Understanding NET90 Terms and Early-Pay Discounts: What You Need to Know
Recently, our company secured a significant client with a workforce of approximately 80,000 employees. While we are thrilled about this opportunity, we are facing a challenge: the client requires NET90 payment terms. This extended timeframe for payment raises concerns about our cash flow, especially since our usual practice has been to offer NET30 terms.
In light of this situation, I am contemplating whether proposing a 2% discount for payments made within 30 days would incentivize them to settle their invoice early. However, I find myself uncertain: should I anticipate that they will take advantage of this proposal?
If anyone in the community has navigated similar client relationships or worked with companies that typically follow NET90 terms, your insights would be invaluable. While I’m hesitant to share the client’s name out of caution, I would greatly appreciate any guidance or experiences you can offer.
Thank you in advance for your help!
One Comment
Great discussion! The concept of offering early-pay discounts, such as 2% for payments within 30 days, can indeed serve as an effective incentive—particularly when dealing with extended NET90 terms. Many companies use these discounts strategically to improve cash flow and foster stronger client relationships. It’s important to consider your client’s payment history and their typical responsiveness to such incentives; some may prioritize early payment if it benefits their internal cash management policies.
Additionally, it might be worthwhile to set clear expectations around the discount—especially if this is a new arrangement—so both parties understand the conditions and benefits. Sometimes, negotiating a hybrid approach, like a smaller discount for slightly shorter terms (e.g., NET45), can strike a balance between cash flow needs and client flexibility.
Ultimately, proactive communication and understanding your client’s payment behavior will help you determine whether offering an early-pay discount is likely to be effective. Good luck navigating this, and I hope your new partnership proves fruitful!