As consumers prioritise managing their personal finances, merchant suppliers are faced with a similar challenge when balancing the books. Day-to-day costs, such as energy bills, continue to rise, putting profit margins under increasing pressure. Inflation is increasing the cost of materials and products, and as currencies weaken, the cost of doing business internationally is also rising. In summary, the current economic climate is far from ideal for B2B merchants.
Historically, the answer for maintaining profit margins has been to raise prices. However, the current economic climate is affecting buyers just as much as suppliers. Those that raise prices significantly risk being perceived as unfair and out of touch with current socioeconomic conditions. Suppliers should look to other areas to maintain their profit margins, without pushing the entire cost burden onto their customers.
One strategy to address the profit margin dilemma is to look for where savings can be made internally, and this means tackling inefficiencies. One area prone to inefficiencies, particularly for B2B operations, is payments. Many suppliers still manage B2B payments through paper invoicing or BACS processes, an area susceptible to human error and hundreds of wasted hours. Modernising these processes can reduce costs and simultaneously improve cashflow – the lifeblood of every business.
Many suppliers still use the same payment processes that they implemented several years – or even decades – ago. One common example of a dated process, which is still used by some B2B merchants, is collecting payments via mail order/telephone order (MOTO). This is where a business provides its card details over the phone, or via email, so the supplier can process the payment. Not only is this insecure, but it poses PCI-DSS compliance challenges for businesses, who are all required to keep private data safe. If a payment is late, further cost is pushed onto the supplier as they have to chase creditors. Within the current economic climate, these are costs they can ill-afford to incur on a regular basis.
The best way for a supplier to alleviate the pain of late payments is to make it as easy as possible for a buyer to make a payment. We are increasingly seeing merchants turn to new methods to achieve this.
It is imperative for suppliers to accept commercial cards, which are becoming more popular among B2B buyers and can bring benefits to both parties – buyers can extend their days payable outstanding (DPO), while minimising the supplier’s days sales outstanding (DSO), and decreasing the costs of cash collection. Commercial cards also allow merchants to digitise B2B payments to drive further efficiencies through technologies such as Payment Links or straight-through processing (STP).
Payment Links convert non-secure telephone payments into secure online transactions. The supplier simply sends a payment link to their buyer via email, text, or electronic invoice. The link takes the buyer to a secure hosted payment page where they can check out by card or utilise Click-to-Pay anytime, anywhere.
Straight-through processing is a buyer-initiated process that automatically pushes a payment and remittance to the supplier using a commercial card at the point of order or post invoice. This removes manual processing for both parties and mitigates PCI-DSS burden.
The transparent, real-time, reporting data offered by many digital payments platforms is key to informed business decision-making. It provides merchants with an up-to-date and clear view of cashflow for forecasting resources. Within today’s economic climate, this is vital to ensuring merchants can carry on as usual. In more prosperous times, this is how a merchant grows.
We often hear that B2B payments are a future multi-trillion-pound opportunity for digitisation. We believe this is no longer true. The time for that opportunity is now.
While digital payment methods have usurped cash within the consumer payments ecosystem, B2B payments still have some catching up to do. Juniper Research recently determined that ’B2B payments have seen less implementation of new payment types, and account payable and receivable processes create an ecosystem that is difficult to manage.’
Juniper also predicts that by 2027, 35% of embedded payments’ revenue will be from the B2B segment, with B2B payments continuing its digital transformation journey. Technologies like Click-to-Pay and straight-through processing aim to make the buying and supplying process more streamlined, making instant purchases possible with just one click.
The current economic climate means businesses need smoother payments to establish and maintain trusted buyer-supplier relationships. Suppliers should be ready to accept the fastest, most convenient methods to get paid on time, to ensure regular cashflow into the business. Given the clear and immediate benefits suppliers can realise by turning B2B payments digital, it is unlikely for cash and cheques to make a resurgence.
Andy Downman is Commercial Director at Adflex. He has over 17 years of experience in the payments industry and specialises in the B2B issuance and acceptance of commercial credit cards and the related cloud-based technology for accounts payable and receivable.
Adflex has been at the heart of the B2B fintech revolution from the beginning. We are known for fostering innovation and helping companies harness the power of digital payments. Our technology and expertise bring together buyers and suppliers to make transactions fast, cost-effective, and straightforward to manage. We take the pain out of the supply chain by delivering seamless and secure payment integration that adds value to both buyers and merchants.
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