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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Based on our saas pricing book, Price to Scale, handling enterprise customers who request longer payment terms—such as Net 60 or Net 90—involves a careful balance between customer flexibility and the cash flow implications for your business. Here’s how we suggest approaching it:
• Direct Answer:
Extend payment terms when they align with your overall contract strategy, but do so within a structured framework that considers cash flow, discounting, and risk. Essentially, treat extended payment terms as one of the negotiable levers in the deal, ensuring that any financial impact is balanced by adjustments in pricing or other contract elements.
• Book Insights and Methodology:
As discussed in our book (see the section on “Contract Term Negotiations That Deal Desk Supports” on page 127), customers often negotiate these terms to better match their internal cash flow cycles. For example, a small business might change Net30 to Net60. With enterprise customers, who typically have more complex needs (often under an Enterprise License Agreement or ELA), similar flexibility is expected. However, enterprise deals also allow you to build in structured flexibility—from discounting to additional service terms—so that any potential delays in cash inflows are compensated by agreed-upon invoice incentives or slight adjustments in pricing.
• Practical Application:
- Evaluate the financial impact of longer payment terms on your cash flow.
- Consider offering early payment discounts as an incentive, thereby turning extended payment terms into a negotiated win-win scenario.
- Incorporate these terms into your overall contract framework without undermining the perceived value of your service.
- Ensure that any negotiated payment term changes are factored into your broader discounting strategy, keeping in line with your enterprise pricing model.
• Summary/Takeaway:
By viewing extended payment terms as one component of a broader negotiation strategy—as outlined in Price to Scale—you can confidently offer Net 60 or Net 90 terms to enterprise customers while protecting your financial interests. This aligned approach ensures that while customers get the flexibility they need, you maintain control over overall revenue and cash flow dynamics.
This strategic balance is key to both winning enterprise deals and ensuring your pricing model remains robust and sustainable.