Updated: Aug 28
A critical part to get right when selling online are the net 15/30/60/90 day payment terms for business buyers.
B2B is moving online at a rapid pace. Previously, we shared what is driving this shift and what buyers are looking for when buying online. If you missed the article, you can read all about it here.
This series will discuss a critical component of any B2B commercial relationship: offering net 15/30/60/90 day payment terms to your business buyers.
Whether you are selling offline or online, business buyers expect to receive an invoice for their purchases with a net payment term of 15, 30, 60 days, or more. And they want to pay their invoices in a way that they are used to, which is usually a form of bank transfer or account-to-account payment.
Extending credit and net payment terms to your business buyers means that you will be shipping products or providing services to your buyer before receiving payment for that purchase. This is a risky business, and it needs to be managed well.
Net payment terms are much easier to extend in an offline environment when you have the time to investigate a buyer and the opportunity to meet them face-to-face. In the fast-paced online environment, this is much harder to do, and the risk of losses as a result of credit defaults or fraud is high.
The B2B merchants, platforms and marketplaces that get this experience right will have a real advantage over competitors. Buyers will return to merchants where they can get net payment terms and where the purchasing experience is convenient and fast. For you, the merchant, this means growth through higher-order values, higher order conversion and repeat purchase rates.
But getting this experience right is not easy.
In this first part of “How to offer net payment terms to business buyers online, " we focus on buyer onboarding.
Creating your buyer onboarding experience
To get started, you need to have a robust solution for onboarding business buyers onto your platform. The best scenario is that the business buyer knows whether they have been approved for net payment terms by the time they finish the registration or sign-up process. This way, the business buyer will know whether they have been approved for net payment terms before they start purchasing on your site.
To achieve this, you need to verify that the buyer is an actual, active business. You also need to verify additional information about the business, such as its registration number and registered address. There are different data providers that can help with this; you can either integrate directly with various chambers of commerce or other government agencies in your buyer countries, or you can work with a credit bureau (some of them offer such a service).
You will also need to check if the user that is registering the business works for and represents the registered business. You want to check where the user is located, whether the email address domain is a business email address or a private one, and whether any known fraud cases have been reported around either the IP address or the email address.
Once you have verified that the buyer is an actual business and that there is no known suspicious activity around the user’s IP and email addresses, the next step is to determine the business's creditworthiness.
To make credit decisions, you will need to set up a credit policy, which outlines how you will decide which buyers will get credit and how much.
Depending on which countries your business buyers are located and what types of business entities they are (e.g., small businesses, such as sole proprietors, or larger enterprises), you will need to work with different credit bureaus to find credit information about the business that you are onboarding.
You will need to determine which combination of data sources gives you the best match rate, and these sources you will need to integrate into a workflow tool to make credit decisions. For some businesses, it will not be a clear-cut yes or no decision, and someone will need to manually review the business information before making a credit decision.
Once these steps have been completed, the output from this process will be whether the buyer has been approved or rejected, and if they have been approved, what credit limit you assign to this buyer.
Key metrics for measuring buyer onboarding effectiveness
When building or buying a buyer onboarding solution, you need to have a clear way to compare solutions and measure their effectiveness.
The key metrics to think about when building (or buying) a buyer onboarding solution are:
Business match rate: What percentage of new business buyers can you find credit information on with your chosen data sources? The higher this percentage, the fewer buyers you will disappoint and hence the better the customer experience and growth impact for your business.
Request-to-decision time: How long does it take to complete the process from when the business buyer starts the registration process until a credit decision is made? The faster this process, the better the customer experience.
Automation rate: What percentage of decisions are made through an automated process, without the need to involve a person to review the information and make a manual decision? The higher this percentage, the fewer operational people you will need to do this work and hence the more cost-effective the solution is.
Acceptance rate: What percentage of business buyers are you able to accept for net payment terms? Subject to a maximum acceptable loss rate, the higher the acceptance rate, the better the customer experience and the growth impact for your business.
The good news is that you do not need to build an onboarding solution from scratch yourself. You can opt for a white label solution that gives you advanced buyer onboarding and net payment terms capabilities without the need for designing, building, and maintaining a complex solution yourself.
For instance, as part of our checkout platform, Sprinque offers a white label buyer onboarding solution:
Business buyers can search for their business entity during the registration process, which will pre-populate the registration form with crucial business information;
Sprinque performs fraud checks on the business user;
Sprinque has numerous integrations with credit bureaus and other data sources to assess the creditworthiness of business buyers;
You are supported by an experienced team that will guide you through the API integration.
In part 2, we will focus on managing a buyer’s credit limit and managing buyer payments and collections in real-time.