Finance term
Net 60 / Net 90
Also known as: Net 60, Net 90, 60-day terms, 90-day terms
Definition
Net 60 and Net 90 are extended payment terms giving buyers 60 or 90 days to pay an invoice. Common in manufacturing, government contracting, and large-enterprise B2B sales. The longer the term, the more working capital the buyer needs to bridge the payment gap.
Detailed explanation
Net 60 and Net 90 terms follow the same logic as Net 30 but with a longer window. They are most common in industries with extended delivery or production cycles, large-enterprise procurement processes, or government contracting (where federal payment terms can legally extend to Net 30 but payment often runs later in practice).
For the buyer, net-60/90 is a working-capital advantage — you're using vendor money for up to 90 days before paying. For the seller, it's the opposite: revenue is tied up in receivables for 60–90 days, creating a funding gap. This is the core reason invoice financing and factoring exist — sellers with net-60/90 terms but near-term cash needs can sell or borrow against those receivables.
The Days Payable Outstanding (DPO) and Days Sales Outstanding (DSO) metrics both track how these payment terms move through a business's cash flow. Long customer terms (high DSO) combined with short vendor terms (low DPO) creates the widest cash conversion cycle gap — and the largest working capital requirement.
The Prompt Payment Act (31 U.S.C. §3901 et seq.) governs federal agency payment timelines — agencies must pay within 30 days or owe interest penalties (https://www.fiscal.treasury.gov/prompt-payment/). The Federal Reserve's Small Business Credit Survey (https://www.fedsmallbusiness.org/reports/survey/2026/2026-report-on-employer-firms) documents how extended receivables cycles drive demand for invoice financing among small government contractors.
◈ Worked example
- A government subcontractor invoices for $200K of completed work on net-60 terms. They won't receive payment for 60 days but have payroll due in 2 weeks. They factor the invoice at 85% advance ($170K) to bridge the gap.
- A furniture manufacturer sells to national retailers on net-90 terms. Average DSO is 75 days. With a 45-day production cycle, the cash conversion cycle is 120 days — the company needs significant working capital financing.
- A staffing company pays employees weekly but collects from client companies on net-60 terms. The mismatch requires a revolving line of credit to fund payroll during the float.
Common questions
The most-asked questions about Net 60 / Net 90 — answered straightforwardly.
Why do large companies demand net-60 or net-90 terms from small vendors? +
Large buyers use extended terms to optimize their own working capital — they're effectively using vendor financing to fund operations. For small vendors, accepting net-60/90 from large buyers can be make-or-break: the contract is too big to turn down, but the cash flow gap can be fatal without financing. Invoice factoring or a revolving credit line is typically the solution.
What is DSO and how does it relate to net-60/90 terms? +
Days Sales Outstanding (DSO) measures the average number of days between issuing an invoice and receiving payment. If you have net-60 terms and customers pay on time, DSO ≈ 60 days. High DSO means more cash tied up in receivables. Lenders and investors watch DSO as a proxy for receivables quality and working-capital efficiency.
How can I negotiate better terms with my buyers? +
Options include: early-payment discounts (2/10 net 30 or net 60) to incentivize faster payment; invoice financing to bridge the gap while keeping the buyer relationship intact; dynamic discounting programs (large buyers like Walmart offer supply chain finance platforms that advance payments for a fee); or simply pricing the terms into your contract rate.
Further reading
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