How to improve company liquidity

The crises of recent years have presented many companies around the world with major financial challenges. The biggest business risks at the moment are inflation and rising energy costs. According to current reports, the eurozone is only narrowly escaping a recession. However, according to the European Commission, persistently high energy costs and core inflation continue to dampen the purchasing power of private households and the investment decisions of companies. In these uncertain times, a company’s liquidity is more important than ever to ensure its long-term viability.

One innovative solution that has recently gained popularity in the B2B sector is Buy Now, Pay Later (BNPL). In this article, we’ll show you how B2B merchants can help their customers to master the challenges of stable liquidity by offering BNPL solutions and thereby increase their own success – through more sales and strong customer loyalty.

Liquidity quickly explained

In a business context, liquidity refers to the ability of a company to meet its short-term financial liabilities, such as paying off debts, paying salaries and other operational expenses, and funding daily activities. Liquidity can be measured by the availability of cash or other assets that can be easily converted into cash to cover these liabilities.

A company that can pay all bills and expenses due with its available funds is considered liquid. A lack of liquid funds means illiquidity (= temporary inability to pay). This can lead to financial bottlenecks and, in the worst case, to insolvency. 

Liquid assets are assets that companies can access and use to make immediate payments. Companies should have sufficient liquid assets to remain solvent, i.e., to pay for current expenses and outstanding invoices. The most common liquid assets in B2B (business-to-business) include: Bank balances, cash, credit lines, checks and securities.

What affects a company’s ability to pay?

Of 516 professionals surveyed in the Liquidity Management 2022 study, 61 percent said they struggle with liquidity bottlenecks in their company. The reasons for this are manifold:

Crises: Respondents to the study cited unforeseen events as the main reason for liquidity bottlenecks. These include natural disasters, the Corona pandemic and the Ukraine war. 

Payment defaults: In second place, respondents cited poor customer payment behavior, which becomes an increasing problem in times of crisis. Companies often need to provide goods or services in advance of receiving payments from their customers. If these payments are delayed or even defaulted, this can lead to liquidity problems. 

Additional expenses: Companies may face unexpected costs, such as repairs or other emergencies, which can further affect their liquidity.

How BNPL strengthens purchasing power in B2B

BNPL strengthens the purchasing power of B2B buyers by enabling them to make purchases for their company regardless of their liquid assets and to pay later by invoice or in installments

One example of how BNPL can improve B2B buyers’ liquidity is the purchase of raw materials. B2B buyers often need to purchase a significant amount of raw materials to meet their production requirements. When B2B buyers lack sufficient cash, BNPL can be an ideal solution. With BNPL payment methods, B2B buyers can order the materials they need, carry out their production, and generate revenue before paying the invoice for the raw material.

Another example of how BNPL can improve the liquidity of B2B buyers is the purchase of technical equipment. Many companies need computers, tablets or other technical devices to run their business successfully. However, purchasing such equipment can be very expensive and not all businesses have enough liquidity to pay for it at the time of purchase. BNPL can be a beneficial option in this case, as B2B buyers can postpone the payment until a later date.

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More revenue through liquid customers

B2B merchants who offer their customers BNPL solutions in their online checkout or offline sales benefit from the positive effect of increased liquidity for their customers and beyond:

Instant payments: BNPL payment providers for B2B enable companies to receive the purchase amounts from customers immediately paid by the solution provider, even if the buyers only pay later on invoice or in installments. 

More revenue: By providing flexible and convenient payment methods, B2B companies can offer their customers an additional incentive to buy their products and services. This can increase sales and support business growth. 

Less risk: BNPL can also minimize the risk of non-payment. When working with specialized providers, B2B companies are guaranteed to receive their payment on time and pass on the risk of bad debt to the payment provider. 

Stronger customer loyalty: By providing B2B buyers with the most popular payment methods, companies can gain the trust and loyalty of their customers, which can help build long-term customer relationships and expand their customer base.

This is why you should use Mondu’s BNPL

When choosing a BNPL payment provider, you should ensure that the provider specializes in B2B, as the requirements differ from those in B2C. 

Mondu allows you to easily integrate various BNPL payment solutions for B2B into the checkout of your webshop or to use them for telesales and field sales. With Mondu, you can offer your customers flexible payment methods such as invoice and installment payments – with high purchase amounts and without risk. Mondu assumes the risk of non-payment and pays you after each purchase – even if buyers pay later. 

Learn more about how Mondu’s BNPL solution can help you improve your customers’ liquidity and what other benefits Mondu has in store for you here

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