Wednesday, November 24, 2010

Net 30 Terms: A Thing of the Past?

One of the major, recent shifts in the procurement profession has been how organizations have changed their standard payment terms en masse.

Net 30 used to be the seemingly universal standard payment term used by almost every organization in the USA. Last night, I gave a procurement-finance presentation at a local purchasing association. Out of curiosity, I asked for a show of hands of those who use net 30 as their standard terms.

Out of a crowd of 60, four people raised their hands.

More people acknowledged having a standard of net 45. A few more use net 60. And even a few use net 90.

"My, oh my," I thought. "If I would have asked that same question five years ago, almost everyone would have said net 30 terms were their company's standard."

The big question in my mind is whether these extended payment terms are here to stay. With the economy (slowly) rebounding, credit loosening, and suppliers trying to regain their dignity, will we see a return to the days of net 30 terms?

Personally, I think that because the prevalence of these longer terms was induced by significant macroeconomic forces, that it will take significant macroeconomic forces to warrant any type of across-the-board tightening of payment terms.

What do you think?

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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