What are credit terms?

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:

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)