Published 5th June, 2023
Trade credit, the business payment method that 80-90% of global trade relies on. It’s the financial backbone for both suppliers and buyers around the world. Yet trade credit has remained largely the same for years. While buyers prefer paying on net terms to help with cash flow, it’s suppliers that are left chasing late payments and managing paperwork.
The problems with traditional trade credit
Cash flow issues
With trade credit, you’re effectively postponing when you get paid, leading to cash flow issues. The reality is you’ll have to run your business without that income until you receive payment.
Of course, you could use accounts receivable financing or debt factoring but they’re less than ideal and will cost more in the long run. Either way you’re losing money trying to access tied up working capital that you should already have access to.
As a business, you also take on the credit and fraud risk for trade credit purchases. Any sale on trade credit runs the risk of non-payments which can have dire consequences for your cash flow and business as a whole.
You’ll also need to establish the buyer’s creditworthiness. Less formal operations often make that assessment internally based on existing relationships, but it can be risky. Although there are credit risk management companies out there that do this for you.
Managing invoices in-house requires time and effort and unless you have a dedicated team to deal with this, you’ll find a lot of your time can be spent organising paperwork. This means manually filling out invoices, sending them to your buyers, and reconciling payments. All of which can be an operational struggle.
How B2B BNPL can help
With a list of inherent problems baked into traditional trade credit, the challenge of growing your business is likely all too familiar. Which is why B2B BNPL has become so popular in recent years.
Changes in the workforce have also helped to change B2B payment solutions for the better. For example, Gen-Z now accounts for 25% of the B2B workforce. Why is this relevant? Well, they’re also the generation that use BNPL in the consumer world the most.
The reality is as many as 80% of B2B buyers now expect the same buying experience as B2C. A growing proportion of the B2B workforce is extremely familiar with BNPL B2C platforms. Offering a likewise solution for your B2B operations isn’t just nice to have, it’s expected.
So how does B2B BNPL help grow your business?
1. Upfront payments
As we’ve established, waiting for payments creates a host of cash flow issues. With B2B BNPL, however, you’re paid upfront. Take Two, for example. Once a buyer places an order, you’re paid regardless of the payment term.
That means no need for invoice financing, debt factoring, or credit lines with your bank. With instant payments, you have access to previously tied up capital to continue growing your business.
2. Accelerates B2B sales
Traditional trade credit is known to increase B2B sales as it’s the preferred choice for buyers. But that doesn’t mean it’s an optimal process. Performing credit and ID checks to even offer trade credit can be a tedious task that often takes days, slowing the whole sales process down considerably.
You want a checkout experience that is smooth, fast, and is easy for buyers to use - especially if they want to pay on net terms.
BNPL for B2B solutions like Two integrate instant ID-verification and credit checks into your checkout so customers can apply for trade credit there and then. Offsetting this workload means customers know instantly if they’re eligible for credit, drastically improving everything from conversion rates and overall B2B sales to average order value.
Take Purple Planet Packaging, for example.
3. Cuts admin time
Many businesses are simply unable to tap into the demand of purchases by invoice because it requires too much manual work. Managing an invoice payment solution in-house requires specialist staff to organise invoices and stay on top of payments.
But with BNPL B2B, merchants can simplify operations across multiple departments and save time, making it super easy to stay organised and save multiple hours a week in manual work.
For example, this talent sourcing company saved 15 hours of manual work a week and improved cash flow using Two!
To illustrate how Two simplifies the trade credit process, check out the image below:
4. Grow with negative working capital
Negative working capital is generally not considered a desirable situation for a business long term. Maintaining a position where your current liabilities exceed your current assets can only get you so far. There are of course temporary situations where negative working capital is a strategic choice (like during a rapid growth phase), but this isn’t something you should aim for.
B2B BNPL allows you to ramp up your operations and accelerate sales by offering an advantageous payment solution to your customers. The availability of a frictionless checkout makes it easy for customers to purchase on terms, removing unnecessary hurdles.
The immediate access to working capital also helps you facilitate the growth of your company by drastically improving your cash flow! Plus, the ability to easily access payment terms that suit the buyer enables them to place larger orders with you, increasing your average order value.
Two - B2B payment solutions for growing your business
Two offers a range of B2B payment solutions to make it easier than ever to offer integrated trade credit directly at the checkout to help sell more and grow your business.
With support for some of the most popular E-Commerce platforms like WooCommerce, Magento, and CraftCMS, Two’s E-Commerce Checkout gets you up and running straight away. Or you can integrate directly with our API.
Two’s E-Commerce Checkout allows you to offer a frictionless checkout experience for your customers to increase B2B sales and conversion rates. And with a 90% acceptance rate, you can say goodbye to turning customers away. In fact, this apple reseller was rejecting 52% of their potential B2B customers before using Two.
Onboarding customers in the traditional way is manual and time-consuming. The long it takes to get them up and running, the higher the chances they’ll abandon their basket and choose a competitor.
Two’s Trade Account provides you with a frictionless customer-onboarding experience, integrated right into your sign up flow. Customers simply fill in their details, apply for credit, and checkout in 30 seconds. In fact, Trade Account users see an 18x increase in customer retention and 11x more orders per buyer!
Plus, true one-click purchasing makes buying from you a walk in the park. With features like Grouped Invoices, your customers can receive a single invoice per purchase or grouped into weekly, fortnightly, or monthly invoices to drastically reduce admin!
Omnichannel selling has become increasingly popular in B2B. In fact, B2B customers now regularly use ten or more channels to interact with suppliers. But can your field-sales or tele-sales team offer instant trade credit as easily as your e-commerce store?
Two’s Order Creator makes it simple to offer invoice purchases to all B2B customers, because sales don’t just happen in one place. Capture offline sales, get paid upfront, and offset credit risk by harnessing the total power of Two for all B2B sales.
Selling B2B rental services or subscription plans can be tough. In fact, only 3.8% of SaaS businesses offer annual plans as a result. Other than creating needless cash flow problems, this means B2B sales suffer.
Let your customers split payments for purchases over 3 to 24 months with Instalments. Boost B2B sales for rental services, subscription plans, and big-ticket items to drastically improve cash flow and increase B2B sales. All while Two handles the admin.