Distributors have come to accept so many inefficiencies and complexities in the online payment process. If addressed, however, there are incredible revenue-generating and brand-building opportunities they can take advantage of.
The state of B2B ecommerce payments
Before we dive into specific use cases, it’s important to understand the current state of ecommerce payments for B2B. Traditionally, distributors have largely depended on manual and paper-driven processes to support payments. Large accounts receivable teams go toward reviewing invoices and cashing paper checks; credit teams pour resources into assessing buyers and their risk; and large fees get cut to lending services and payment processors. For a long time, this has simply been the status quo.
Meanwhile, commerce tools up until now have for the most part only served the consumer side. The payment methods and infrastructure to enable commerce payments for B2B were limited to those typically used in B2C. And businesses that wanted to support B2B functions like net terms through an ecommerce experience had no easy way to do so.
So, despite an increasing number of distributors moving online today, business buyers are not able to benefit from a better and easier way to transact. On the seller’s side, things aren’t any better. Manual, resource-intensive payment processes are a burden on finance and accounting teams.
Luckily, technology today is enabling distribution companies to discover easy and simple solutions to online business payments. Below are three ways distributors can benefit from ecommerce payments to stay ahead of the competition.
Payment options are often overlooked as a way to attract and retain customers. In fact, with a predicted $2 trillion in online U.S. B2B sales volume in 2023 (Forrester), businesses that offer a diverse mix of payment methods, such as net terms, will be better equipped to accommodate the needs of a wider range of customers and drive increased sales and revenue.
The long-tail segment of B2B customers is a perfect example of how offering online net terms can be a game-changer. In many B2B companies, the long-tail cohort is composed mainly of small and mid-sized buyers. The customers in this segment don’t spend much. Within reason, it’s most profitable for distributors to receive orders that are in the thousands of dollars and have a margin of several hundred dollars to cover the costs.
However, done properly, net terms allow distributors to break out into the long tail. In 2019, Remi Ducrocq, CEO of KYKLO, discussed the concept of the long tail and how ecommerce can help distributors tap into this market. Ducrocq emphasized the importance of payment terms as one of the top three processes that distributors should prioritize in their ecommerce operations to reach more customers and increase sales.
It makes sense — because of this segment’s size, extending terms can be a huge resource for distributors to take on. But ignoring this segment also means missing out on growth opportunities. Typically, credit-scoring systems favor established, high-revenue companies because they have more publicly available historical data.
This can put smaller or newer businesses at a disadvantage when it comes to obtaining credit options. However, with a strong financing partner, specializing in offering terms to a wide range of businesses, merchants can benefit from long-tail segment sales, without the overhead. Plus, trade credit automation integrated with the ecommerce platform makes it easy for customers to pay with net terms, just as it would be to pay with a credit card.
Ultimately, it’s a win-win for distributors. They can offer cost-effective net terms for customers they weren’t previously selling to, and capture orders from customers that need greater flexibility than what a credit card can provide.
Payment costs are often viewed as an inevitable part of doing business — credit granting, reconciliation and collections can be expensive. But that doesn’t mean that there isn’t room for improvement. Perhaps one of the greatest opportunities for revenue is by accelerating days sales outstanding (DSO).
Why? If distributors must wait 30 days to get paid, that’s cash that can’t be put toward the business. And with cash tied up, margins only get thinner. Finding a payment partner that provides instant payouts can eliminate the time it takes to collect outstanding payments and bring immediate relief to the balance sheet.
The other thing to consider is the time and effort that goes into collecting on and reconciling accounts. For some merchants, the tedious manual effort that goes into AR is holding them back from ramping up ecommerce sales. And that’s where having tools that automatically record payments, match them against invoices and post to your ERP or ecommerce platform can make a big difference.
Just like in consumer shopping—business customers want to know that they can rely on the merchant to provide a secure and convenient online shopping experience. One way to build this trust is by offering the payment methods that businesses know and prefer to pay with, simply in an easy and effortless online manner.
The belief that business buyers expect anything less does not hold true anymore with over 80% of business buyers expecting their ecommerce channel to meet the same or higher standards as other channels.
Creating a payment experience built for business purchasing is an incredible way to not only retain the trust and relationships distributors have built with their offline customers, but also build loyalty among new segments of online customers. With ecommerce sales for distributors expected to increase by 25% in 2022, the time for distributors to make the most of their online channels is now.
The truth is that ecommerce payments can be complicated for distributors. But if you start to get curious about what digitization can do to that stack of paper invoices or how a self-serve payment experience can streamline sales and set your distribution business apart, then it becomes a lot easier—and even exciting—to build for the future.
Bar Geron is the CEO and co-founder of Balance, the B2B ecommerce payments platform built for merchants and marketplaces. Bar has an extensive background in payments from his experience working at PayPal, where he worked as a senior decision scientist. That’s where he met the future co-founder and CTO of Balance, Yoni Shuster. In 2020, the two went on to found the company. Bar is fascinated by the role of technology in solving inefficiencies. In the simplest words, Balance is on a mission to move global trade online.