The True Cost of Inefficient B2B Payments: Economic Impact & Solutions
Efficiency in B2B payments is an essential element of good financial health. Inefficient B2B payments have a major impact across several important metrics. Payment inefficiencies can negatively impact an organization’s forecasting and planning abilities, leading to a ripple effect that affects everyone involved in a company.
Today, we’ll break down some of the reasons for inefficient B2B payments, what the economic impact of these inefficiencies is, and how to address this issue and make your B2B payments flow more effective.
What causes inefficient B2B payments?
A number of factors can play into inefficiencies in B2B payments. Understanding each factor is the first step towards mitigating their impact and providing your customers with a more streamlined and intuitive payments process that can strengthen client relationships and even improve retention.
Lack of transparency
Low visibility into payment details can cause clients to delay sending payments. With more stakeholders involved in deal-closing than ever, transparency is an effective way to win over skeptical executives and start the client-vendor relationship on a foundation of openness and honesty. To put it simply: people want to know what they’re paying for. Hidden or unclear fees, taxes, and surprise costs can lead to delayed payments as clients try to understand their bills.
Operational inefficiencies
If your Finance team’s invoicing process is heavily manual, inefficiencies and human error can lead to delayed payments. If your billing process relies on manually-set reminders and case-by-case follow-ups, overdue invoices will slip through the cracks.
Unclear communication
Unclear communication is another major contributing factor when it comes to inefficient B2B payments. If your client doesn’t know when their payment is due and what their options are for payment, delays will occur.
Lack of flexible payment terms
Without flexible payment terms, your customers may not have the cash they need on hand to pay their invoices. Additionally, if their payments are late, inflexible collections can cause rifts in the client-vendor relationship, stoppage of service, or other unpleasant fallout that could be avoided with flexible payment terms as an option.
The economic impact of inefficient B2B payments
Inefficiencies in B2B payments have a wide ripple effect across many areas of a business.
Poor cash flow
Late, delayed, and inefficient B2B payments cause poor cash flow, which affects every part of an organization. Without reliable cash flow, businesses are forced to operate within tighter margins. This could include reducing the tech stack, cutting physical workspaces, pausing raises, and keeping headcount low.
Forecasting issues
If payments come through inefficiently, Finance has trouble forecasting effectively, causing long-term issues as companies struggle to determine where they are able to invest vs. save. Forecasting issues at their worst can leave companies unprepared for financial challenges.
Reduced capacity for growth
Without reliable cash flow, companies may focus on saving capital to cover basic expenses, such as operational costs. With a focus on saving, companies are unable to invest in growth levers, such as headcount, professional development, marketing, new feature development, and networking. This can have a dramatic negative impact on growth over time.
Delayed revenue recognition
Lastly, inefficient B2B payments can lead to delayed revenue recognition. If a company is growing to find a buyer, looking for partnerships, or simply working to improve revenue for stakeholders, delayed revenue recognition can be a major issue.
How to address inefficient B2B payments
While inefficient B2B payments are a major issue, there are several solutions that can make a significant impact.
Automated workflows
Automating workflow elements such as reminders, invoicing, and follow-up reminders can free up your teams to focus on more important tasks, reduce human error, and eliminate the need for costly manual work.
Increased transparency
Increasing transparency in your B2B payments flow can reduce the number of delays between invoicing and payment. If your client has a clear view of everything they’re paying for, they are more likely to pay in a timely fashion, rather than engaging in back-and-forth with you and their stakeholders as all parties struggle to understand the invoice.
Flexible payment terms with B2B BNPL
B2B buy-now-pay-later (BNPL) platforms allow vendors to easily offer flexible payment terms at checkout. A B2B BNPL lets customers choose a monthly, quarterly, or custom payment schedule that fits their needs, whether they’re operating within budget constraints or simply want to remain liquid for other purposes.
Here’s how a B2B BNPL works:
- After contract negotiations, clients are directed to a payment portal.
- Clients select their payment schedule.
- Your B2B BNPL invoices your client according to the schedule.
- You get paid full ACV upfront.
Eliminating inefficient B2B payments and powering growth with Capchase
Capchase Pay offers an intuitive payment option for both vendors and clients. With Capchase Pay, vendors get full transparency into customer payments and seamless CRM integrations. Clients get flexibility, an improved customer experience, and a bespoke payment schedule that meets their needs.
Capchase Pay further reduces inefficient B2B payments by offering a wide range of payment options, including credit card and ACH. Capchase Pay makes it easy for your clients to pay, with customized reminders and a streamlined collections process.
Capchase Pay’s is a B2B BNPL that offers a lot to your clients – flexible payment terms, easy payments, and top-quality support – and it offers just as much to vendors.
Vendors that use Capchase Pay see an increase in pipeline, more deals closed, and higher ACV across the board. Sales teams using Capchase Pay see shorter sales cycles and a lower reliance on discounts to push deals through. Most importantly, Capchase Pay gives vendors full ACV upfront, on day one, so you can power growth, invest where it counts, and continue building something great.
Capchase Pay is an industry favorite for a reason. Ready to get started with Capchase? Talk to our team here.
