practice pushes the deadline to the next business day. An invoice dated March 1 starts the clock on March 2, and day 60 falls on April 30.
The Net 60 EOM Variation
Some invoices read “Net 60 EOM,” which stands for “end of month.” Instead of counting from the invoice date, the clock starts at the end of the month the invoice was issued. An invoice dated November 15 with Net 60 EOM terms starts the 60-day count on November 30, making payment due around January 29. This batches all invoices from a given month into one payment cycle, which simplifies bookkeeping on both sides.
Reading Discount Shorthand Like 2/10 Net 60
Invoices sometimes carry shorthand like “2/10 Net 60.” That means the buyer gets a 2% discount for paying within 10 days; otherwise, the full net amount is due on day 60.1J.P. Morgan. How Net Payment Terms Affect Working Capital The first number is the discount percentage, the second is the early-payment window, and the third is the standard deadline.
The annualized cost of skipping that discount is higher than most buyers assume. Divide the discount rate by the number of days you’re paying early, then multiply by 360. For 2/10 Net 60, you’re giving up 2% to keep your money for 50 extra days, which annualizes to roughly 14.4%. If your cost of borrowing is lower than that number, paying early and taking the discount is the better financial move. Anyone in accounts payable should run this math on every discounted invoice rather than defaulting to the full window.
How Net 60 Compares to Net 30 and Net 90
Net 30 is the baseline across most industries. Buyers get a month to pay, which works when the purchased goods or services generate revenue quickly. It’s typical for professional services, office supplies, and smaller wholesale orders.
Net 60 doubles that runway. It fits transactions where the buyer needs time to process, assemble, or resell goods before cash comes in. Shifting from Net 30 to Net 60 doubles the time a buyer can hold onto cash.
Net 90 is the longest standard term and carries real risk for the seller. Three months of outstanding receivables can strain a small supplier’s cash flow, so Net 90 tends to appear in government contracting and in relationships where a large buyer has enough leverage to dictate terms.
Where You’ll See Net 60
Manufacturing and wholesale are the classic Net 60 sectors. A company producing industrial equipment may spend weeks assembling a product before the buyer can put it to use and generate revenue. Net 60 aligns the payment obligation with that reality.
Large-scale retail distribution also runs on Net 60. Distributors need time to move inventory through warehouses and onto store shelves, and the payment window gives them room to collect from downstream customers before settling with suppliers. Construction suppliers, agricultural equipment dealers, and specialty chemical manufacturers use similar terms because their supply chains are long and shorter windows would push buyers into unnecessary short-term borrowing.
What Happens When You Pay Late
Missing a Net 60 deadline usually triggers a late fee first. Most commercial contracts specify a monthly interest charge on overdue balances, typically between 1% and 2% per month. State laws cap these charges, and the limits vary significantly by jurisdiction. Some states allow only a modest annual rate when no contractual rate is specified, while others permit substantially higher charges on commercial transactions.
The less visible damage is to your business credit profile. Dun & Bradstreet’s PAYDEX Score, the most widely used measure of business payment performance, tracks how quickly a company pays relative to its agreed terms. A company that consistently pays five or ten days late on Net 60 invoices will see that reflected in a lower score, and suppliers, lenders, and prospective partners all check that number before extending credit or signing contracts.
If the debt goes unpaid long enough, the seller has legal options. Under the UCC, a seller can file a breach-of-contract action for unpaid invoices. The standard limitations period is four years from the date the breach occurred, though contracts can shorten that window to as little as one year.
If the Goods Are Defective
Receiving defective goods doesn’t let you ignore the Net 60 deadline. Under the UCC, a buyer who has accepted goods must notify the seller of the problem within a reasonable time after discovering it, or lose the right to any remedy.3Justia. Ohio Code 1302.65 (UCC 2-607) Effect of Acceptance Notice of Breach The notice doesn’t have to be a formal legal demand. It just needs to tell the seller the transaction has a problem and that you expect it resolved.
The burden of proving the defect rests on the buyer, so document everything: photographs, inspection reports, correspondence. Once you’ve sent proper notice, you and the seller can negotiate an adjustment to the invoice, a replacement shipment, or a credit. Staying silent and withholding payment is the worst approach, because it turns a legitimate quality dispute into what looks like a collections problem.