What's the actual cash-flow tradeoff of offering Net 60 terms to a large wholesale account vs requiring payment upfront?

How much does Net 60 cost in financed working capital?

Net 60 costs about 1.15% of order value in financed working capital at the US bank prime rate of 7.00%. That is the rate the Federal Reserve's H.15 release shows for every business day from 1 to 7 October 2026 (Federal Reserve H.15, October 2026). The carrying cost of a term is order value times your cost of capital times days over 365. On Shopify the wait can run past day 60, because Shopify's net terms run from invoice to payment without capturing anything at the due date.

So a $500,000-a-year account paid on Net 60 costs about $5,750 a year to finance (Deploi arithmetic).

Which cost of capital should the Net 60 arithmetic use?

The Net 60 arithmetic should use your own marginal cost of capital, not prime, because prime is a reference rate. The Federal Reserve describes prime as "one of several base rates used by banks to price short-term business loans" (Federal Reserve H.15, October 2026). If you borrow on a revolving credit line at prime plus 2, use 9.00%, which puts Net 60 at about 1.48% of order value (Deploi arithmetic). If you fund terms from retained cash you would otherwise put into inventory or paid media, use the return on that alternative. In our judgment that return sits well above prime for a growing merchant, so it is the honest number to use.

What does Net 60 cost beyond the interest?

Net 60 costs three things beyond the interest: slippage, bad debt and collections labor.

1. Slippage. Net 60 is a promise about day 60, and your actual days sales outstanding (DSO) is the number that costs money. A book that runs 14 days past term on average is a Net 74 book, which costs about 1.42% at a 7.00% prime rate (Federal Reserve H.15, October 2026; Deploi arithmetic).
2. Bad debt. Use your realized write-off rate on wholesale accounts over the last three years. If you don't have one, that is the finding, and it comes before the terms policy.
3. Collections labor. On Shopify that person gets up to five reminder emails, from the due date to 30 days after (Shopify Help Center, October 2026), and no aging buckets. Count their hours honestly, because this line grows with the account count rather than with revenue. Our receivables aging record keeps aging and chasing in the accounting suite (October 2026).

When does offering Net 60 pay for itself?

Offering Net 60 pays for itself when the contribution margin on the volume the terms actually win beats about 1.15% plus your bad-debt rate. The 1.15% is the carrying cost at the 7.00% prime rate (Federal Reserve H.15, October 2026). Terms buy order size, order frequency and displacement of a competitor who doesn't offer them. The test we use: would this account have placed this order, at this size, paying up front? If yes, the terms are a price cut you left off the price list. If no, compare the carrying cost plus bad debt against the margin on the increment. In our judgment most wholesale gross margins clear that bar, which is why terms are standard. So the discipline belongs on which accounts get terms, not on whether to offer them.

Which wholesale accounts should get Net 30, Net 60 or Net 90?

Give Net 30 to most wholesale accounts, Net 60 to accounts with clean history and real volume gains, and Net 90 only against a limit you can enforce. In our judgment the term follows payment history, not account size:

• Payment up front for any account in its first two orders, regardless of size. The reference check is the two orders.
• Net 30 as the default, because it is the shortest term the market treats as normal. It halves the carrying cost of Net 60: 0.58% against 1.15% at a 7.00% prime rate (Federal Reserve H.15, October 2026).
• Net 60 where payment history is clean and the volume increment is real. Price it: a 1 to 2% terms differential against the Net 30 price list is defensible and easy to explain.
• Net 90 only against a signed credit application with a limit you can enforce. Shopify doesn't enforce limits natively, which is why our credit limits record scores enforcement BUILD (October 2026).

When should you refuse terms to a large wholesale account?

Refuse terms to a large wholesale account, whatever its size, when the risk sits outside the interest line.

This page describes commercial modelling, not financial, credit or accounting advice. Rates and write-off assumptions are yours to set with your own advisors.