Net 90 Payment Terms Are a Loan to the Retailer

When a retailer or distributor asks to move you from net-60 to net-90, they're asking you to hold their invoice for another 30 days. That extra month of unpaid AR is an interest-free loan from your brand to theirs.

Sales often hears the request as the price of keeping the account or winning the next door. Finance hears it later, when cash gets tight and nobody priced the change. Net 90 payment terms can be the right trade. They should still be priced like a loan before anyone says yes.

At Teicor we sit inside CPG brands as fractional CFOs and accounting operators. We want finance at the table when terms move, with a clear read on the extra AR, the carrying cost, and what you'd ask for in return.

What does a shift to net 90 payment terms actually cost?

Start with the open AR on that customer, or the AR you expect if the account is new. Moving from net-60 to net-90 adds about 30 days of receivables for the same shipment pattern. You're carrying those invoices for a month longer before cash lands.

Say that customer runs about $100,000 a month through your warehouse. Stretching terms by 30 days means roughly another $100,000 sitting in AR at steady state. That cash used to turn. Now it funds the retailer's working capital instead of yours.

If you're already shipping and the change hits mid-relationship, the first cycle feels sharper. Invoices that would have paid in 60 days now pay in 90, so one month's worth of collections slips while shipments continue. The P&L can still look fine while cash doesn't. That gap between booked sales and bank balance is the same honesty problem we wrote about in why your profit and loss statement is probably lying to you.

Net 90 isn't automatically a bad deal, but it does have a cost, and the mistake is treating it as a paperwork tweak.

How do I price the extra 30 days of AR?

Price the loan two ways, and use both in the conversation with Sales.

First, the carrying cost. What would it cost to borrow that extra AR for 30 days, or what return would that cash have funded inside the business? If the extra AR is about $100,000 and your real cost of short-term capital is 12% a year, that's about $1,000 a month, or roughly $12,000 a year at this volume, for as long as the terms last. A number that size rarely kills a deal on its own. It does make the ask concrete. If your alternative is pulling from a line you already have, use that rate. If the alternative is delaying a production deposit or a hire, name that trade in dollars.

Second, the opportunity cost inside your own plan. What was that cash going to cover in the next quarter? Ingredients, a co-man deposit, slotting on another door, payroll buffer? Put the terms change next to those uses so leadership sees what they're funding when they say yes.

Keep the math simple and tied to this customer. This doesn't need a finance-textbook model. Sales just needs a number they can bring into the buyer meeting: "Another 30 days costs us about $1,000 a month at this volume, so here's what we need back."

How should a terms change land in the 13-week cash view?

A terms change belongs on the weekly cash forecast the week you agree to it, not the week the first late remittance surprises you.

Move the expected remittance dates for that customer out by the extra days. If you're going from net-60 to net-90, shift the inflows about four weeks later and watch which operating weeks go negative. That view is the same tool we use when a brand is funding a first retail PO with a 13 week cash flow. There the job is funding the order itself. Here the job is pricing a terms change on volume you already ship, or on volume you're about to add.

Also watch the overlap with load-in and promo windows. Longer terms during a heavy ship period stack unpaid invoices on top of production cash going out. That timing squeeze is close to what we covered in Q4 load-in cash. If the buyer wants net 90 right as you're loading inventory for a reset, the loan is larger than the steady-state AR math suggests for a few weeks.

Update the forecast when the first remittances under the new terms arrive. If "net 90" in practice means 105 days, price the real behavior, not the contract label.

When should I push back or trade terms for something else?

Push back when the carrying cost and the cash-grid hit are real, and the buyer hasn't offered anything that offsets them. You can negotiate a terms change like any other part of the deal, and you don't owe it to the buyer for being listed.

Trades that can make sense, depending on the account:

• A volume commitment that makes the extra AR worth carrying.
• Smaller or clearer deductions, so more of the invoice actually comes back (see gross-to-net without the distributor mythology for why the remittance haircut matters as much as the due date).
• An early-pay discount on a portion of invoices, so you can pull cash forward when you need it.
• A staged move (net-75 for a quarter, then revisit) instead of a permanent jump to net 90.
• Order timing that doesn't stack the longer terms on your heaviest production weeks.

You're looking for a two-sided deal. If the retailer needs 30 more days, ask what the brand gets for funding that month. Sales can still own the relationship while finance checks whether the math works.

Sometimes the right answer is yes with eyes open. A strategic door can be worth the loan if the cash plan absorbs it and the rest of the account economics hold. Sometimes the right answer is no, or not at this volume. Both are easier to defend when you've priced the change before the buyer call.

Who should sign off before Sales agrees to longer terms?

Finance should sign off on terms changes the same way you'd want sign-off on a discount that permanently cuts case price. Net 90 payment terms change when cash arrives. That belongs next to pricing, not in a side email after the deal is done.

A simple rule of thumb for mid-market brands:

1. Sales brings the request and the commercial reason.
2. Finance prices the extra AR, the carrying cost, and the 13-week cash impact.
3. Leadership decides whether to accept, counter, or decline.
4. Someone updates the customer terms in the books and the cash forecast the same day.

If finance only finds out when AR aging jumps, you've already made the loan. The sign-off habit is how you stop funding retailer working capital by accident.

Stretching terms is fine when you know what each stretch costs and you get something for it.

If a buyer just asked you for net 90 and you haven't priced it yet, I'd love to run the AR and cash view with you. Reach out through our contact page and tell us the current terms, the proposed terms, and roughly what that customer ships in a month. If it's easier to pick a time, you can book a call on my calendar.

FAQ

What are net 90 payment terms?

Net 90 means the invoice is due 90 days after the invoice date (or after the trigger your contract names). Compared with net-60, you're waiting about a month longer for the same shipment to turn into cash.

Why are net 90 payment terms like a loan to the retailer?

Because you're letting them hold goods (or sell through) for longer before they pay you. That unpaid AR is capital your brand is providing at zero interest unless you price and trade for it.

How do I estimate the cost of moving from net-60 to net-90?

Estimate the extra AR (often about one month of that customer's shipments at steady state), then apply your real cost of short-term capital for 30 days, and check the 13-week cash forecast for weeks that go short when remittances shift later.

Should Sales be able to approve a terms change alone?

I'd keep finance in the sign-off. Sales owns the account relationship, and finance should confirm the cash plan and carrying cost can absorb the change and decide what to ask for in return.