Credit Terms
What Does Credit Terms Mean?
Credit terms lay out the timing and terms for customer payments.
![cts1](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts1.jpg)
How it Works
A business will make sales on a credit basis.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts2.jpg)
This means, the business allows customers time to pay for the goods and services they have bought.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts3.jpg)
Payment details will be set out in the credit terms, shown on each invoice issued.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts4.jpg)
Payment terms may stipulate a simple net term.
![cts5](https://seeaccountingnow.online/wp-content/uploads/2021/06/cts5.jpg)
This sets out when payment is due.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts6.jpg)
Alternatively, the credit terms may include a special clause.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts7.jpg)
In other words, it will set out an incentive offer for paying early.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/cts8.jpg)
© R.J. Hickman 2020