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The hidden cost of manual B2B payments

Updated: May 30, 2023

Business ideas written on whiteboard | Sprinque

B2B commerce is undergoing a significant transformation, with three major changes affecting its effectiveness and efficiency:

1. B2B Commerce is increasingly moving online and introducing friction to a buying process can be harmful. Letting buyers wait 1-3 days before they’ve been approved for net terms is a good example of friction.

2. The growing prevalence of cross-border transactions makes it difficult for businesses to assess the reliability of international buyers.

3. The impact of COVID on business operations and financial health complicates the assessment of a company's ability to manage downturns.

These changes have highlighted the inherent problems and costs associated with manual payment terms. In this blog post, we will discuss these challenges and how Sprinque's B2B payment solution can help businesses overcome them.

Offering manual payment terms and its costs

1. Friction leads to revenue loss

Although business buyers may not be as impatient (or flaky) as consumers, business buyers don’t want to wait 1-3 days for their account to approved to purchase something. 1 in 5 online purchases do not happen because the right payment method isn’t available, which explains up to 20% of conversion or acquisition of new buyer loss (E-Commerce Payment Report 2021). Furthermore, finance teams are often prone to be prudent with who they give credit to - resulting in an acceptance rate of only 70-80%. The rest of the new buyers is asked to pay upfront, straining their cash flow and thus buying power.

2. Operational Costs of Buyer Checks

The process of assessing new customers' creditworthiness can be labor-intensive, involving tasks such as obtaining credit reports, conducting fraud checks, and evaluating risk assessments. This requires dedicated personnel, adding to operational costs. In a €25M revenue business, for example, there might be one credit controller whose sole responsibility is to assess buyers and monitor their exposure. These time-consuming processes can also slow down the onboarding of new customers, impacting overall business growth.

3. Accounts Receivable Operations

The operational burden of keeping track of payments, chasing late payments, and reconciliation can become unbearable for most businesses. In the Netherlands, 23.6% of all invoices are paid late, while this figure rises to 28.7% in Spain and 31.3% in Belgium (Atradius Payment Practice Barometer 2019). Making sure a business gets paid may not be as glamorous as winning new deals or acquiring new customers, but is arguable just as important. Because without getting paid, businesses don’t survive. What we have seen varies greatly, but our data shows that there is usually 1-3 FTE per €25M turnover (depending on the average invoice size and buyer recurrence) to ensure.

Uncollectible B2B receivables (NL, Spain, Belgium) | Sprinque

4. Defaults and Write-offs

Businesses still face losses from unpaid invoices, even with invoice insurance covering 80-90% of the risk. In industries like construction, 6% of all invoices are written off, meaning that even with insurance, businesses can lose up to 0.6% of their revenue. This not only impacts the bottom line but also increases the financial burden on businesses trying to recover from defaults and write-offs.

5. Cash Flow Management

Capital has a cost, especially now the era of free money is over. The actual cost of capital varies widely and depends on the company’s maturity, the type of loan or facility and so on, but ranges anywhere from 0.5% - 8%. Managing payment terms manually can result in capital stuck in unpaid invoices and suboptimal allocation of resources

By understanding these challenges, businesses can explore innovative solutions like Sprinque's B2B payments platform to streamline payment processes, reduce friction, and improve cash flow management, ultimately driving growth and success in today's fast-paced B2B commerce landscape.

Sprinque: A Solution for the Digital B2B Commerce Era

Sprinque was founded with the mission to help businesses grow safely in a digital world and get paid without burdening their finance teams. Our B2B payment platform offers a seamless solution that addresses the challenges of manual payment terms:

  • Reduced Friction: By offering instant approval for net terms, Sprinque eliminates waiting times and boosts conversion rates.

  • Automated Buyer Checks: Sprinque streamlines the credit assessment process, saving time and resources by automating credit reports and fraud checks.

  • Efficient Accounts Receivable Management: Our platform simplifies payment tracking and reconciliation, reducing the operational burden on businesses.

  • Risk Mitigation: Sprinque's advanced risk assessment tools help businesses minimise defaults and write-offs, protecting their revenue.

  • Optimised Cash Flow: By providing flexible payment options, Sprinque helps businesses manage their cash flow more efficiently.

Ready to upgrade your existing finance process and embrace the future of B2B commerce? Reach out to us via e-mail or book a meeting with our team to learn more about Sprinque's innovative payment solution.

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