Net Payment Terms

Net payment terms specify the number of days a buyer has to pay a supplier invoice after the invoice date. "Net 30" means the full invoice amount (net of any discounts) is due within 30 calendar days of the invoice date. "Net 45" means 45 days, "Net 60" means 60 days, and so on. The word "net" in this context means the total invoice amount -- as distinct from early payment discount terms like "2/10 net 30" where "net 30" refers to the deadline for the full amount while "2/10" indicates an optional early payment discount.

Net payment terms are the most common payment term structure in Australian business-to-business transactions. The default in most industries is net 30, though actual terms vary by industry and supplier. Industrial goods suppliers often offer net 30 to net 45 as standard. Professional service firms commonly bill net 14 or net 30 for cash flow reasons. Large construction contracts may specify payment within 15 or 20 business days of a valid payment claim under SOPA.

When the clock starts

The starting point for net payment terms -- the "invoice date" -- is an important definition that varies by agreement. The most common reference points are: the date the invoice is issued by the supplier; the date the invoice is received by the buyer; or the date at which goods or services are accepted by the buyer. Disputes about payment timeliness often turn on which reference point applies. Most standard terms use invoice date as the reference; some negotiated agreements use receipt date or acceptance date, particularly in construction contracts where acceptance is a formal step.

For AP scheduling purposes, the AP system should record the invoice date from the invoice itself (not the date the invoice was entered into the system), and calculate the payment due date from that invoice date using the supplier's agreed terms. If the invoice date and the entry date are different (because of a processing delay), the payment due date is still driven by the invoice date -- the processing delay does not extend the payment obligation. This is a common source of late payments: invoices processed late are calculated against the entry date rather than the invoice date, making the due date appear further away than it actually is.

Net terms and industry norms

Understanding payment term norms in your industry is important both for setting supplier expectations and for negotiating with customers on the receivables side. Industries with capital-intensive supply chains (construction materials, mining consumables, heavy manufacturing inputs) tend to have longer standard terms because suppliers understand that buyers need to collect payment from their own customers before paying their suppliers. Industries with perishable goods or tight operating margins (fresh food, small professional services firms) tend to push for shorter terms.

The ATO's prompt payment guidelines for government bodies (28 days from receipt of a correctly rendered invoice) and the Prompt Payment Protocol promoted by the Australian Small Business and Family Enterprise Ombudsman provide reference points for best-practice commercial payment terms. Neither is legally binding for most private sector transactions, but both reflect the policy consensus that faster payment of small business suppliers is a desirable commercial and economic norm.