What it means to trust new customers in order for them to place their first order.
Trust is a key part of any relationship - including the relationship between a business to business (B2B) buyer and seller. The value per customer is generally high in B2B sales - especially when you compare this to business to consumer (B2C) sales - driven by both higher average order sizes, and higher order recurrence and reliance on each other for success.
How buyers pay and suppliers get paid, traditionally evolves as the relationship progresses. The majority of business business buyers prefer to Pay by Invoice with net terms - including when they buy online. The flexibility of net terms (paying up to 90 days later) allows buyers to manage their cash flow better, a benefit that shouldn’t be understated when you consider 57% of UK small businesses have cash flow issues. Also, let’s not forget that pay by invoice serves an industry practice. Buyers provide an invoice to their Accounts Payable department to pay later in the cycle, and spend less time in the ordering process upfront.
Sellers on the other hand are reluctant to allow first-time-buyers to pay by invoice and pay later, as sellers don’t know who to trust and they don’t want to take unnecessary risks. Instead, they give buyers payment flexibility only after they have placed multiple orders.
It’s easy to see why sellers take a cautious approach to trade credit when you examine what’s at stake. In 2023, at least 51% of B2B invoices were paid late, and 6% became bad debt. Also, in 2021, 98% of B2B companies experienced payment fraud attacks. So in some ways, a staggered approach to trade credit (e.g., afterseveral successful purchases) acts as a protective measure that sellers don’t want to let up.
Common practice for most businesses is therefore to only extend credit and payment flexibility to customers they have a commercial relationship with and have known for some time. The most important customers get the greatest payment flexibility, meaning the longest payment terms and highest lines of credit.
Meanwhile, you (as a seller) only want to give this to buyers after a relationship has been established?
But if this is true, how do sellers attract new (online) buyers who want payment flexibility from the start, while you only want to give flexibility to customers you’ve known for some time?
How do sellers extend Trust at first order?
How do sellers manage payments to B2B buyers today
Before diving into how B2B sellers can extend trust at first order, let’s review first how many companies approach B2B payments today. New customers are usually first asked to pay their first invoice upfront - either via bank transfer, direct debit, or via a local payment method like iDeal.
Completing several successful orders (and payments) allows sellers to:
Business verification: sellers get a window to run checks on buyers based on things like account name, credit rating, and ongoing legal disputes.
Reduce risk of fraud: Having received multiple payments from a valid source and having delivered orders successfully reduces the risk of fraud.
Admin: A new account can be created in the ERP or CRM system, potentially with the right pricing and credit limit
Customer analysis: Get to know each buyer, their purchasing habits, needs, size of the opportunity to guide your sales and marketing initiatives.
You could argue that this process works and has been serving many businesses for years. And if it ain’t broken, don’t fix it - right?
However, it’s important to look at the downside of this process: many buyers don’t convert or buyers don’t make their first purchase because of the lack of payment flexibility. In the Netherlands >55% of buyers at companies with more than 10 employees prefer to pay by invoice and 8% of B2B buyers go as far to say that they to don’t purchase (online) when they have to pay upfront
This figure may not seem like a lot of money, but when you’re dealing with large orders, losses can rack up quickly. Remember, 35% of B2B buyers have a $500,000 budget, and a further 15% are willing to spend $1 million on a single online selling channel. This situation creates a hidden loss as you don’t know the buyers that don’t place an order.
That’s why Sprinque introduces extending “Trust at First Order”.
What Trust at First Order means for Sprinque
Trust at first order means the ability for sellers to trust buyers on their first purchase and giving them the payment flexibility they want. It also means doing this in a way that doesn’t add friction to the customer journey by asking them to fill in extensive forms or calling them to verify if they’re a real business.
Sounds hard? We believe it doesn’t have to be. Here’s how it works with Sprinque:
When buyers arrive on a website, Sprinque performs a real-time fraud and credit risk analysis (usually in less than 3 seconds). This can be done in the check-out, when buyers create an account, or any other point in the buying journey.
When the fraud and credit risk assessment is positive, the buyer receives a revolving credit limit, based on their financial health and payment history. This credit limit works as a revolving credit line for the buyer and can be used for multiple purchases.
When buyers place an order, Sprinque verifies if there is enough credit limit for the purchase available and online transaction is approved. When the invoice is generated by the seller, it’s sent to Sprinque, who forwards it to the buyer with payment instructions. This is also when Sprinque pays out the seller, taking over the risk of defaults and the payment collection tasks.
At the end of the payment term, the buyer pays with a payment method of their choice or transfer the open balance to a local IBAN.
Sprinque’s capability to verify the creditworthiness and credibility of businesses in two seconds ensures that >95% of buyers get the flexibility they want. But buyers aren’t the only ones that’ll benefit. Trust at first order also slashes the administrative burden of sellers on credit control, finance, and legal teams since the customer verification process and credit assessments are automated. Sprinque takes over the risk of late payments and defaults as well as the collection process towards the buyer.
This means sellers can free up their time and energy to grow their business, which is a huge win when you consider:
50% of professionals waste 6-10 hours per month managing B2B payments
76% of businesses have suffered losses when dealing with accounts receivable due to time spent.
43% of merchants say that they lose between 4-5% in income monthly due to operational inefficiencies within their payment processing system.
To see the business-altering powers Sprinque’s embedded payments platform, let’s take a look at HelloPrint’s story. HelloPrint followed the typical pay by invoice process, allowing buyers to access credit after 1-2 purchases. HelloPrint’s team battled a large admin load because they updated account statuses manually when buyers requested to pay by invoice.
But now, with Sprinque, buyers can select to pay by invoice from the first order. It’s a way of extending trust, but within a split second, all without it being risky for HelloPrint. These days HelloPrint’s Finance team has eliminated manual credit checks and spends less time chasing late buyers since Sprinque manages these tasks automatically.
Become a customer favorite with Sprinque
Trust at first order is a revolutionary leap forward in B2B payments. And buyers and merchants are thriving because of it. So if you’re held back by admin, losing sales due to the traditional pay by invoice process, or you’re looking for a leg up on your competition, our BNPL software is the solution.
At Sprinque, believe in making B2B payments fast, simple, and easy on both sides of the table without compromising on security. Learn how Sprinque can change your business’ trajectory today.