# Net-Terms vs Prepay in B2B Software Sales: Which Should You Offer?
A prospect loves your product, the demo went well, and then procurement asks: "We pay on net-45 terms." Meanwhile your CFO wants payment before go-live. Net terms versus prepay is one of the oldest tensions in B2B software sales — and in India, where commercial credit is informal and enforcement is slow, getting it wrong is expensive. Here's how to think about it.
What Each Model Really Means
Prepay is simple: the customer pays before (or at) activation. You carry zero credit risk, your cash conversion cycle is negative in the best way, and there are no collection calls.
Net terms (net-15, net-30, net-45) mean you deliver first and invoice later. The customer uses your software for weeks or months before paying a rupee. You've effectively become their lender — an unsecured one.
The Real Cost of Net Terms
Working capital you're silently lending
On a ₹12 lakh annual contract at net-45, you're floating roughly ₹1.5 lakh of carrying cost in time-value alone, plus gateway/admin overhead. Multiply across your enterprise book and net terms quietly consume a meaningful slice of gross margin.
Credit risk concentrated in your biggest deals
Ironically, the customers who demand the longest terms are often the ones with the most negotiating power — large enterprises with slow AP departments, or struggling companies stretching payables to survive. In India, recovering unpaid B2B invoices means civil litigation measured in years. Your DSO (days sales outstanding) isn't just a metric; it's a measure of how much of your business depends on other people's discipline.
Sales friction cuts both ways
Prepay scares off buyers who've been burned by vendors disappearing after payment. Net terms reassure them — but attract exactly the accounts most likely to stretch payments further.
Where Each Model Wins
| Situation | Better fit |
|---|---|
| SMB / self-serve deals under ₹50k | Prepay (monthly or annual) |
| Funded startups, fast-moving teams | Prepay with annual discount |
| Large enterprises with formal procurement | Net terms — fighting it loses the deal |
| New logo, unproven relationship | Prepay or shortened terms |
| Renewals with proven payment history | Flexible — they've earned trust |
Hybrid Structures That Break the Deadlock
You don't have to pick one globally. Vendors commonly blend:
- Deposit + net: 25–50% upfront, balance on net-30.
- Milestone billing: quarterly invoicing instead of one annual invoice, reducing exposure per cycle.
- Late-fee teeth: contractual interest on overdue amounts (and actually enforcing it once, early, sets the tone).
The Financing Middle Path
The newest option removes the trade-off entirely: let the buyer pay on terms they like while you get paid upfront anyway. Vendor-financing platforms such as KredFlow sit between both parties — the customer signs the annual contract and pays in monthly instalments via eNACH auto-debit, with instant approval based on their GSTIN track record, while the vendor receives the full contract value from the financier at the start. The buyer gets net-like flexibility; you get prepay economics without playing debt collector.
Conclusion
Prepay protects your cash flow; net terms protect your close rate. Rather than choosing dogmatically, segment: prepay for self-serve and SMB, structured terms for enterprise, and financed annual contracts for buyers who need monthly payments but shouldn't become your credit risk. The best billing model is the one that closes the deal and keeps the cash coming home.