Payment Terms in Distribution and Wholesale

What Are Payment Terms in Distribution?

In B2B distribution and wholesale, payment terms define the time frame and conditions under which buyers pay suppliers for goods or services. They set expectations for invoice due dates, discounts, and penalties for late payment.

These terms form part of every sales agreement and directly affect both cash flow and supplier–customer relationships. For example, Net 30 means the buyer must pay within 30 days of the invoice date.

Payment terms allow distributors and retailers to receive products before paying for them, creating flexibility to sell inventory and generate revenue first.

In short, payment terms determine when money changes hands — shaping financial stability, trust, and long-term business growth.

How Payment Terms Work in Practice

Payment terms usually appear on invoices and contracts. They specify how much time a buyer has to complete payment, whether discounts apply, and what happens if payment is late.

Here’s how the process typically works:

1. Agreement Setup: The seller and buyer agree on terms before placing an order.

2. Invoice Issuance: The supplier sends an invoice with the agreed payment window.

3. Credit Period: The buyer receives goods and uses the payment period to sell or process them.

4. Payment Execution: The buyer pays within the specified time frame.

5. Reconciliation: The supplier marks the invoice as paid and records the transaction.

Common examples include:

• Net 15 / Net 30 / Net 60: Payment due 15, 30, or 60 days after the invoice date.

• 2/10 Net 30: The buyer gets a 2% discount if payment is made within 10 days; otherwise, it’s due in 30 days.

• Cash on Delivery (COD): Payment is made when goods are delivered.

In distribution, clear payment policies prevent disputes, improve forecasting, and create trust between partners.

Key Benefits of Clear Payment Terms

Establishing and enforcing payment terms offers several advantages for both suppliers and buyers.

1. Better Cash Flow Management

Predictable payment schedules help both sides plan revenue and expenses accurately.

2. Stronger Business Relationships

Consistent, fair terms build trust between manufacturers, distributors, and retailers.

3. Fewer Disputes

Well-documented terms reduce confusion around invoice due dates or late fees.

4. Improved Financial Forecasting

Suppliers can project cash inflows more accurately, while buyers can plan purchases strategically.

5. Higher Sales Volumes

Flexible terms encourage larger orders since buyers can manage cash more effectively.

In essence, clear and transparent terms benefit the entire supply chain — from production to retail — by creating financial predictability and reducing operational risk.

How SimplyDepo Helps Manage Payment Terms

SimplyDepo helps distributors and brands manage payment terms directly within its connected sales and finance tools.

With Order Management and Distribution Management features, teams can set, track, and enforce custom terms for each customer — automating credit control and payment tracking.

Key SimplyDepo capabilities include:

• Customizable net term options (e.g., Net 15, Net 30, Net 60)

• Automated invoice generation and status tracking

• Alerts for upcoming or overdue payments

• Integration with ERP and accounting systems

• Real-time dashboards for outstanding balances and credit limits

By digitizing payment processes, SimplyDepo helps companies maintain strong cash flow, reduce administrative workload, and build more transparent financial relationships.