Payment terms, cash discounts, and dating determine when and how much of the invoiced value will be paid by the retailer. Most sales by manufacturers to retailers are made on credit. Invoice terms are intended to stimulate early payment by retailers. Traditionally, terms differ for different product lines. For example, discounts in men's wear tend to be '2/10 net 30' while discounts in women's wear tend to be “8/10 net 30." The terms "2/10 net 30' mean a 2% discount on the face value of the invoice is acceptable to the manufacturer if the payment is made Within 10 days of the date on the invoice. Otherwise, the face value of the invoice is due within 30 days. These terms are a source of controversy between manufacturer and retailer when the retailer automatically deducts the "accepted” discount, whether or not the terms are stated on the invoice.
Retail buyers may negotiate for 8/10 net 60 or even 90 meaning the net value of the invoice in not due for 2 or 3 months after the date of the invoice. A manufacturer may use "forward dating” of the invoice to make the cost of the merchandise more favorable to the buyer without changing the terms. The invoice date is advanced to the next month or to the end of the season when the stated terms are applied. This allows the retailer to take the discount as long as the invoice is paid within 10 days of the forward date. Sometimes special arrangements are made for cash payment from the retailer before the merchandise is delivered. This reduces the need for the manufacturer to borrow money to pay expenses, therefore discounts are allowed for early payment.
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