Net payment terms are the number of days a Client has to pay an invoice in full, counted from the invoice date: "net 30" means payment within 30 days. In construction, net terms are common on Supplier accounts and Subcontract invoices, while payment under a main contract follows the due date and final date for payment set in the contract.
Worked example
A specialist Subcontractor invoices £50,000 on 1 March. Wages and subcontractors cost £28,000 and are paid by the end of March. The merchant's £14,000 is on net 30 and is paid on 31 March. By then £42,000 has gone out.
| Terms | Cash arrives | Days funding the £42,000 |
|---|---|---|
| Net 30 | 31 March | 0 days (paid in time) |
| Net 60 | 30 April | 30 days |
| Net 90 | 30 May | 60 days |
The work is identical. The only difference is how long the business carries the cost, which is why payment terms belong in the price discussion as well as the contract.
Payment terms in the cash flow forecast
A forecast built on invoice dates is wrong as soon as terms differ. Forecast each receipt at the invoice date plus the terms, and each supplier payment the same way. Then look at the two lines side by side: the weeks where payables fall due before receivables are the weeks that need working capital.
Check the aged debtors report against the terms each month, because an invoice that is 10 days past its net date is a prompt for a phone call, not a surprise at month end.
Terms also matter when you accept work. If a supplier gives you net 30 and your client pays on net 60, you finance the 30-day gap on every pound of materials.
In the UK
The Construction Act requires a construction contract to have an Interim Payment mechanism with a due date and a final date for payment, so a bare "net 30" line does not replace it.
The Fair Payment Code, which replaced the Prompt Payment Code in December 2024, is a voluntary scheme that gives awards to businesses that pay quickly. Gold is for paying 95% of invoices within 30 days, and bronze for 95% within 60 days.
The government has also said it will legislate for a maximum payment term of 60 days, so net 90 terms like those in the example above may not stay lawful (RICS, Retentions ban proposed).
Related terms
Cashflow Forecast, Interim Payment, Deferred Payment Schedule, Pay-When-Paid Clause.
Planyard's cash flow forecasting projects receipts and payments from your orders, valuations and payment terms, so a gap between money out and money in shows weeks ahead.
