When your best customer wants Net 90: managing cash flow under extended payment terms

It has become one of the most common complaints we hear from software company CFOs: the enterprise deal finally closed, the contract is signed, implementation is live—and then procurement sends over their standard payment terms. Net 60. Net 90. Sometimes Net 120. For a SaaS company that modeled its cash flow on Net 30, that single line item can move the month you actually receive cash by a quarter.

This isn't a new phenomenon, but it has gotten markedly worse. Enterprise procurement teams have become more sophisticated about using payment terms as a working capital tool—pushing cash out to their own suppliers while protecting their own balance sheets. Large public companies in particular have financial incentive to do this: extending payables improves their cash conversion cycle and, in a higher interest rate environment, holding cash longer has real economic value. The software vendor on the other end of that contract absorbs the cost.

What Net 90 actually costs you

The math is simple but often underappreciated in the deal-closing euphoria. A $500K annual contract billed quarterly means $125K invoices. At Net 30, you're collecting within a month of invoice. At Net 90, you're waiting 3 months—and that's assuming the customer pays on time, which enterprise AP departments frequently do not.

A company running $20M ARR with a Net 90 book has roughly $5M in receivables outstanding at any given moment. At Net 30, that number would be closer to $1.7M. The difference—$3.3M—is cash you've earned but can't use. For a venture-backed company managing runway, that's 2–4 months of burn sitting in someone else's bank account. For a profitable company, it's capital you're providing interest-free to a customer who probably has a larger balance sheet than you do.

When "strategic" customers pay whenever they want

The more insidious version of this problem isn't the customer who negotiated Net 90 upfront—it's the one who negotiated Net 30 and simply pays in 75 days anyway. Enterprise AP teams operate on their own cycles. They know that most software vendors won't escalate over a 45-day overage because the relationship feels too important to risk. So they pay when it's convenient for them.

We see this pattern constantly in accounts placed with us. A software company has a customer paying at day 45, then day 60, then day 80, and finally the invoice simply stops getting paid. The AR team sends reminders; the customer responds with "in queue" or "awaiting approval." By the time the account gets placed with us, it's 8 or 9 months old—and the vendor has been providing the service that whole time.

The customer's slow-pay behavior was a signal for a year before it became a bad debt. The software company read it as "they're a little slow" instead of "they are extracting credit from us without authorization."

Practical responses that work

There is no perfect solution to enterprise payment term pressure, but there are moves that materially improve your cash position:

• Negotiate terms before the deal, not after. Payment terms should be discussed in the commercial negotiation, not handed to you by procurement after legal has signed off on everything else. Once the deal is "done," your leverage to push back on Net 90 is gone.
• Price Net 90 into the contract. If a customer insists on extended terms, price the cost of float into the deal. A 1–2% premium on a Net 90 deal versus Net 30 is reasonable and easy to justify. Many procurement teams will accept it; some will suddenly discover that Net 45 works fine.
• Offer early payment discounts with teeth. A 1% discount for payment within 10 days (1/10 Net 30) translates to roughly 18% annualized—attractive for a customer with capital. These programs work when someone in the customer's treasury function is actually watching. They don't work when the AP team runs on autopilot.
• Set escalation triggers, not "check-in" calls. If an invoice hits day 45 unpaid, the next contact should be formal notice—not another reminder email. Customers who pay late train you to wait for them. Escalation protocols retrain them.
• Separate "strategic" from "slow-pay." A customer can be strategically important and financially reliable. A customer can also be strategically important and a chronic slow-payer. Those are different situations and shouldn't get the same AR treatment.

When the payment terms problem becomes a collections problem

The failure mode we see most often: a software company tolerates slow payment from an important customer for 6–12 months, the relationship continues, and then one day the customer stops responding entirely. Maybe they're being acquired. Maybe they're running out of runway. Maybe the champion who cared about the relationship left the company.

At that point, the vendor faces a difficult decision. The account is old—old enough that recovery odds have dropped meaningfully. The customer relationship is already damaged because there's been no communication in months. And the balance has been sitting on the books long enough that some internal stakeholders have mentally written it off.

The accounts we recover most successfully are placed within 90 days of the first missed payment—not 90 days after the last attempt to resolve it internally. The distinction matters. The longer you wait to escalate, the more options you lose.

Extended payment terms are a business reality in enterprise software. Chronic slow-pay disguised as extended terms is a different thing. Knowing the difference—and acting on it early—is one of the more important disciplines a software company's finance team can develop.