Learning how to manage your creditors in a business setting can at first seem straightforward. You get a bill, you pay it by the due date, and you're done. Easy. However, when we start looking at vendors, it's not always so cut and dry. Business credit terms are not the same as personal. While some creditors work the same for business and personal, others do not. For example, utilities and credit cards are primarily the same in that you are billed monthly with a set due date, late fees, and interest where applicable. Vendors, however, follow different billing practices.

Part of learning how to manage your creditors is understanding the concept of accounts payable. In a business setting, especially a large business with a separate accounting department, payments are seldom made to a vendor by a single person. Accounting professionals recommend the separation of duties to prevent fraud or stealing. This means that one employee might enter a payment into the business accounting system and make out the check, but another employee has to review the payment and sign the actual check. This added layer of protection slows down the payment process. As such, payment terms such as net 30 are often used by a vendor for all accounts to simplify invoicing.

Payment terms such as 'within 30 days', ' net 30' or ' 2/10 net 30' will be common as you learn how to manage your creditors in a business setting, especially if dealing with some international suppliers. The first two terms simply mean that payment is expected within 30 days. In the case of 2/10 net 30 (and other similar payment terms) the 2/10 portion refers to an offer of a payment discount if paid early. The term 2/10 net 30, can thus be understood as the payee can take a 2% discount off the total of the invoice if paid within 10 days. Otherwise, the full amount is due within 30 days.

Even though, as a small business, you may track, enter, and pay all expenses through yourself or another single employee, you should be familiar with the common payment terms. In particular, discounts for early payments can offer a small business considerable savings over time. However, not only will knowledge and understanding of payment terms help you to understand how to manage your creditors, but it will also help you to understand what customers expect in terms of your billing practices. When applied to accounts receivable, payment terms can have a tremendous affect on cash flow and the ability to keep creditors paid on time.

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