Net 60 is not 60 days. The clock starts at invoice, not delivery.
A brand that ships three weeks after invoicing on net 60 terms has given the buyer 39 days of float, not 60. Where the days go, and how to write terms that say what you mean.
Net terms are the simplest idea in wholesale and the most common source of a cash-flow surprise. "Net 60" reads as sixty days of credit. It is sixty days from a date, and which date is almost never written down. In most trade the clock starts on the invoice date. If the goods ship three weeks later, the buyer had thirty-nine days with the product, and the brand waited sixty for the money.
Where the days actually go
Picture an order placed on the first of the month. The brand invoices on the first, because the order system invoices at confirmation. Production and pick-and-pack take two weeks. Freight takes another week. The buyer receives the goods on the twenty-second. Net 60 from invoice makes payment due on the first of the third month: sixty days for the brand to wait, thirty-nine days for the buyer to sell through.
Neither party did anything wrong. The terms were agreed and honoured. The problem is that "net 60" described a duration and left out its starting point, and the two sides pictured different ones.
The three clocks people mean
Three conventions exist, and each is used somewhere. A term sheet that does not name one is relying on whichever the other party assumed.
- From invoice date. The most common convention in wholesale, and the default in most order systems. Good for the brand, since the invoice can be raised the day the order is confirmed.
- From ship date. Common in apparel and seasonal goods, where the invoice is raised at shipment so the clock and the goods leave together.
- From receipt of goods, sometimes written ROG. Favoured by larger retailers, whose accounts-payable departments date everything from the receiving dock.
What this costs a brand
A brand on net 60 from invoice with a three-week lead time is financing sixty days and giving thirty-nine. A brand that quotes net 60 from receipt of goods is financing eighty-one. Across a season of orders, the difference between those two is the difference between making payroll from receivables and borrowing against them.
Factoring, which advances cash against an invoice, prices this directly: the longer the expected wait, the higher the discount. So the convention you pick is not a formality. It is a line on your cost of capital.
What this costs a buyer
The buyer's surprise runs the other way. A store that planned to sell through before paying finds the due date arriving with stock still on the shelf, because the sixty days it counted on were counted from a date it never saw. The result is a late payment on a first order, which is the one that decides whether there is a second.
How to write it so both sides mean the same thing
Name the clock on the linesheet and on the invoice, in the same words: "Net 60 from invoice date" or "Net 60 from receipt of goods". Put the invoice date and the due date on the invoice as two dates, not one term. If the lead time is long, invoice at shipment, so the buyer's days and the goods arrive together.
On GRAJ the terms are a field on the order, not a phrase in an email. The due date is computed from the date the terms name, it is on the record both parties can read, and settlement runs against it. Nobody has to remember which convention they meant, because the order remembers.