What Is the Meaning of "Terms Net 10"?

Instead of demanding immediate payment, many businesses offer customers the opportunity to buy on credit. The business will assign credit terms to each business-to-business purchase it allows customers to make on credit. "Net 10" means that payment is due 10 days from the date of the invoice. The most common terms for credit sales are net 10, net 30 and net 60.

Not every business offers the same credit terms to the same customers. Businesses that don't have have much experience with a particular customer may start out with shorter credit terms like net 10. As the customer proves trustworthy and reliable, the business may extend credit terms to net 30 or net 60 and allow the customer to make larger purchases on credit.

In addition to identifying a payment date, a business may also offer credit customers a discount of 1 or 2 percent for early payment. The company indicates this discount by writing the percent discount over the discount period before the payment period. For example, a business that offers a 2 percent discount for payments made within 10 days and requires payment within 30 days would have terms of 2/10, net 30.