Understanding net 45 payment terms: Meaning and examples

Every payment term you choose impacts your cash flow and business relationships. Net 45 provides a predictable payment schedule that benefits both buyers and suppliers when used strategically.

Understanding how it works, along with its pros and cons, can help you make smarter business decisions and prevent financial gaps.

What are net 45 payment terms?

This gives businesses time to process payments while ensuring vendors get paid within a reasonable window. The impact of net 45 depends on the business:

• For buyers: Provides flexibility, allowing them to manage cash flow before paying invoices
• For sellers: This means waiting longer for payment, which can affect liquidity and financial planning

For example, say a supplier delivers office furniture to a company and issues an invoice on March 1 with net 45 terms. The buyer must pay by April 15—no earlier requirement, no late penalties (as long as they pay on time). If payment is late, the supplier may charge fees or restrict future credit terms.

Why do businesses use net 45?

Payment terms aren’t one-size-fits-all. Some industries—like wholesale, consulting, and enterprise sales—favor net 45 because they operate on longer financial cycles. Larger companies may also push for extended terms to optimize their working capital.

Understanding net 45 is about balancing financial flexibility with vendor relationships. Businesses need to weigh the benefits of delayed payment against the potential impact on supplier trust and future terms.

Components of net 45 payment terms

Not all payment structures operate the same way, and net 45 terms come with specific expectations that businesses need to navigate. Here’s what defines them:

• Invoice date vs. due date: The 45-day countdown starts from the invoice date, not when goods are delivered or services are completed. This distinction matters, especially for businesses managing multiple invoices at once
• No early payment discounts (unless specified): Unlike terms such as 2/10 net 45, which offer a discount for early payment, standard net 45 terms require the full amount to be paid on day 45—no incentives for settling the balance sooner
• Late fees and penalties: If payment isn’t made within 45 days, the buyer may face late fees, interest charges, or even restrictions on future credit terms. In some cases, consistent late payments can impact a company’s financial reputation and vendor relationships

Understanding these terms helps businesses manage expectations—whether they’re extending credit or operating within a longer payment cycle.

How to calculate net 45 payment terms

Calculating net 45 payment terms is straightforward—it’s just a matter of adding 45 calendar days to the invoice date to determine when payment is due. Since net 45 starts from the invoice date, not the delivery date, businesses need to track the timeline carefully to avoid late fees.

Here’s how it works:

1. Identify the invoice date: This is the date the seller issues the invoice, which starts the 45-day count
2. Add 45 calendar days: Count forward including weekends and holidays, unless the contract specifies business days only
3. Determine the due date: The payment is due exactly 45 days after the invoice date. If that date lands on a weekend or holiday, some businesses may shift it to the next business day, but this depends on the agreement

Example calculation

A supplier issues an invoice on March 10 with net 45 terms.

• Invoice date: March 10
• Due date: April 24 (45 days later)

Since weekends and holidays are typically included in the calculation, April 24 remains the due date unless the contract specifies otherwise. If payment processing policies adjust for non-business days, the due date may shift—so it's always best to review the terms in advance.

Common examples of net 45 payment terms

Net 45 payment terms can vary slightly depending on the payment conditions set by the supplier. These variations often include discounts for early payment, which can encourage buyers to settle their invoices sooner. Here are a few common examples of how net 45 terms might appear in invoices:

1. Net 45: The full invoice amount is due in 45 days with no discount for early payment
2. 2/10 net 45: A 2% discount is offered if the buyer pays within 10 days. Otherwise, the full amount is due within 45 days
3. 1/10 net 45: A 1% discount applies if the invoice is paid within 10 days. Otherwise, the full amount is due in 45 days
4. 1/15 net 45: A 1% discount is available if payment is made within 15 days. After that, the full amount is due in 45 days

We’ve already covered how standard net 45 terms work in our previous calculation. Here’s how the other variations work.

2/10 net 45 example

With 2/10 net 45, the buyer receives a 2% discount if they pay within 10 days. Otherwise, the full amount is due in 45 days.

• Invoice date: March 10
• Discount deadline (10 days later): March 20
• Payment amount: $980 on a $1,000 invoice
• Full payment deadline (45 days later): April 24
• Payment amount: $1,000 if discount isn’t used

1/10 net 45 example

With 1/10 net 45, the buyer gets a 1% discount if they pay within 10 days, but must pay the full amount if they wait the full 45-day period.

• Invoice date: March 10
• Discount deadline (10 days later): March 20
• Payment amount: $990 on a $1,000 invoice
• Full payment deadline (45 days later): April 24
• Payment amount: $1,000 if discount isn’t used

1/15 net 45 example

With 1/15 net 45, a 1% discount applies if the buyer pays within 15 days. Otherwise, they owe the full amount in 45 days.

• Invoice date: March 10
• Discount deadline (15 days later): March 25
• Payment amount: $990 on a $1,000 invoice
• Full payment deadline (45 days later): April 24
• Payment amount: $1,000 if discount isn’t used

These variations help businesses balance cash flow management—buyers get an incentive to pay early, while suppliers can improve liquidity by reducing waiting periods for payments.

Advantages and drawbacks of net 45 terms

Net 45 offers flexibility but comes with risks. Here’s what to consider.

Advantages of net 45

• Flexibility for buyers: Extends the payment window, easing short-term cash flow constraints
• Stronger business relationships: Appeals to clients who prefer longer payment terms, fostering trust
• Predictable revenue cycle: Helps suppliers anticipate cash inflows, assuming payments are made on time
• Less strain than longer terms: Offers more time than net 30 but avoids the cash flow risks of net 60 or net 90

Drawbacks of net 45

• Risk of late payments: Clients may delay payments, creating cash flow uncertainty
• Potential collection issues: Longer payment cycles mean more follow-ups for overdue invoices
• Not ideal for every industry: Businesses with high operational costs may struggle with delayed payments

Net 45 works best when payments are reliable, but businesses should assess whether it aligns with their financial needs.

Should your business use net 45 payment terms?

Net 45 can work well for businesses that can wait 45 days for payment without disrupting cash flow. If delayed payments create challenges, invoice factoring can provide immediate funds by allowing businesses to sell unpaid invoices to a third party. This helps maintain liquidity without adjusting payment terms.

To implement net 45 effectively:

• Set clear terms in contracts and invoices
• Use automated reminders to track due dates and follow up on payments
• Consider early payment discounts to encourage faster payments
• Monitor accounts receivable regularly to spot potential payment issues early

Should industry matter?

Certain industries handle longer payment cycles better than others. Wholesale, manufacturing, and consulting often use net 45 because of established payment structures, while small service-based businesses or those with high operational costs may find shorter terms more sustainable. Evaluating how net 45 fits into your cash flow strategy is key to ensuring it works for your business.

Managing net 45 payments effectively

Net 45 terms offer a balance between flexibility and timely payments, but managing them requires careful tracking to avoid cash flow issues. Without the right systems in place, vendors may experience delays, and buyers risk missing due dates, leading to penalties or strained relationships.

That’s where Ramp’s accounts payable automation makes managing net 45 payments seamless:

• Automated invoice processing: Capture, categorize, and approve invoices faster, reducing manual data entry
• Smart approval workflows: Route invoices to the right stakeholders, ensuring approvals happen before payments are due
• Visibility into cash flow: Get a real-time view of upcoming payments and optimize working capital

With net 45 terms, efficiency is key. The right AP automation ensures payments stay on track, vendors get paid on time, and businesses maintain control over cash flow.

Try an interactive demo and see how Ramp simplifies accounts payable while saving your business time and money.