Net terms (Net 30 / 60)

Net terms are a payment arrangement in which a business invoices a customer for goods or services and gives them a set number of days after the invoice date to pay in full, rather than requiring payment at the time of purchase. Net 30 means payment is due within 30 days of the invoice date, and Net 60 means payment is due within 60 days, with other common variants including Net 15, Net 45, and Net 90. For a subscription business, net terms usually show up in B2B contracts with larger accounts, where a customer's accounts payable process requires an invoice and an approval cycle rather than an immediate card charge. A subscription platform such as Recurly can generate and track invoices with defined due dates, but managing net terms well is as much a finance and collections discipline as it is a billing configuration, since the business is effectively extending short-term credit to every customer on those terms.

Why net terms matter for subscription businesses

Net terms are often a requirement for closing larger B2B deals, since many enterprise procurement and accounts payable processes are built around invoicing on a schedule like Net 30 or Net 60 rather than paying by card at signup. A subscription business that cannot offer net terms may find itself excluded from deals with customers whose internal processes require them, even when the product itself is a strong fit. At the same time, net terms introduce a real timing gap between recognizing a sale and receiving cash, which affects cash flow planning, days sales outstanding, and the risk of late or non-payment. A subscription business offering net terms needs a deliberate collections and credit process, because the flexibility that wins a deal can also create a receivables management burden if it is not tracked carefully.

*The following is based on Recurly invoice data*

Overall: ~66% of net-terms invoices that get paid are paid after their due date.

By term length:

| Terms | % paid late | Avg days late (when late) | Median days late | % paid 30+ days late | | --- | --- | --- | --- | --- | | Net 30 | 57.4% | 25.5 days | ~29 days | 0% | | Net 45 | 95.9% | 22.7 days | ~14 days | 28.2% | | Net 60 | 89.8% | 34.0 days | ~29 days | 23.2% | | Net 90 | 97.0% | 66.0 days | ~59 days | 93.8% |

How net terms work

Net terms follow a defined invoice-to-payment cycle:

1. The subscription business delivers the product or service, or renews a subscription period, and issues an invoice that states the amount due and the payment terms, such as Net 30.

2. The due date is calculated from the invoice date, not the date the customer actually receives or reviews the invoice, so a Net 30 invoice dated the first of a month is due 30 days later regardless of when the customer opens it.

3. The customer's accounts payable team processes the invoice through its own internal approval workflow and issues payment, commonly by ACH, wire transfer, or check, before or on the due date.

4. If payment is not received by the due date, the invoice becomes past due, and the subscription business typically follows a collections process, which can include reminder notices, late fees where contractually allowed, and eventually collections escalation or service suspension for accounts that remain unpaid.

How to use net terms in a subscription billing program

A subscription business offering net terms should build several practices around it, not just the invoice due date itself:

• Set eligibility criteria for which customers or contract sizes qualify for net terms, since extending unsecured short-term credit to every customer carries risk.

• Choose consistent terms (Net 30, Net 45, Net 60) by segment or contract tier, and state them clearly in the contract and on every invoice.

• Build a dunning and collections workflow that sends reminders before and after the due date, escalating appropriately for accounts that go significantly past due.

• Track days sales outstanding and aging of receivables by customer segment to catch collections problems early, rather than only at contract renewal.

• Decide in advance how overdue net-terms accounts affect service access, since suspending or downgrading access for a large B2B account carries different considerations than for a self-serve customer on a card.

Benefits and examples

Offering net terms brings real advantages, alongside the collections responsibility it creates:

• Removes a common procurement obstacle for enterprise and mid-market buyers whose internal processes require invoicing rather than card payment.

• Can support larger deal sizes, since finance teams evaluating a purchase order are often more comfortable with a longer payment cycle for a larger commitment.

• Strengthens the customer relationship by aligning the subscription business's payment process with how the customer's own finance function actually operates. As an illustrative example, imagine a subscription business signs an annual contract worth 24,000 dollars with a customer on Net 30 terms, invoiced at the start of the contract. The invoice is dated January 1 and is due January 31. If the customer's accounts payable team processes payment on January 25, the subscription business has effectively extended 25 days of credit on that invoice, and the payment posts within terms with no collections action needed. If instead payment is not received until February 20, the invoice is 20 days past its Net 30 due date, which would typically trigger the business's standard dunning and collections escalation for that account.

Net terms vs upfront payment

Net terms invoice the customer after delivery or renewal and give them a defined window, such as 30 or 60 days, to pay. Upfront payment, most commonly seen in self-serve subscription billing with a card on file, charges the customer at the time of purchase or renewal, with no invoicing delay and no receivables risk for the business. Net terms suit B2B relationships where the buyer's procurement process requires an invoice cycle, while upfront card-based payment suits self-serve and smaller-account relationships where speed and simplicity matter more than accommodating a customer's internal approval workflow.

Recurly provides robust invoicing and dunning capabilities specifically designed for net-terms customers, primarily through its manual invoicing feature. This functionality is ideal for Business-to-Business (B2B) billing workflows where customers pay on agreed-upon net terms rather than through automatic payment collection. Here's how Recurly handles invoicing and dunning for net-terms customers:

Invoicing for Net-Terms Customers:

• Manual collection: To enable net terms, the collection method for a subscription must be set to "Manual Collection." This can be configured at the subscription plan level or for individual customer accounts. When set to manual, Recurly does not store a payment method for automatic collection.

• Configurable net terms: Recurly allows merchants to define various net terms, such as Net-10, Net-30, Net-60, or custom day lengths. Additionally, End of Month (EOM) terms like EOM +0, EOM +15, EOM +30, EOM +45, EOM +60, and EOM +90 are supported. These terms dictate the period a customer has to pay an invoice before it is considered past due.

• Overriding default terms: Merchants can override the default net terms for a customer on a manual plan within the subscription's "Edit Subscription" view, under the "Invoicing" section.

• Invoice communication: When terms are set on an automatic invoice, a "New Invoice" email template is sent to customers, informing them of the final invoice amount and due date.

• API and exports: Manual invoicing details, including purchase order numbers (po_number), collection method (collection_method), net terms (net_terms), and net terms type (net_terms_type), are available in invoice, subscription, and transaction exports for accounting, auditing, and reporting. Subscriptions and one-time invoices can also be created via the API with specified collection methods, net terms, and PO numbers.

Dunning for Net-terms customers:

• Dedicated dunning rules: Recurly offers a separate set of dunning rules specifically for manual invoices, distinct from those for automatic collection.

• Dunning cycle initiation: The dunning period for manual invoices begins the day after an invoice exceeds its net terms (i.e., net terms + one day).

• Dunning suppression: For manual invoices, the standard dunning process, including automated payment retries and reminder emails, is suppressed because no payment method is on file for automatic collection.

• "Invoice past due" emails: The dunning cycle for manual invoices utilizes "Invoice Past Due" email templates to notify customers.

• Manual past due management: If a manual invoice becomes past due and payment is not received, merchants must manually use the "Stop Collection" option to fail the invoice. This prevents the invoice from remaining in a past-due state indefinitely.

• Customizable dunning campaigns: Merchants can create and customize dunning campaigns to fit different customer groups, including the length of the dunning cycle and the cadence of emails.

It's important to note that manual invoicing and dedicated dunning campaigns for manual invoices are typically not included in Starter or Pro plans and may require an upgrade.

Frequently asked questions

What does Net 30 mean on an invoice? Net 30 means the full invoice amount is due within 30 days of the invoice date. It does not mean a discount is available or that partial payment is expected; it specifies the payment deadline.

Is Net 60 better for the customer or the business? Net 60 gives the customer more time to pay, which can help close a deal with a buyer whose accounts payable cycle is longer, but it extends the period the subscription business is carrying that receivable, which affects cash flow and collections risk.

Can a subscription business charge a fee for late payment on net terms? Many businesses build a late fee or interest charge into their contract terms for invoices that go past due, but this needs to be stated clearly in the contract in advance, and specific rates or terms should be confirmed with finance or legal.

Merchants can utilize the "Terms and Conditions" and "Customer Notes" fields on invoices to communicate their late fee policies to customers.

How do net terms affect revenue recognition? Net terms affect when cash is received, not necessarily when revenue is recognized, since revenue recognition is generally tied to delivery of the service rather than to the invoice due date, though the specifics depend on the applicable accounting standard and contract terms.