What Do Credit Terms of n/60 Mean on an Invoice?
Understand the language of invoice payment terms. Gain insights into common codes like "n/60" for clear financial management.
An invoice often includes specific credit terms. These terms define when payment for goods or services is due, helping both the seller and buyer manage cash flow and financial planning by setting clear deadlines. Understanding these terms is foundational for accurate accounting and maintaining healthy business relationships.
Decoding “n/60”
The credit term “n/60” means the full, or “net,” amount of the invoice is due within 60 calendar days. “N” stands for “net,” indicating the total amount owed without deductions or discounts. The “60” signifies the number of days payment must be remitted.
This extended payment window is a form of trade credit, allowing the buyer time to generate revenue from the purchased goods or services before payment is required. The term “net” emphasizes that no early payment discounts are offered under this specific arrangement; the entire billed amount is expected by the deadline. It is a common practice in business-to-business (B2B) transactions where immediate payment is not always feasible or expected.
Calculating the Payment Deadline
To determine the exact payment due date for an invoice with “n/60” terms, simply add 60 calendar days to the invoice date. This calculation includes weekends and holidays, as these are typically calendar days unless explicitly stated otherwise in the terms. For example, if an invoice is dated August 15th, counting 60 days from that date means payment would be due by October 14th.
The 60-day period begins from the invoice date, not from the date goods were received or services completed. For example, if an invoice is issued on September 1st, payment would be due by October 31st. Clear communication regarding the start date is crucial to prevent misunderstandings and ensure timely payment.
Related Invoice Terms
While “n/60” specifies a 60-day payment window, other common credit terms also appear on invoices, each with its own meaning. For instance, “n/30” (net 30) indicates that the full invoice amount is due within 30 calendar days from the invoice date. This is a widely used term, balancing the seller’s need for timely payment with the buyer’s desire for a reasonable payment period.
Another prevalent term is “2/10 n/30” (two-ten, net thirty). This means the buyer can receive a 2% discount on the total invoice amount if payment is made within 10 days of the invoice date. If the buyer chooses not to take the early payment discount, the full, net amount is then due within the standard 30-day period. Such terms incentivize faster payments, which can benefit the seller’s cash flow. Other variations like “3/10 n/30” or “2/10 n/45” also exist, offering different discount percentages or full payment deadlines.