For years, the strategy worked. Offer Net-60 instead of Net-30. Be more flexible than competitors. Reduce friction in negotiations. Win more business. And it did.
Revenue increased. Customers stayed. Sales teams celebrated.
But then the market changed.
Cash tightened. Collection timelines stretched. Forecast accuracy weakened. And suddenly finance leaders started asking a harder question: Did we grow revenue—or did we quietly become a lender?
For many CFOs today, that question is becoming increasingly important. Because the credit policies that helped accelerate growth in stable periods can become liabilities during economic transitions.
When Did Customer-Friendly Terms Become an Unsecured Loan?
Most companies think of payment terms as a commercial decision. But financially, payment terms are credit. Every invoice paid in 60, 90, or 120 days represents working capital funded by the seller. According to Corpay’s 2026 Business Payment Terms Guide, payment terms directly influence Days Sales Outstanding (DSO), cash conversion cycles, and working capital performance because longer settlement periods delay cash realization and increase receivables exposure.
That means extended terms are not neutral. They create financial obligations. Think of it like offering customers a company credit card—with no underwriting after approval. Most organizations would never approve that explicitly. But many do operationally.
Why Growth-Era Credit Policies Often Break During Economic Shifts
During expansion periods, flexible terms can look harmless. Customers pay eventually. Liquidity feels strong. Revenue offsets slower collections. Then conditions change. Customers preserve cash. Approval cycles slow. Working capital becomes more expensive.
According to Corcentric’s analysis on Credit Management in the Face of Increasing Payment Terms, longer payment terms originally emerged to stimulate growth and customer purchasing power—but increasingly place suppliers under greater pressure as payment cycles expand.
The challenge is subtle. Credit policies rarely fail overnight. They become outdated gradually. The market changes. The policy doesn’t.
Why Longer Terms Can Quietly Increase Collection Costs
Imagine two customers.
Customer A: Pays Net-30 consistently
Customer B: Operates under Net-90
Both generate identical annual revenue. Which one creates more value? Most companies answer incorrectly.
Because revenue alone ignores carrying costs. Extended terms create:
- Higher financing requirements
- Increased collection workload
- Lower liquidity flexibility
- Greater forecasting uncertainty
According to eCapital’s Extended Payment Terms analysis, delayed invoice settlement remains one of the most common drivers of working capital pressure because cash becomes trapped inside receivables rather than funding operations or growth. The result? Sales stay strong. Cash feels weak.
Why More Revenue Doesn’t Always Mean Better Cash Flow
One of the biggest misconceptions in B2B finance is: Higher revenue equals stronger financial health.
Not always. If growth requires increasingly generous terms, profitability and liquidity can move in opposite directions.
According to Deloitte’s Working Capital Management insights, organizations continue facing DSO pressure despite growth, highlighting that revenue performance alone cannot measure financial resilience.
In practical terms: Winning a large contract with poor terms can create more financial stress than losing it. That’s because growth funded through receivables becomes expensive growth.
How Smart CFOs Know When Credit Terms Need to Change
Strong credit policy isn’t about becoming restrictive. It’s about staying aligned. Leading finance teams increasingly review:
- DSO by customer segment
- Margin adjusted for payment timing
- Collection effort per account
- Payment behavior trends
- Exception frequency on terms
Think of credit policy like pricing. You wouldn’t leave pricing unchanged for years. Credit deserves the same discipline. Because customer expectations evolve. Markets evolve. Risk evolves.
Why Collections Should Influence Credit Policy
Many organizations separate sales, credit, and collections. But collections teams often see policy weaknesses first.
Patterns emerge:
- Customers always requesting extensions
- Chronic late payers under favorable terms
- High-value accounts becoming harder to collect
This is where BARR Credit supports businesses beyond traditional recovery. Collections should not begin after credit policies fail. They should help strengthen policies before exposure grows.
Final Thought
The credit terms that helped win customers five years ago may not be protecting cash flow today. Because every extra payment day has a cost. The strongest CFOs no longer ask: “Did these terms help us grow?”
They ask: “Are these terms still helping us collect?”
That answer often determines whether revenue becomes cash—or risk.
