Definition of Credit Terms
Credit terms indicate when payment is due for a company's sales invoice (which the customer will refer to as a purchase invoice).
The credit terms also indicate whether a discount can be taken if the invoice is paid in a shorter period of time (the discount period). This discount is also referred to as:
- An early payment discount
- A sales discount for the company selling the goods
- A purchase discount for the customer buying the goods
Examples of Credit Terms
Some examples of credit terms include:
- Net due upon receipt
- Net 30 days (which means the amount owed is due in 30 days)
- 1/10, n/30 (which means 1% can be deducted from the amount owed if paid within 10 days instead of the required 30 days)
- 2/10, n/30 (which means 2% can be deducted from the amount owed if paid within 10 days instead of the required 30 days)
