Payment Terms Optimization

Overview

Payment terms define when a B2B customer must pay for goods delivered on credit: net-30 (due 30 days after invoice), net-60, net-90, or early-payment variants like "2/10 net-30" (2% discount if paid within 10 days). Offering flexible payment terms is a competitive advantage in B2B commerce — it reduces friction in the purchase decision — but introduces credit risk that must be carefully managed.

The right tools depend on your platform. Shopify Plus, BigCommerce B2B Edition, and several WooCommerce plugins provide native net-terms support. For smaller setups, a combination of your ecommerce platform and an invoicing tool (Invoiced, Stripe Invoicing) is the most practical approach.

When to Use This Skill

When moving from prepay-only to net-terms for B2B customers to increase conversion
When different customer segments need different terms (SMB net-30 vs. enterprise net-60)
When you want to incentivize early payment with discounts to improve cash flow
When setting up a new wholesale or distribution channel with trade accounts
When credit losses are rising and you need better credit limit enforcement

Core Instructions

Step 1: Determine your platform and choose the right payment terms tool

Platform	Recommended Tool	Native Support
Shopify (Standard)	Invoiced app or Balance app	No native net-terms; use an app
Shopify Plus	Shopify B2B (native) + Invoiced for advanced dunning	Net-30/60/90 built into Shopify B2B; credit limits and company accounts native
WooCommerce	WooCommerce B2B plugin + WooCommerce PDF Invoices	WooCommerce B2B adds payment terms per customer group
BigCommerce	BigCommerce B2B Edition (native)	Net-terms, credit limits, and company accounts built in
Custom / Headless	Stripe Invoicing + Stripe Billing for terms enforcement	Stripe Invoicing supports net-30/60/90 natively

Step 2: Configure payment terms per customer

Shopify Plus (B2B native)

Go to Shopify Admin → Customers → Companies and create a company profile for each B2B account
Click a company and go to Payment methods — set their payment terms:
- Net 7, Net 15, Net 30, Net 60, Net 90
- or a custom number of days
Set a Credit limit on the company — orders that would exceed the limit are blocked or sent for approval
When a company buyer places an order, Shopify automatically creates an invoice with the correct due date and sends it to the buyer's email
The buyer can pay via a link in the invoice email; Shopify marks the order as paid automatically

Early payment discounts on Shopify Plus: Shopify B2B does not natively support "2/10 net-30" early payment discounts. Use Invoiced app for early payment discount terms — configure in Invoiced → Settings → Payment Terms → Early Payment Discount.

Shopify (Standard, via Invoiced app)

Install Invoiced from the Shopify App Store
Go to Invoiced → Settings → Payment Terms and create your term configurations: Net 30, Net 60, Net 90, 2/10 Net 30
In Invoiced → Customers, assign payment terms per customer
When a Shopify order is placed by a net-terms customer, Invoiced automatically generates an invoice with the correct due date
Configure dunning: go to Invoiced → Settings → Chasing and set up a reminder schedule (1 day before due, 1 day overdue, 7 days overdue, 14 days overdue)

WooCommerce

Install WooCommerce B2B plugin (by WooCommerce or a third-party B2B plugin)
Go to WooCommerce → B2B Settings → Payment Terms and configure terms per customer role or per customer
Install WooCommerce PDF Invoices & Packing Slips to automatically generate invoices with due dates
For early payment discounts, you can use a custom pricing rule (WooCommerce Dynamic Pricing plugin) that applies a percentage discount when a coupon code representing the early payment option is used

Credit limit enforcement in WooCommerce:

In the B2B plugin settings, set credit limits per customer or customer group
Configure the behavior when the limit is exceeded: block the order or notify an admin for approval
Credit is automatically released when an invoice is paid

BigCommerce B2B Edition

In B2B Edition → Company Management → Payment Methods, enable net-terms
In B2B Edition → Companies → [Company] → Credit, set:
- Credit limit
- Payment terms (Net 30, Net 60, etc.)
- Credit status (Approved, Pending, Suspended)
When a company buyer places an order, BigCommerce B2B Edition generates an invoice with the configured terms
The buyer can view and pay outstanding invoices from their account portal

Custom / Headless

Use Stripe Invoicing for net-terms enforcement without building a credit system from scratch:

// Create a customer with payment terms in Stripe
const customer = await stripe.customers.create({
  email: customerEmail,
  name: companyName,
  metadata: { payment_terms: 'net_30', credit_limit: '50000' },
});

// Create an invoice with net-30 terms
const invoice = await stripe.invoices.create({
  customer: customer.id,
  collection_method: 'send_invoice',
  days_until_due: 30,            // Net-30
  auto_advance: true,            // Automatically finalize and send
  description: `Invoice for Order ${orderNumber}`,
  metadata: { order_id: orderId, po_number: poNumber },
});

// Add line items, then finalize and send
await stripe.invoiceItems.create({ customer: customer.id, invoice: invoice.id, amount: orderTotal, currency: 'usd', description: orderDescription });
await stripe.invoices.finalizeInvoice(invoice.id);
// Stripe auto-sends the invoice and handles dunning reminders via Billing settings

Configure dunning in Stripe Billing settings: Go to Stripe Dashboard → Billing → Settings → Invoice reminders and configure automatic reminders: 3 days before due, on due date, 3 days after, 7 days after, 14 days after.

Credit limit enforcement (custom):

async function checkCreditAvailability(customerId, orderAmount) {
  const customer = await db.customers.findUnique({ where: { id: customerId } });
  const openInvoicesTotal = await db.invoices.aggregate({
    where: { customerId, status: { in: ['sent', 'overdue', 'partially_paid'] } },
    _sum: { amountDue: true },
  });

  const currentBalance = openInvoicesTotal._sum.amountDue ?? 0;
  const availableCredit = customer.creditLimit - currentBalance;

  if (orderAmount > availableCredit) {
    return { approved: false, availableCredit, shortfall: orderAmount - availableCredit };
  }
  return { approved: true, availableCredit: availableCredit - orderAmount };
}

Step 3: Optimize terms for cash flow and credit risk

The right terms for each customer tier:

Customer Tier	Recommended Terms	Rationale
New account (< 3 orders)	Net 15 or prepay	Insufficient payment history to extend credit
Established (3–12 months on-time)	Net 30	Standard B2B terms
Strategic (12+ months, large volume)	Net 60 or "2/10 Net 30"	Reward loyalty; early discount improves your cash flow
High-risk (2+ late payments)	Prepay or Net 15 only	Protect against bad debt

Early payment discount economics: "2/10 net-30" means the customer gets a 2% discount if they pay within 10 days instead of 30. For the customer, this is equivalent to borrowing at ~36.7% APR — most customers with any cost of capital should take the discount. For you, paying 2% to receive payment 20 days earlier is typically better than your borrowing cost.

Annual credit review: Review every credit account annually — set a calendar reminder. A customer who qualified for $50,000 credit 2 years ago may look very different today. Reduce limits for customers who have developed slow-pay patterns.

Best Practices

Start new B2B customers on stricter terms — onboard new accounts at net-30 or net-15 and upgrade after 6 months of on-time payment; never start with net-60 or net-90 without a credit check
Never ship to accounts on credit hold — enforce credit holds at the order level, not just the invoicing level; once goods leave the warehouse you have lost leverage
Price early payment discounts correctly — "2/10 net-30" implies an annualized cost of ~36.7% to the customer; communicate this value clearly
Segment collections intensity by risk tier — high-risk customers need follow-up on day 3 overdue; long-term accounts with a perfect history deserve more grace
Document every credit decision — store the reason for every credit limit change; you will need this if you ever need to defend a write-off to auditors

Common Pitfalls

Problem	Solution
Customer places an order exceeding their credit limit	Check available credit before order confirmation, not just at invoicing; Shopify Plus B2B and BigCommerce B2B Edition enforce this natively
Early payment discounts taken after the discount period	Record the payment date strictly; Invoiced and Stripe Invoicing track this automatically
Credit limits not updated as AR balance changes	Use a tool that deducts from available credit when an invoice is created and restores it when paid; Invoiced and Stripe handle this automatically
Different departments granting different terms informally	Centralize terms configuration in your platform or AR tool; sales reps should request terms changes through the credit system
High bad-debt write-off rate	Implement a credit application process before approving any account for net terms above $5,000

Related Skills

@accounts-receivable-automation
@invoice-generation-automation
@payment-reconciliation-automation
@stripe-integration

payment-terms-optimization