Payment Terms Every Wholesale Seller Should Know

Payment terms look like an administrative detail. They are actually a pricing decision, and most brands make it without doing the arithmetic.

Every term you extend is a short term loan you are giving a retailer, priced at whatever your own cost of capital happens to be. Offer Net 60 instead of Net 30 and you have funded that account's inventory for an extra month. Offer an early payment discount and you have cut your margin to buy back your own cash sooner. Neither is wrong. Both should be deliberate.

RepSpark's own wholesale metrics guidance notes that delayed payments in this industry can stretch beyond 75 days. That is the gap between what your terms say and what your bank account experiences.

Here are the terms worth knowing, what each one actually costs, and how to decide which accounts get which.

A note before the list. This is general information about how wholesale terms work, not financial or legal advice. Your credit policy should be set with your own finance team and counsel.

Terms That Delay Your Payment

Net 30, Net 60, Net 90. The full invoice is due in that many days. The number is the easy part. The hard part is what the clock starts from, which is almost never specified clearly enough. Invoice date, ship date, and date of receipt can differ by two weeks on a cross country shipment, and retailers will reliably choose the interpretation that favors them. Write the trigger event into your terms, not just the number.

Net 30 EOM, sometimes written MFI or proximo. Payment is due 30 days after the end of the month in which the invoice was issued. An invoice dated the 2nd and an invoice dated the 28th become due on the same day. This quietly extends your average collection period by about two weeks compared with true Net 30, which is exactly why buyers like it.

Extended or seasonal dating. Terms deliberately stretched to align with a retailer's selling season, so a spring order shipped in February might not be due until May. Common in golf, outdoor, and swim, where a shop's cash arrives long after the product does. It is a legitimate growth tool. It is also the single largest driver of working capital strain in seasonal categories, so it belongs in a forecast rather than in a rep's discretion.

Credit limit. The maximum outstanding balance an account may carry. Not a payment term strictly, but the control that makes terms survivable. A limit that exists only in your ERP and is not enforced at the moment of order entry is not a limit. It is a report you read after the exposure already happened.

Consignment. You retain ownership until the product sells at retail, and you are paid on what sells. It removes the buyer's risk entirely, which is why it opens doors. It also means you are financing inventory, carrying the markdown risk, and depending on someone else's reporting for your revenue recognition. Use it to enter accounts you could not otherwise reach, with a defined end date.

Terms That Accelerate or Secure Your Payment

CIA, cash in advance. Payment in full before production or shipment. Standard for new accounts with no credit history, for custom and decorated goods, and for anything you cannot resell if the order is abandoned.

CBD, cash before delivery. Payment clears before the product leaves your warehouse. Slightly softer than cash in advance, since the order can be produced while payment is arranged.

COD, cash on delivery. The carrier collects at the door. Rare now and worth knowing mostly so you recognize it. It moves collection risk to a third party who is not motivated to solve your problem, and it creates refusal risk at the dock.

Deposit terms, often 50/50. Half at order, the balance at ship. The default for custom, embroidered, and cresting work, where the goods have no resale value if the account walks away. If you sell decorated product on open terms, you are absorbing a risk your margin probably does not cover.

Early payment discount, written as 2/10 Net 30. A 2% discount if the invoice is paid within 10 days, otherwise the full amount is due in 30. Read the next section before you offer this.

Terms That Reduce What You Actually Collect

Chargebacks and deductions. Amounts a retailer subtracts from your invoice for compliance failures, late shipments, mislabeled cartons, or routing violations. Larger retailers apply these systematically. They are a real cost of doing business with scale accounts and they should be modeled into the margin on those accounts rather than treated as a surprise each quarter.

Markdown allowances. Money you agree to contribute when a retailer discounts your product to clear it. Negotiated after the fact, which means the amount depends heavily on how well you documented what was originally agreed.

Cooperative advertising and marketing funds. A percentage of sales set aside for the retailer's promotion of your brand. Usually deducted rather than invoiced separately.

What an Early Payment Discount Actually Costs

This is the calculation almost nobody runs.

When you offer 2/10 Net 30, you are paying 2% to receive your money 20 days sooner. Annualize that and the effective rate is about 37%.

Two percent for twenty days, expressed as a yearly cost, is 2 divided by 98, multiplied by 365 divided by 20. That is roughly 37% per year.

For comparison, 1/10 Net 30 costs about 18% annualized, and 3/10 Net 30 costs about 56%. That is expensive money. It can still be the right call if your alternative is a line of credit at a worse rate, or if late payment is choking your ability to buy inventory. But it should be a treasury decision, not a concession a rep offers to close a deal.

The metric to watch alongside it is days sales outstanding. Divide your accounts receivable by annual credit sales, then multiply by 365. A brand with 850,000 dollars in receivables against 4.2 million in credit sales is running about 74 days, regardless of what its invoices say.

How to Assign Terms by Account

Terms should follow risk and volume, not tenure or relationship warmth.

New accounts with no credit history start on prepayment or a deposit. Not as a signal of distrust, but because you have no data yet.

Established accounts with clean payment history earn open terms and a credit limit sized to their actual order pattern. Review both annually rather than letting them ossify.

Seasonal accounts get dated terms tied to their sell through, priced into the margin.

Custom and decorated orders take a deposit regardless of the account's standing, because the risk is in the product, not the customer.

Large scale retail accounts get terms that already assume deductions, because they will apply them.

Where Terms Break Down in Practice

Almost every terms problem is really a visibility problem.

A rep offers Net 60 because they do not know the account is already over its limit. An order ships on terms the finance team never approved. A buyer disputes a due date because the invoice and the purchase order describe the clock differently. Someone spends Friday afternoon reconciling a deduction against a shipment nobody documented.

None of that is a credit policy failure. It is a data failure, and it happens when terms live in an ERP that the people writing orders cannot see.

On RepSpark, customer specific payment terms and credit limits synchronize from your ERP and are enforced at the account level during order entry, so a rep is working from the same rules your finance team set rather than from memory. Invoice detail, including final pricing, applied discounts, taxes, and shipping charges, is visible in the platform with downloadable PDF invoices, which removes a large share of the calls that begin with a buyer disputing a number.

For brands that want accounts receivable handled in the same place buyers already order, the optional A/R Hub module supports invoice payments inside the platform, credit memo visibility, and consolidated invoice history at the account level. RepSpark Pay handles integrated payment processing for checkout, invoice payments, and event based transactions, and can run through our gateway or a provider you already use.

Your ERP stays the system of record for every financial number. RepSpark makes those numbers visible to the people making commitments.

RepSpark connects more than 100,000 retailers with brands and their sales teams, has been named to the Inc. 5000 list for five consecutive years, and maintains SOC 2 Type II and GDPR compliance.

If you do not know your current days sales outstanding, that is the number to find this week. Everything else on this page is easier to decide once you have it.