According to recent studies, B2B invoices are still the most popular means of payment in B2B commerce. B2B merchants and B2B marketplaces should therefore not consider whether they should also offer this option in e-commerce, but rather how they can best implement it. There are two options: manage invoice payment internally or outsource it to an external service provider. In this article, we look at both options and their respective advantages and disadvantages.
The B2B invoice payment process
First of all, it should be noted that B2B invoice payment involves much more than just creating an invoice. It is a complex process that involves several crucial steps. Only by carefully carrying out all of these steps can the payment method be offered securely and reliably.
- Buyer identification: Verification of the customer’s identity to avoid fraud.
- Scoring and credit checks: assessment of the customer’s creditworthiness in order to minimise the risk of payment defaults.
- Risk management: Analysis and management of risks associated with invoice payment.
- Accounts receivable management: Management of receivables to ensure that payments are received on time.
- Dunning and collection: Follow-up and collection of overdue payments to secure cash flow.
Manage B2B invoices internally or outsource them – when is it worthwhile for whom?
The important question for companies is therefore whether it makes more sense to manage the invoice payment process themselves or outsource it to a specialised payment service provider. This decision depends on various factors, such as company size, sales volume, financial experience and customer base.
In the following, we take a closer look at the advantages and disadvantages of both options – in terms of control, effort, costs and risk.
Manage B2B invoices internally
Pros:
- Full control: Companies retain complete control over the entire process and the direct relationship with their customers.
- Flexibility: Adjustments and changes can be made quickly and without external coordination.
- Cost savings: No fees for external service providers, which can be more cost-effective for low transaction volumes.
Cons:
- High effort: The administration of B2B invoice payments requires a considerable amount of time and personnel, which ties up internal resources.
- Higher risk: Companies bear the full risk of payment defaults and must establish an effective receivables management system.
- Lack of data: The data required for precise credit checks is often missing, which can lead to higher default rates.
Outsource B2B invoices
Pros:
- Reduced risk: The risk of payment defaults is transferred to the service provider, who takes over and secures the receivables.
- Time saving: companies can concentrate on their core business while the service provider takes over debtor management.
- Better database: Service providers have access to extensive data and can carry out credit checks more accurately and quickly.
- Efficiency: Specialised processes and technologies enable service providers to handle invoice payments more efficiently.
Cons:
- Costs: There are fees for services, which may vary depending on the payment provider and scope.
- Dependence: Companies are dependent on the reliability and conditions of the service provider.
- Less control: Direct control over the process and the customer relationship is partially relinquished.
| Â | Manage B2B invoices yourself | Outsource B2B invoice management |
|---|---|---|
| Control | Full control over the entire process and the direct customer relationship | Partial control, dependence on the service provider |
| Effort | High expenditure due to time and personnel requirements | Low expenditure, allows focus on the core business |
| Cost | No fees for external service providers, potentially cost-effective for low transaction volumes | The fees vary depending on the provider and scope |
| Risk | Full risk of payment defaults, need for effective receivables management | Lower risk, the service provider assumes the default risk and pays the company directly |
Conclusion
Companies that want full control and flexibility and have sufficient resources can benefit from internal management.
For many companies, however, especially those with high transaction volumes and limited internal resources, it is worth outsourcing B2B invoice payment to a specialized payment provider. This reduces risk, saves time and enables more efficient processing.Â
Want to learn more about the benefits of B2B payment providers? Visit www.mondu.ai or contact us directly.Â
