B2B invoice payment has established itself as an important payment method in e-commerce. It offers business customers a flexible and convenient payment option. However, it also poses a risk for merchants, as payment defaults and fraud can occur. To make the payment method secure for B2B merchants, they need a sophisticated accounts receivable management system.Â
Invoice payment in B2B commerce
Around 80 percent of Germans prefer to make their daily purchases on account. Invoice payment has also become indispensable in B2B commerce and is the most popular payment method in B2B e-commerce. Buying on account offers B2B customers numerous advantages. When companies offer their customers this short-term financing solution, they increase convenience and trust during the payment process, which automatically strengthens customer retention.
However, buying on account also entails risks for companies: payment delays or even complete payment defaults. Studies show that in Germany, nine percent of invoices in the B2B sector alone are not paid within the usual payment period. Late payments lead to an annual loss of 56 billion euros in cash flow. In the worst case scenario, these bottlenecks can lead to insolvency.
To minimise such risks, companies need effective accounts receivable management.
What does accounts receivable management mean?
Accounts receivable management comprises all processes and measures that a company takes to ensure that customers pay their invoices on time. It includes monitoring and managing receivables, carrying out credit checks, invoicing, dunning and, if necessary, debt collection. The aim is to optimize cash flow and minimize the risk of payment defaults.
What are the advantages of effective accounts receivable management for B2B merchants?
Effective accounts receivable management offers numerous advantages for B2B merchants:
- Improved cash flow: timely payments secure the company’s liquidity, which increases financial stability.
- Reduced risk: Credit checks and structured dunning minimise the risk of payment defaults and delays.
- Increased efficiency: Automated processes such as invoicing and reminders save time and resources, allowing the company to focus on its core business.
- Customer loyalty: Transparent and well-organised management improves customer satisfaction and strengthens business relationships.
What does accounts receivable management involve?
Accounts receivable management comprises several steps that are carried out systematically:
- Credit checks: Before a transaction is concluded, the customers’ creditworthiness is checked in order to assess the risk of payment default.
- Invoicing: After the delivery of goods or services, an invoice is created and sent to the customers.
- Documentation: All invoices and net terms are documented and monitored to keep track of outstanding payments.
- Payment reminders: When the net terms are approaching, customers are reminded of the upcoming payment to avoid delays.
- Dunning: Reminders are sent out if payments are not made. If customers continue to fail to pay, the case is handed over to a debt collection agency.
- Debt collection: The debt collection company takes over the collection of the debt if all previous measures have been unsuccessful.
Efficient accounts receivable management for B2B merchants
For B2B merchants, internal accounting poses major challenges when sales figures are high. Efficient accounts receivables management is particularly crucial in B2B web shops with high invoice amounts.
External management can relieve the burden on employees, ensure timely payments and conserve resources. Intelligent software can also automate manual tasks such as invoicing and reminders, saving merchants time and money.
B2B payment provider for secure invoice payment
Merchants can outsource accounts receivable management to an external provider. However, they can also outsource the entire invoice payment process to a specialized payment provider. In doing so, they not only transfer the administrative effort, but also the default risk, as the payment provider assumes the risk and pays the merchants immediately.
This allows merchants to offer their customers popular buy now, pay later payment methods such as invoice payment and installment payments risk-free. One example of such a payment provider is Mondu. Mondu offers several advantages:
- Real-time credit checks so that invoice payments are approved quickly
- Easy integration into the web shop through direct integration into the shop system, plugins or PSPs such as Mangopay and Stripe
Interested in Mondu’s payment solutions? We’d like to learn more about your business and look forward to talking to you. Get in touch with us today!
