What net 30 and net 60 really mean
Net means the whole invoice, with no discount taken off. The number is a count of days. Most suppliers count from the invoice date. Some count from the date you receive the goods or the date you approve the work. That choice can move the due date by a week or more, so read the line carefully.
You will also see "end of month" terms. Net 30 EOM usually means 30 days from the end of the month the invoice was issued. An invoice dated the 2nd is then due much later than one dated the 28th. Ask the supplier to show you a worked example with real dates.
Some suppliers offer a discount for early payment, such as "2/10 net 30". That means take 2 percent off if you pay within 10 days, otherwise pay in full by day 30. It is worth doing only if your cash allows it.
How to compare terms across suppliers
A low price with long terms can cost the same as a higher price with short terms. Line the offers up on the same footing before you decide.
Ask each supplier the same five questions. How many days? Counted from what date? Is there a discount for early payment? Is there interest or a fee on late payment? How do they want invoices sent? Write the answers in one table.
Then think about your own cash. If your customers pay you in 45 days and your supplier wants payment in 14, you fund the gap. Try to match your supplier terms to the way money comes in. If you cannot, say so early and ask for more time before you sign.
Remember the other side too. Small suppliers often cannot wait 60 days. A fair term keeps good suppliers willing to serve you.
What large buyers and government report and promise
Payment practice in Australia is becoming more public. The Payment Times Reporting Act 2020 received Royal Assent on 14 October 2020 and took effect on 1 January 2021. Under it, large businesses with income over A$100 million, and some entities in large corporate groups, must publicly report their payment terms and payment times to small business suppliers. Reports go on a public register.
The law was updated in 2024. The Payment Times Reporting Amendment Act 2024 received Royal Assent on 9 July 2024, and its provisions commenced on 7 September 2024. The scheme does not set a payment period that businesses must follow. It makes their practice visible.
For a small supplier, this is useful. Before you take on a large customer, check the register for the terms it usually offers and how fast it actually pays.
Federal agencies go further on speed. Under the Supplier Pay On-Time or Pay Interest Policy, non-corporate Commonwealth entities must pay within 20 calendar days of a correct invoice and satisfactory delivery, unless shorter terms are agreed. That policy has applied to all contracts regardless of value since 1 July 2022. It also requires interest on late payments, which shows what a firm late payment clause can look like.
What to agree on invoicing
Most late payments start with a bad invoice, not a bad payer. Agree the basics at the start and put them in writing.
- The exact date the clock starts.
- What a correct invoice must show, such as the ABN, the purchase order number and the amount.
- Who receives invoices, and in what format.
- How a dispute over part of an invoice is handled, so the undisputed part is still paid on time.
As a supplier, send the invoice the day the work is done, then confirm it arrived. As a buyer, tell your supplier quickly if something is wrong with an invoice. Silence is what turns a small error into a month of delay.
What to agree on late payment
Decide before a problem appears. A good late payment clause is short and clear.
First, state the due date in days and the start date. Second, say what happens after the due date, such as simple interest per day, or a flat fee. Third, say whether the supplier may pause work if an invoice stays unpaid past a set number of days. Fourth, name a person on each side who can resolve a delay.
Keep it fair. Interest that is far above market rates can be hard to enforce and sours the relationship. The federal policy uses simple interest calculated per calendar day, and its example contract clause applies only where the interest owed is above A$100. A similar small-amount rule can save both sides from tiny claims.
If the supplier is much smaller than you, consider paying faster than you must. It costs little and builds trust.
This article is general information only. Your own supplier agreement may word its payment clauses differently, so a commercial lawyer should read the invoice due dates and late fee wording first.