Question

What do the following credit terms mean? 1. n/30 2. 2/10, n/30 3. n/10 EOM 4. n/20 5. 1/10, n/20 6. 3/5, n/30 7. n/15 EOM Have you seen any of these in your work place?

Answer 1

The credit terms are the requirements related to payments stated in the invoice.

It includes the time period; in that period the customer must be made the payments.

1. n/30

n/30 means you have to pay your payables within the specified time period (Here, 30 days.) If not, you have to pay additional charges.

It is also referred to the due date of the payment agreement

4. n/20

The solution for the n/20 is same as applicable for the solution 1. n/30

2. 2/10, n/30

The ' 2/10, n/30 ' indicates discount provided to the buyer by the seller for immediate payment.

In that, 2 indicates discount % offered by the sellers.

10 indicates the number of days in that buyer must make the payments to avail the discount.  

n/30 represent if the buyer does not pay the amount within 10 days to avail the discount, then the amount is due within 30 days after the actual DATE OF INVOICE.

5. & 6. The solution for the 2/10, n/30 & 3/5, n/30 is as same as applicable for the solution 2. 2/10, n/30.

3. n/10 EOM

'n/10 EOM' indicates the type of payment term usually sees on an invoice.

The n stands for the net and the 10 stands for the number of days.

EOM Stands for the End of the Month.

7. The solution for the n/15 EOM is as same as applicable for the solution 3. n/10 EOM.

While making invoices to the trade receivables the credit terms generally used at many workplaces.

This term usually used in the financial institutions,