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The most effective payment methods

In the B2B world, optimised payment terms and defined net terms are crucial for the success and liquidity of a company. They not only influence cash flow management, but also the quality and stability of business relationships between merchants and their customers. 

This article provides a comprehensive overview of the importance of payment terms and net terms in the B2B sector and provides practical advice for merchants to make their financial arrangements effective.

What are payment terms?

Payment terms are agreements between business partners on the modalities of payment for the delivery of goods or services. In the business-to-business (B2B) sector, these terms are particularly important as they influence liquidity, risk management and business relationships between companies. A clear and detailed list of payment terms is essential for smooth business operations. 

What information should be included in the payment terms?

  • Payment terms: The period within which payment must be made after invoicing or delivery. For example, payment terms can be 30, 60 or 90 days.
  • Payment methods: The way in which payments are to be made, e.g. bank transfer, direct debit or electronic payment transactions.
  • Discounts: Discounts granted to buyers if they pay within a certain period before the actual payment deadline. This serves as an incentive for earlier payment and improves the seller’s liquidity.
  • Default interest: The interest due in the event of late payment. This is intended as a deterrent and to minimise the damage to the creditor.
  • Retention of title: A clause stating that the goods remain the property of the merchant until full payment has been made. This serves to protect the merchant against payment defaults.
  • Discounts and bonuses: Additional incentives for buyers who fulfill certain conditions, such as ordering large quantities or complying with payment terms.

Payment terms in B2B vs. B2C

Compared to B2C transactions, where payment terms are often standardised, the B2B sector allows for greater flexibility and customisation to suit individual needs and relationships. B2B payment terms and net terms are often flexibly negotiable and can be tailored to the specific requirements of both parties to create a win-win situation.

What payment terms should I offer my B2B customers?

The choice of payment terms and payment target should be made strategically. Common options in the B2B sector are

  • Net 30, 60 or 90 days: Depending on your industry and liquidity situation, these payment terms can offer customers more flexibility.
  • Installments: Enables your customers to pay for larger purchases in smaller, manageable amounts over a fixed period of time.
  • Cash discount offers: Incentivising earlier payments can accelerate cash flow.
  • Customised agreements: Based on the customer relationship and history.

Factors to consider when setting payment terms

The following factors should be taken into account when setting payment terms and net terms:

  • Company liquidity: your cash requirements will influence the optimal net terms that you offer to your buyers.
  • Customer relationships: Long-term and trusting business relationships can justify more flexible net terms.
  • Industry standards: Follow the usual practices in your industry.
  • Risk management: Assess customer risk and the potential impact on your own finances.

What to do when payment terms are not met?

According to Sidetrade, companies around the world pay their supplier invoices on average 21 days late. If your B2B customers do not honour the agreed payment terms and there are delays in payment, it is crucial to take effective action to secure your payments. It is important to take a proactive approach and seek dialogue. Find out the reasons for the late payment and suggest possible solutions, such as flexible payment plans. In some cases, it may be necessary to take legal action to enforce your claims.

Offer flexible payment terms without risk

With Mondu, offering flexible payment terms for invoice and installments to your B2B customers is child’s play. Thanks to the payment provider, you can offer your customers customised payment options tailored to their needs without the risk of payment delays. You receive the payment immediately after the transaction is completed. This allows you to expand your business with full focus on growth and customer relationships, while Mondu ensures smooth financial operations. Find out more.

Content & SEO Manager

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Anthony Back

Today I have the pleasure of unveiling our new brand identity, the culmination of a lot of hard work, passion and focus by Mondu’s Marketing team. It’s been a little over a year since Mondu was founded, but we have achieved so much as a company. Growing to 140+ Monduneers, launching two products across three markets and helping thousands of companies pay better and grow their business – these are just a few achievements that couldn’t have happened without Mondu’s spirit and principles, such as: Think big and never settle, bias for action, and deliver WOW.
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Na'ama Sheba

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