A net account is a trade credit arrangement in which a supplier lets your business buy goods or services now and pay the full invoice later, within an agreed number of days. The most common terms are Net-30, Net-60, and Net-90, giving you 30, 60, or 90 days to settle the balance. These accounts work as short-term, interest-free credit between businesses, and they are one of the main ways companies manage cash flow without leaning on bank loans or credit card interest. How you handle them also shapes your commercial credit profile, which determines what other vendors and lenders will offer you later.
How the Payment Window Works
The number after “Net” is the number of calendar days you have to pay the full invoice. An invoice dated June 1 under Net-30 terms is due by July 1. Net-60 pushes that to July 31, and Net-90 gives you until August 30. The clock usually starts on the invoice date rather than the delivery date, though some vendors specify otherwise in their agreements.
Some vendors add modifiers that align payment cycles with their own accounting. “EOM” (end of month) starts the payment window at the end of the month when the purchase happened, not the invoice date. Under Net-15 EOM terms, a purchase made any time in March isn’t due until April 15. “Prox” works similarly, tying the deadline to the following month’s calendar. These modifiers can quietly extend your real credit window by a week or more depending on when in the month you order.
Before a new business qualifies for net terms, many vendors require prepayment. You’ll see “COD” (cash on delivery) or “pro forma” arrangements, where you pay before or at the time of shipment. These are essentially trial periods: the vendor evaluates your order volume and reliability before extending actual credit. Graduating from prepayment to Net-30 terms is a meaningful step, because it signals the vendor trusts your ability to pay.
Early Payment Discounts
Many vendors offer a discount if you pay well before the deadline. The most common notation is “2/10 Net-30”: you get a 2% discount if you pay within 10 days, otherwise the full balance is due at 30 days. Variations like “1/10 Net-60” or “3/15 Net-45” follow the same pattern. The first number is the discount percentage, the second is the early-payment window, and the last is the standard deadline.
That 2% looks small, but the annualized math tells a different story. On a 2/10 Net-30 invoice, skipping the discount means you’re effectively paying about 36% annualized for the privilege of holding onto your cash for an extra 20 days. Most business lines of credit charge far less. If your company has the cash available, capturing early payment discounts is one of the highest-return, lowest-risk moves you can make with working capital.
What You Need to Open a Net Account
Applying for a net account is more involved than signing up for a consumer credit card. Vendors run their own credit evaluation, and the application typically goes through their accounts receivable or credit department. You’ll usually need to provide:
- Your legal business name and physical address as registered on state filings.
- Your Employer Identification Number (EIN), the nine-digit tax ID issued by the IRS for businesses that hire employees, operate as partnerships or corporations, or pay certain taxes.1Internal Revenue Service. Get an Employer Identification Number
- Your D-U-N-S Number, a unique nine-digit identifier assigned by Dun & Bradstreet for each physical location. Vendors use it to pull your commercial credit file.2Dun & Bradstreet. Get a D-U-N-S Number
- Two to four trade references, with contact information and approximate monthly spending, from suppliers where you already maintain credit.
- Business bank information, including routing and account numbers, so the vendor can verify your average balance and account age.
- Annual revenue and time in business, which help the vendor set an appropriate credit limit.
Accuracy matters. Inflated revenue or an omitted thin trade history won’t help, because vendors cross-reference your application against your D-U-N-S file and bank records. If the numbers don’t line up, you’ll either be denied or receive a lower credit limit than you expected.
Getting a D-U-N-S Number
If your business doesn’t already have one, register before applying for any net accounts. The SBA recommends it as one of the first steps in establishing business credit.3U.S. Small Business Administration. Establish Business Credit Registration is free through Dun & Bradstreet, though standard processing takes up to 30 business days. Expedited processing is available for a fee and typically delivers the number within eight business days.2Dun & Bradstreet. Get a D-U-N-S Number
You’ll need your legal business name, address, phone number, the name of the owner or principal, legal structure, year of formation, primary industry, and total number of employees. If your business has multiple locations, each one needs its own D-U-N-S Number. A Dun & Bradstreet representative may contact you to verify your information before the number is issued.2Dun & Bradstreet. Get a D-U-N-S Number
What New Businesses Should Expect
A company with no trade references faces a chicken-and-egg problem: you need credit accounts to build a credit file, but vendors want to see a file before approving you. The workaround is starting with vendors that cater to newer businesses. Office supply companies and industrial suppliers are often the first to extend Net-30 terms to companies with limited history, sometimes requiring only 30 to 90 days of operation. Some ask you to prepay orders by credit card for 90 consecutive days before converting your account to net terms.
Building a solid commercial credit file from scratch typically takes six months to a year of consistent, on-time payments across several vendor accounts. Opening three to five starter accounts and paying every invoice early or on time generates enough reported data for the credit bureaus to score your business.
Personal Guarantees and Owner Liability
Newer businesses and those with thin credit files will almost certainly be asked for a personal guarantee. A personal guarantee means the business owner promises to repay the debt personally if the business can’t.4U.S. Small Business Administration. Unsecured Business Funding for Small Business Owners Explained This is standard practice rather than a red flag, but it has real consequences you need to understand before signing.
With a personal guarantee in place, a default on your business net account can spill onto your personal credit report. Some creditors report only negative activity like defaults and late payments to the consumer bureaus, while others report all account activity. Policies vary by creditor and can change, so read the guarantee language carefully. Banks and credit unions require personal guarantees more often than online-only vendors, and the requirement is especially common for unsecured credit where no collateral backs the account. As your business credit profile strengthens, you gain leverage to negotiate the guarantee away on future accounts.
How Ordering and Payment Work
Once approved, you place orders through the vendor’s purchasing portal, sales team, or ordering system up to your approved credit limit. After an order ships, the vendor generates an invoice listing what was purchased, the quantities, unit prices, and the payment deadline. This invoice is the legal record of the transaction and usually arrives by email or through integrated accounting software.
Before paying, verify that what you received matches the invoice. Check quantities, pricing, and product condition. If something is wrong, contact the vendor immediately rather than paying the disputed amount and sorting it out afterward. Most vendor agreements include a process for filing disputes, and the Uniform Commercial Code gives buyers the right to reject non-conforming goods in commercial transactions. Paying a disputed invoice without raising the issue first can weaken your position.
For settled invoices, most businesses pay through Automated Clearing House (ACH) transfers, which move funds directly between bank accounts. Online payment portals, wire transfers, and physical checks are also common. If you’re mailing a check, send it early enough that it arrives before the net term expires. The payment date is usually when the vendor receives the funds, not when you drop the envelope in the mail.
How Net Accounts Affect Business Credit
Every invoice you pay, or miss, on a net account can end up on your business credit report. Vendors report payment data to commercial credit bureaus like Dun & Bradstreet, Experian Business, and Equifax Business, where it’s compiled into a credit profile that other vendors and lenders review before extending you credit.5Experian. Business Credit Report
PAYDEX and Intelliscore Plus
The Dun & Bradstreet PAYDEX Score is one of the most widely referenced metrics. It runs from 1 to 100, with 80 or above generally considered good. The score is dollar-weighted, so larger invoices count more heavily, and it’s based entirely on how you pay relative to your agreed terms. A company that consistently pays on time or early will score in the 80s or 90s; one that regularly pays late will drop below 50.
Experian’s Intelliscore Plus is another common score, also on a 1 to 100 scale. It predicts the likelihood that a business will become seriously delinquent within the next 12 months, and higher scores mean lower risk.6Experian. Intelliscore Plus Product Sheet Unlike PAYDEX, Intelliscore can incorporate the business owner’s personal credit data for smaller companies, which is another reason personal guarantees have downstream effects.
Days Beyond Terms
One metric that trips up businesses is “days beyond terms” (DBT), the average number of days past the due date your payments arrive. A DBT of zero means you’re paying on time. A DBT of 15 means you’re averaging two weeks late. According to Experian, 80% of U.S. businesses have a DBT between zero and 15 days, with the national average around seven. Even a modest DBT can hurt your profile because potential creditors read it as a pattern, not a one-time slip. A bad stretch of late payments can drag down your score quickly, and recovering takes months of clean payment history.
Late Fees and Consequences of Non-Payment
Missing a deadline isn’t just a credit score problem. Late fees on commercial invoices commonly run between 1% and 1.5% per month on the outstanding balance, which works out to 12% to 18% annualized. Some vendor agreements charge a flat percentage per occurrence instead. The fee structure has to be spelled out in your signed agreement to be enforceable; a vendor can’t spring a late fee on you that wasn’t in the original contract. Over 30 states have no statutory cap on commercial late fees, so contract terms govern.
If a bounced check caused the missed payment, expect a separate returned-check fee on top of the late charge. These commonly range from $20 to $40 depending on the state and the vendor’s terms.
Escalation Beyond Late Fees
Unpaid commercial invoices don’t sit in limbo. Vendors typically follow a predictable escalation: reminder calls and emails within a few weeks of the missed deadline, followed by formal demand letters if the account remains unresolved. If the debt stays unpaid after demand letters, the vendor may turn it over to a commercial collection agency or pursue legal action.
For lawsuits over unpaid invoices involving the sale of goods, the Uniform Commercial Code sets a four-year statute of limitations from the date of the breach, meaning the vendor has four years from the missed payment date to file suit. The parties can agree to shorten this period to as little as one year in their original contract, but they cannot extend it beyond four years.7Legal Information Institute. UCC 2-725 Statute of Limitations in Contracts for Sale One important boundary: the federal Fair Debt Collection Practices Act, which limits how aggressively collectors can pursue consumers, does not apply to commercial debts. Business debt collectors operate under fewer restrictions.
A vendor that sends your unpaid account to collections will almost certainly report the delinquency to the commercial credit bureaus. That record will follow your business for years and make it substantially harder to open new net accounts, secure business financing, or negotiate favorable terms with future suppliers. For businesses that signed a personal guarantee, the vendor can also pursue the owner’s personal assets and report the default to consumer credit bureaus.
Using Net Accounts to Build Business Credit
Net accounts are one of the few tools available for building a business credit profile from zero. The SBA identifies establishing business credit as a key step for companies that want better financing terms and stronger supplier relationships.3U.S. Small Business Administration. Establish Business Credit The strategy is straightforward: open several net accounts with vendors that report to the major commercial bureaus, pay every invoice on time or early, and let the payment history accumulate for six to twelve months.
Not all vendors report to the credit bureaus. Before opening an account specifically to build credit, confirm with the vendor that they report payment data to at least one of the three major commercial bureaus. An account that doesn’t get reported does nothing for your credit file no matter how perfectly you pay it. Office supply vendors and industrial suppliers are popular starting points because they tend to have lower approval thresholds and consistent reporting practices.
Paying early is worth the effort even when no discount is offered. PAYDEX rewards payments that arrive before the due date, and an early-payment pattern signals to future creditors that your business manages cash flow well. Once you’ve built a solid base of three to five reporting accounts with clean histories, you’ll have a much easier time qualifying for larger credit lines, better net terms, and traditional business financing.