Net 45 payment terms give the buyer 45 calendar days from the invoice date to pay the full amount owed, with no discounts or deductions applied. The term appears on business-to-business invoices and sits between the more common Net 30 and the longer Net 60. For the buyer, it works like a short interest-free loan. For the seller, it means waiting an extra two weeks beyond a standard 30-day window before the cash arrives.
“Net” signals that the full invoiced amount is due. The “45” is the number of calendar days the buyer has to remit it. Together they tell the buyer exactly what to pay and by when.
How to Calculate the Due Date
Count 45 calendar days from the invoice date, with the day after the invoice date as day one. An invoice dated January 1 is due February 15. Weekends and holidays count, because the standard uses calendar days rather than business days unless the contract says otherwise.
A common variation is “Net 45 EOM,” where EOM stands for end of month. The 45-day count begins on the first day of the month after the invoice was issued. An invoice dated March 15 under Net 45 EOM starts its countdown on April 1 and comes due May 15. Companies that batch their payables into monthly cycles often prefer this form.
Early Payment Discounts
Sellers sometimes attach a discount to Net 45 terms as an incentive to pay early. You will see this written as something like “1/15 Net 45,” meaning the buyer can take 1% off the invoice by paying within 15 days. If the buyer skips the discount, the full amount is still due on day 45.
The 1% looks small until you annualize it. The standard formula is to divide the discount percentage by one minus the discount, then multiply by 365 divided by the days of acceleration. For 1/15 Net 45, that is (0.01 ÷ 0.99) × (365 ÷ 30), or roughly 12.3% annualized. A seller offering the discount is effectively paying about 12.3% a year to collect 30 days sooner. For a buyer with available cash, taking the discount usually beats any low-risk alternative for the same 30-day period.
What Net 45 Does to Cash Flow
For the Seller
Compared with Net 30, Net 45 stretches the working capital cycle by two extra weeks. Payroll, rent, and materials still come due on their own schedules, so the seller must cover 15 additional days of operating cost before the corresponding revenue arrives. Smaller businesses feel this most, since they rarely hold enough cash reserves to absorb the gap without leaning on a line of credit.
The longer the payment window, the more can go wrong on the buyer’s end. A customer who was solvent on the invoice date can hit trouble before day 45. Sellers extending Net 45 should evaluate buyer creditworthiness more carefully than they would for shorter terms.
For the Buyer
Holding cash for 45 days gives the buyer flexibility. The window can be long enough to receive inventory, sell it, and collect revenue before the payment is due, which effectively finances the purchase with the seller’s money at no cost. Even when goods do not turn over that fast, the extra liquidity lets a purchasing department manage cash across multiple obligations rather than paying each invoice on arrival.
Tools Sellers Use to Bridge the Gap
Invoice Factoring
Sellers who cannot wait 45 days sometimes sell their unpaid invoices to a factoring company. The factor advances most of the invoice value right away and collects from the buyer when the invoice comes due. Factoring fees typically run about 2% to 5% of the invoice amount for a 30-day collection period, though rates vary by industry and by the buyer’s creditworthiness.
One legal point matters here. When a seller assigns an invoice to a factor, the buyer must be notified that payment should go to the factor rather than the original seller. Under the Uniform Commercial Code, that notification must identify which invoices have been assigned and must come from either the seller or the factor. If the buyer asks for proof of the assignment and does not receive it promptly, the buyer can pay the original seller and be legally in the clear.1Legal Information Institute. UCC 9-406 Discharge of Account Debtor; Notification of Assignment
Trade Credit Insurance
Trade credit insurance covers accounts receivable if a customer defaults, goes bankrupt, or cannot pay. Insurers price the policies based on factors including your payment terms and the coverage percentage you choose. Net 45 generally costs more to insure than Net 30 because the longer window increases the insurer’s exposure. For sellers extending credit to many buyers, a policy can be more cost-effective than factoring, because it protects the whole portfolio rather than discounting invoices one at a time.
When a Buyer Pays Late
What you can collect on a late Net 45 invoice depends almost entirely on the contract. There is no single federal law governing late-payment penalties between private businesses. Late fees and interest are enforceable only to the extent your agreement provides for them and state law allows them.
Most well-drafted vendor agreements include a late-payment clause specifying an interest rate or flat fee. State usury laws cap the maximum rate on commercial debts, and those caps vary. Some states allow rates as high as 18% annually, while others set lower limits or distinguish between loan interest and late-payment charges on trade credit. If your contract is silent on late fees, collecting one after the fact is difficult.
Federal government buyers are a separate case. Under the Prompt Payment Act, federal agencies are generally required to pay proper invoices within 30 days, and when they pay late they owe interest at a rate the Treasury Department publishes in the Federal Register.2Office of the Law Revision Counsel. 31 USC Ch. 39 Prompt Payment Interest accrues from the day after the required payment date until the day payment is made. The Act does not reach private B2B transactions, so if your customer is another business, you are back to the contract and state law.
Tax Timing on Unpaid Net 45 Invoices
When You Report the Income
If your business uses the accrual method, you report income in the year you earn it, whether or not the customer has paid. The IRS treats income as earned when all events have occurred that establish your right to receive it and the amount can be determined with reasonable accuracy.3Internal Revenue Service. Publication 538, Accounting Periods and Methods For a Net 45 invoice, the income typically hits your books when you deliver the goods or finish the service, not 45 days later when the check arrives. That creates a timing mismatch: you may owe tax on revenue you have not yet collected.
Cash-basis businesses have it easier. You record the income when payment is received, so a Net 45 invoice generates no tax liability until the buyer pays.
Deducting a Bad Debt
If a Net 45 invoice goes unpaid and you have exhausted collection efforts, you can deduct the loss as a business bad debt. The IRS requires that a genuine debtor-creditor relationship existed, meaning the buyer had a legal obligation to pay a specific amount. For accrual-method businesses, the deductible amount is limited to the income you previously reported from that transaction.4eCFR. 26 CFR 1.166-1 – Bad Debts You cannot deduct a receivable you never included in taxable income.
The deduction is available in the tax year the debt becomes wholly or partially worthless, and the burden of proving worthlessness sits with you. If you miss the deduction in the right year, the statute of limitations for claiming a refund based on a worthless debt is seven years rather than the usual three.
Where Net 45 Fits Among Payment Terms
Net 30 is the common baseline for B2B invoicing. It suits recurring orders with established customers and industries with fast inventory turnover. Moving from Net 30 to Net 45 is a meaningful concession, typically made to win larger accounts or to stay competitive in markets where buyers have leverage.
Net 60 and Net 90 are reserved for situations where the buyer genuinely needs the extra time, such as capital-intensive projects, international shipments with long transit, or industries with extended production cycles. Each additional 30-day window raises the seller’s financing cost and default risk while giving the buyer more room.
At the other end, some sellers use Net 10 or “due on receipt,” which leaves no credit window at all. Those terms appear with new customers whose credit is untested or in industries where margins are too thin to absorb any financing cost.