# Net-60 Payment Terms: Who Really Pays the Cost?
"Net-60" appears on invoices like a neutral administrative detail — payment due in 60 days, nothing to see here. In reality, it's one of the largest hidden transfers of wealth in Indian commerce. Every day of credit a buyer takes is a day of financing someone must fund. This article unpacks who actually pays for net-60, how much it costs in rupees, and what smarter structures exist.
What net-60 actually is
Net-60 means the buyer has 60 days from invoice date to pay, interest-free — at least on paper. It dominates Indian B2B trade: large corporates routinely impose 60–120 day terms on suppliers, and mid-market businesses copy the practice down the chain. The invoice is delivered today; the money arrives two months later; and in between, someone is running a financing business without charging for it.
The seller pays — here's the arithmetic
The vendor extending net-60 is an unsecured, unpriced lender. Consider a mid-size manufacturer with ₹10 crore in annual sales, all on net-60:
1. Working capital locked up
60-day terms mean roughly one-sixth of annual sales (₹1.67 crore) is perpetually outstanding as receivables. To fund operations during that window, the manufacturer borrows at 12–16% from its bank:
- Interest cost ≈ ₹20–27 lakh per year
- That's 2–2.7% of revenue evaporating into financing costs
2. The cash-discount trap
To accelerate payment, vendors offer 2/10 net 60 (2% off if paid in 10 days). Buyers who take it cost the vendor 2% of revenue; buyers who don't still leave the vendor carrying 60 days of credit. Either way, the vendor loses.
3. Bad debts
Unsecured trade credit defaults at 1–3%. On ₹10 crore of sales: ₹10–30 lakh written off annually.
4. Growth rationing
Every rupee trapped in receivables is a rupee not spent on capacity or sales. Vendors turn away orders they can't finance — growth capped by balance sheet, not demand.
Add it up and net-60 costs this manufacturer ₹40–70 lakh a year — 4–7% of revenue — none of which appears on any invoice line.
The buyer doesn't escape either
Buyers think they win. Partially true — free float is real. But:
- Vendors price it in: suppliers serving net-60 corporates quote higher prices than they would for cash. The buyer pays the financing cost invisibly through pricing
- Smaller vendors degrade: squeezed suppliers cut corners on quality, service, or simply exit — leaving buyers with weaker supply chains
- Relationship asymmetry: a buyer known for stretching to 90+ days gets deprioritised when allocation is tight
- Missed discounts: refusing early-payment discounts to hold cash often earns less than the discount was worth
Why the system persists
- Large buyers treat payables as free working capital — CFOs are measured on cash conversion cycles
- Terms are set by procurement leverage, not economics
- Sellers can't unilaterally change terms without losing accounts
- Nobody sees a single "net-60 fee" line item, so nobody owns the problem
Better structures that already exist
1. Early-payment discounting done right
Instead of blanket discounts, let sellers sell specific receivables for cash via TReDS or invoice discounting — converting net-60 into near-net-zero selectively, only when cash is needed.
2. Split the payment, don't stretch it
For large purchases, instalment structures beat stretched terms: the buyer pays monthly over 6–12 months while the vendor is paid upfront by a financier. On a ₹36 lakh annual contract, the buyer pays ₹3 lakh/month instead of owing ₹36 lakh at day 60 — and the vendor books full value on day one. Platforms like KredFlow run exactly this model for software contracts, with instant GSTIN-based approval for the buyer.
3. Price terms explicitly
Sophisticated vendors publish tiered pricing: X% lower for advance, base price for net-30, +1.5% for net-60. Once the cost is visible, buyers often choose faster payment — and sellers stop subsidising slow payers.
4. Supply-chain finance programs
Large buyers sponsor reverse-factoring so their small suppliers get paid early at rates based on the buyer's credit rating — cheaper for everyone than each supplier borrowing alone.
A decision framework
If you're the seller:
- Compute your real cost of terms: (receivables × your borrowing rate) + expected bad debt
- Offer financed monthly options before conceding longer terms
- Reserve net-60 for accounts whose volume justifies the carry
If you're the buyer:
- Ask what cash terms would cost — the discount may exceed your cost of funds
- Use structured instalment financing for large contracts rather than imposing terms on smaller vendors
- Remember: your cheapest financing is sometimes your supplier's most expensive
Conclusion
Net-60 is never free; it's just unbilled. The seller usually pays through financing costs and bad debts, and the buyer quietly pays back through prices and supply-chain friction. India's new financing rails — TReDS, invoice discounting, and instalment-based purchase financing — make it possible to decouple the sale from the payment schedule entirely. The companies that see payment terms as a priced product, not a default, will keep both their cash and their margins.