B2B e-commerce is growing fast, as brands seek to increase sales and boost their bottom line. In fact, a 2017 report from Forrester Research estimated business-to-business (B2B) e-commerce transactions will reach $1.2 trillion by 2021.

But as the industry booms, the pace of business is also picking up speed, so B2B organizations tackling e-commerce need to figure out how to keep up. After all, competition across industries is getting more fierce, particularly in tight-margin retail sectors, while small business success is more challenging than ever. Customers are also becoming more demanding, accustomed to the seamless path-to-purchase journeys they enjoy on the B2C side (think Uber and Seamless.com). In addition, as millennials move into B2B management positions, they expect technology on their terms.

Finally, transactions are global and 24/7, so those businesses that don’t move faster will be left behind. The faster a business can complete a transaction, the faster it can move on to the next opportunity.

Complex B2B payments slowed by the paper chase

The problem is, B2B e-commerce is far more complex than B2C transactions. Unlike clicking “buy” on Amazon, for example, purchasing or selling B2B goods and services often involves multiple decision-makers, high-value deals, and a highly-targeted customer base.

Historically, complicated B2B payment methods also slow things to a crawl. In B2B transactions, customers usually don’t pay upfront but wait until they have received goods and services. Contracts may include prepayments or partial payments in order to receive discounts or gain increased flexibility. Invoices, of course, also have to make their way through various stages of approval. In addition, complex fees and taxes are part and parcel of cross-border payments.

Traditional types of business payments used can also slow things down with delays and asynchronous transactions, resulting in cash flow issues, delayed deals and slowed growth. According to AFP, 51% of Business-to-business (B2B) payments in the US are made by checks, with the other 49% spread across Electronic Funds Transfer (EFT), prepaid debit cards, Automated Clearing House (ACH) credit and debit transfers.

For example, after analyzing proprietary data, including an analysis of 16,000 customers from July through December 2018, Fundbox found that the average small- to medium-sized company has 24 percent of its monthly revenue tied up in accounts receivable, terms, or trade credit.

PYMNTS recently reported on just one example of what businesses both small and large deal with all the time in the world of B2B: Three Babes Bakeshop, a local San Francisco business, had provided weekly pie orders to Munchery, an on-demand delivery service. The bakery is still owed $20,000, but Munchery has shut down and still owes many suppliers. Receivables are only considered an asset when Three Babes gets the cash, but without it, the bakery can’t get access to working capital it needs to grow. This kind of credit risk can be devastating to a small business.

On the other hand, for the B2B buyer, extended payment terms from suppliers can be essential in order to get the inventory it needs to succeed. Unfortunately, the bottom line in B2B has typically been that both parties, both buyer and seller, don’t necessarily get what they need when they need it, in the ways they want it. But the B2B payment paradigm is now shifting—big time.

Changing payments to move faster

Freedom, flexibility, at a faster speed: That is the key to lasting financial success in B2B e-commerce payments. Offering businesses credit, in context, at the point of sale, is an essential part of this fundamental shift.

If both parties—the buyer and seller—can reduce friction during the payment process, both sides can win and thrive. For small businesses, including those that sell on B2B online marketplaces, using the latest digital technology to offer and receive credit at the point of sale, inside the checkout flow, is a game-changer. It means sellers can get paid right away, rather than letting months go by. At the same time, buyers can get the product they need to keep up with orders and trends.

The result? Buyers can purchase more on the spot, sellers can sell more without waiting for money, and the entire industry has the opportunity to grow like never before. For small businesses, B2B e-commerce can become a growth opportunity, rather than a hindrance requiring complicated paperwork and a deep understanding of complex financial solutions.

B2B e-commerce has long had a need for speed. Now, thanks to the latest digital solutions, both B2B buyers and sellers—especially in the small business space—can move as fast as they need, to succeed on their own terms.


Author: Sharon Goldman

Published: June 4, 2019

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