Your Biggest Customer Wants Net 90. How Much Is That Actually Costing You?
Imagine you run a small company and finally land a major customer.
The contract is worth $1 million.
It looks like a breakthrough.
Then you reach one line in the agreement:
Payment Terms: Net 90.
You deliver the product or service now.
Your customer pays 90 days later.
You have made a $1 million sale.
But today, none of that $1 million is in your bank account.
That is where the economics of the deal start to change.
DAY 0 — $1 Million Sale, $0 Cash
You finish the work and send your customer a $1 million invoice.
Your company now has an account receivable: money the customer owes you.
But a receivable is not cash.
Until the customer actually pays, that $1 million cannot fund payroll, pay suppliers, or cover operating expenses.
A $1 million sale does not mean $1 million in cash today.
DAY 30 — The Bills Do Not Wait
Thirty days pass.
Your customer does not have to pay yet.
Your company does.
Payroll comes due. Suppliers need to be paid. Rent and operating expenses continue.
The contract increased your sales.
But fulfilling it may also be consuming your cash.
This is one reason a growing company can still run into a cash shortage.
DAY 60 — Look at the Same Invoice From the Other Side
Now look at the transaction from your customer's perspective.
The customer already has your product or service but has not yet paid the $1 million.
For the buyer, that invoice sits in accounts payable.
For you, it sits in accounts receivable.
The same invoice has opposite effects.
BUYER
Receives the product or service
→ Pays later
→ Keeps cash longer
SUPPLIER
Provides the product or service
→ Gets paid later
→ Waits longer for cash
J.P. Morgan explains that longer payment terms can allow buyers to hold cash longer and extend days payable outstanding, while having the opposite effect on suppliers by delaying receivables and extending days sales outstanding.
One company's working-capital improvement can become another company's working-capital burden.
What Are 60 Extra Days Worth?
Suppose the alternative was Net 30.
Moving from Net 30 to Net 90 adds another 60 days before the cash arrives.
If your company has enough cash to cover the gap, that may be manageable.
If you need outside financing to pay employees and suppliers while you wait, those extra days acquire a price.
Consider a simple example.
ILLUSTRATIVE SIMULATION
Invoice: $1,000,000
Additional wait from Net 30 to Net 90: 60 days
Assumed annual financing cost: 10%
$1,000,000 × 10% × 60 ÷ 365
= approximately $16,438
The 10% rate is not a market average. It is simply an assumption used to illustrate the economics.
The point is not whether the actual financing rate is 8%, 10%, or something else.
The point is that time has a cost when a company needs capital while waiting to get paid.
Large Companies Really Do Use Net 90
This is not just a hypothetical payment term.
In 2018, Cummins announced that it was moving its global standard payment terms for new business and contracts from Net 60 to Net 90, except where different regional norms or government requirements applied.
The company said the change would strengthen its ability to invest in new products, remain competitive, and invest further in its global supply chain.
More recent publicly available U.S. purchase-order terms from Cummins still state:
“Payment Terms are [Net 90].”
There is nothing inherently improper about Net 90. Payment terms are a normal part of business-to-business commerce.
What matters is understanding that a term that benefits the buyer's working capital can create a very different cash-flow reality for the supplier.
What If the Supplier Cannot Wait 90 Days?
Return to our $1 million invoice.
The customer plans to pay on Day 90.
You need cash before then.
You do not have the cash yet, but you may have something financeable: an eligible receivable owed by your customer.
That is where invoice financing and factoring can enter the picture.
With invoice financing, a business can borrow against eligible receivables. With factoring, a business generally sells receivables to a factor at a discount to receive cash earlier.
But there is another structure particularly relevant to relationships between large buyers and their suppliers:
Supply chain finance.
Can the Buyer Pay Later While the Supplier Gets Paid Earlier?
Yes.
In simplified form, it can work like this:
SUPPLIER
Delivers goods or services
↓
BUYER
Approves the invoice
↓
FINANCE PROVIDER
Offers the supplier early payment
↓
ORIGINAL PAYMENT DATE
Buyer pays the finance provider
The buyer can preserve its payment schedule while participating suppliers gain the option to turn approved invoices into cash earlier.
There is another important feature.
The financing economics can reflect the credit quality of the large buyer behind the approved invoice, rather than relying only on the smaller supplier's standalone credit profile.
That can change the cost of funding.
How Bata Used This Structure
A 2026 case study from Standard Chartered shows how this can work in practice.
Bata wanted to improve its working-capital cycle by increasing days payable outstanding and extending payment terms with suppliers.
But longer terms create an obvious problem for suppliers: they have to wait longer for cash.
Standard Chartered designed a supplier-finance facility that allowed Bata to extend payment terms while giving participating suppliers access to liquidity once invoices were approved.
Because the program leveraged Bata's credit profile, suppliers could access financing at more competitive rates.
Bata could hold cash longer.
Suppliers could choose to receive cash earlier.
The finance provider funded the time between the two.
What began as a small line in a contract — Net 90 — now connects corporate working capital, supplier cash flow, and banking.
DAY 90
The customer finally pays the $1 million.
But by now, the contract looks different.
The headline number was never the only number that mattered.
When will the cash arrive?
How much money must you spend before then?
Can your balance sheet carry the gap?
If not, who will finance it — and at what price?
Net 90 looks like a date on an invoice.
But between Day 0 and Day 90, someone has to finance the time.
And time has a price.
BEYOND THE OBVIOUS.
Sources
J.P. Morgan — How Net Payment Terms Affect Working Capital
December 10, 2025
Cummins Supplier Portal — Cummins Global Payment Terms Move to Net 90 Days
March 9, 2018
Cummins — United States Purchase Order Terms and Conditions for Products and Services
Standard Chartered — Unlocking Value Across Bata's Supply Chain in China
June 2, 2026
J.P. Morgan — Supply Chain Finance Solutions