Terms of Payment - Meaning & Definition

Published by MBA Skool Team, Last Updated: November 25, 2014

What is Terms of Payment?

These are the conditions under which the seller will complete the sale if they are satisfied. The terms include the specific period within which the buyer needs to pay off the amount dues, demands related to cash in advance, cash on delivery, 30 days or more deferred payment and similar other provisions. It is the conditions under which the vendor completes the sale. The objectives covered within it are:

1. Expected Date of Payment

2. Conditions that are stated for the payment receive

3. Discounts that are entitled to the buyer

Terms of payment can be entitled to any one in the process of sales, from the wholesaler to the end customer.

Examples of common Invoice payment terms:

PIA-Payment in Advance for the prepaid products

COD- Cash on delivery, Cash payment after receiving the good

CBS- Cash being paid before the product is shipped

Net 30 -The payment will be issued 30-days from the date of the suppliers invoice

Net 10 - Payment 10 days after invoice date

EOM – Payment at the end of the month

Cash account- No credit, only cash based account

Bill of exchange – Supported by a bank, when a promise is made to pay after due date

Letter of credit – Often used in export, it is a documentary credit confirmed by a bank

2MD- credit payment done monthly of a full month's supply plus an extra calendar month

Discount payment terms:

Coupons: Terms are mentioned under which certain quantity can be purchased at a redeemed price

Discount cards: A discount card that gives certain customers or any customer holding it a discount

Disability discount – Discount given to the disable people

Student discount: Discount given to the students

Military discount: Discount given to the military and to their families

Rebates: Refund given to the buyer after purchase

Seasonal discount: Discount which is given when the sales are down.

Thus we can say from these examples that a wide variety of terms that can be offered by the vendors.


Hence, this concludes the definition of Terms of Payment along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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