Credit terms refer to an agreement where the supplier allows the customer to make payment after the delivery of goods or services. Standard credit periods range from 30 to 60 days, but terms vary by agreement and industry. Longer credit periods can incentivise customers to purchase more but may affect cash flow for suppliers.

Example: A furniture supplier offers a 45-day credit term to a retailer for purchasing £10,000 worth of chairs. This agreement means the retailer can sell the chairs in the meantime and pay the supplier within 45 days. However, if the retailer fails to pay within this period, they may incurlate payment penalties or interest.

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