Companies are constantly seeking innovative ways to do better business. Improve cash flow. Manage expenses. Streamline operations. Attract new customers. Keep current customers. Lower days sales outstanding (DSO). The wishlist goes on and on!
Buy Now, Pay Later (BNPL) is one such solution that has made significant inroads in recent years. Having become popular in the B2C market, BNPL for the B2B sector is now making its mark. In this blog, we will explore five of the key benefits of BNPL solutions in your B2B setting.
How does BNPL work?
The Buy Now, Pay Later concept adds value by providing businesses with flexibility. Buyers can purchase products or services immediately while deferring payment to a later date. A small business owner recently asked me how Buy Now, Pay Later actually works for B2B. With that in mind, here’s a brief outline of how it works in a B2B context.
Selection and Purchase
A B2B buyer selects the desired products or services from a supplier’s offerings and proceeds to the checkout process. For example, this procurement might be via e-commerce or an online marketplace.
Buy Now, Pay Later Option
What happens at checkout? The buyer usually has several payment options on a menu, including a Buy Now, Pay Later choice. The buyer chooses the BNPL payment method, allowing the company to defer payment. The deferred payment may be through payment terms (e.g. 30, 60, or 90 days) or instalment payments (3 or 4 payments over equal periods of time. The exact BNPL offer is determined according to the buyer’s eligibility and how the particular BNPL service operates.
Approval and Agreement
The buyer’s eligibility for BNPL is assessed by a third-party provider. In the best case scenario, the BNPL provider uses and end-to-end solution. For example, Terms.Tech specialises in offering flexible payment solutions. The BNPL provider does a risk evaluation. From this, the provider determines decisive factors such as creditworthiness, transaction history, and other relevant criteria.
Payment Schedule
Upon approval, the buyer agrees to the payment terms. These may be either net terms or instalment payments with the amount, duration, and any associated fees or charges.
Fulfilment
What happens once the order is confirmed? The seller proceeds with order fulfilment and delivers the products or provides the agreed-upon services to the buyer. The BNPL provider pays the seller at this point.
Instalment Payments
If the buyer selects instalment payments, payments are made according to the agreed-upon schedule. Payments can be automated or manually settled by the buyer, depending on the BNPL provider’s system. And, some BNPL providers may insist on a down payment before the regular instalments. The buyer continues making payments to the BNPL provider until the full amount is covered.
Payment Terms
If the buyer selects net terms, e.g. 60 days, then the payment deadline is 60 days. In this case, like with instalment payments, the payment may be automated or manually settled by the buyer. And, similarly, the buyer pays the BNPL provider, who has already paid the seller.
Sell Now, Cash Now
This is the game-changer for the seller. Another way to look at buy now, pay later from the seller’s perspective is sell now, cash now. For example, Terms.Tech pays the seller immediately upon proof of shipment. So, the simplified money path is this: Terms.Tech pays the seller up front, then the buyer pays Terms.Tech back according to the agreed payment terms.
What are the top 5 key benefits of BNPL for B2B?
Now that we’ve had a look at how BNPL works, let’s dive into the benefits buy now, pay later for B2B brings to businesses. The buy now, pay later model offers numerous benefits for your B2B operation, including:
- improved cash flow management
- increased sales and conversion rates
- enhanced customer satisfaction and loyalty
- streamlined purchasing process
- reduced financial risk.
Improved Cash Flow Management
Enhanced cash flow management is the first of the most significant advantages you get when you put in place a buy now, pay later system in B2B transactions. With BNPL, businesses can enjoy immediate access to the products or services they need without having to pay the full amount upfront. Some BNPL services may allow you to even pay nothing upfront!
Payment flexibility allows companies to preserve their working capital. They can allocate funds to other critical areas of their operations. By spreading out payments over time, businesses can better manage their cash flow. Doing this ensures they optimise their financial resources for growth and operational needs.
Ok, we admit that this doesn’t sound much different than how many businesses traditionally buy on credit with payment terms – yet. But for the seller, there is a big difference to the traditional credit and net terms approach. The seller offers the buyer what they want, but doesn’t have to wait for the payment. Why? The BNPL provider pays the seller upfront.
That’s a big change and allows the sellers to also benefit from improved cash flow management and access to working capital. Now your DSO for these sales is down to about zero! The seller can immediately use the incoming money to purchase what they need to fulfil other orders, and so on.
Read more about increased cash flow and deferred payments here.
Increased Sales and Conversion Rates
By offering the option to buy now and pay later, businesses can effectively boost their B2B sales and conversion rates. Many organisations, especially small and medium-sized enterprises (SMEs), may face budget constraints that limit their purchasing power. With a BNPL option, these businesses have the opportunity to overcome their financial hurdles. Immediate buying decisions become a reality. In other words, a BNPL service helps level the playing field for SMEs.
The ability to defer payment encourages more B2B buyers to convert. This, of course, leads to increased sales for the seller. Furthermore, the convenience and flexibility of BNPL can also attract new customers who may otherwise hesitate to commit to large upfront payments.
Read more about increased sales from flexible payments here.
Enhanced Customer Satisfaction and Loyalty
Building strong customer relationships is crucial for long-term success. By offering a buy now, pay later option, businesses can enhance customer satisfaction and foster loyalty. B2B buyers appreciate the flexibility and convenience of deferring and/or spreading out payments.
Taking a customer-centric approach not only increases satisfaction but also encourages repeat business and customer lifetime value. Everyone knows a stable trading partner over years and years is one of the valuable success stories a B2B business can achieve. Moreover, when businesses provide flexible payment options, they demonstrate an understanding of their customers’ needs and foster a positive brand image in the market.
Streamlined Purchase Process
Traditional B2B payment methods, such as invoicing and credit terms, often involve lengthy approval processes. Slow credit checks. Mountains of paperwork. This cumbersome process leads to delays, inefficiencies, and potential loss of business. In contrast, a digital BNPL system simplifies the purchasing process. Digitalisation provides a seamless and automated payment solution.
B2B buyers can quickly and easily complete transactions online. Who doesn’t want to eliminate the need for complex administrative procedures? The result is faster order fulfilment and accelerating business operations. This streamlined process saves time for both buyers and sellers.
Reduced Financial Risk
For B2B sellers, the risk of late or non-payment has been a significant concern. How can implementing a BNPL solution mitigate this risk? By transferring the responsibility of payment collection to a third-party provider. Terms.Tech, for example, assumes the risk associated with late or non-payment. This allows businesses to focus on their core operations without worrying about financial losses.
By reducing their financial risk, sellers can offer more flexible payment terms to their customers. The seller’s risk is minimised because they receive payment as soon as they’ve shipped the goods.
Why Terms.Tech’s B2B Buy Now, Pay Later is a winning strategy
Terms.Tech is offers a Buy Now, Pay Later solution for B2B that offers the benefits discussed above, and even more!
A truly European B2B deferred payments solution
Which BNPL service can I use anywhere in Europe? Based in Belgium, but licensed to operate in all of the EEA plus Switzerland, Terms.Tech really does have pan-European reach. Cross-border trade becomes much smoother with a Terms.Tech integration.
How quickly can the solution be set up?
With its partner, the lightning-fast marketplace orchestrator Marjory.io, Terms.Tech’s onboarding process is really fast and efficient. Get selling and get buying without painful delays. Additionally, your developers will get a well-deserved break. Terms.Tech is remarkably easy to integrate into your existing platform.
Does Terms.Tech let me keep my brand?
You want to keep your branding? Great! We want you to, too. Terms.Tech helps you make the Buy Now, Pay Later experience completely “you” with our white label possibilities.
Is a B2B Buy Now, Pay Later solution right for your company?
🤝 Why wait to find out more? Get in touch with our Terms.Tech consultants to find out what the best BNPL solution is for you.
