3 Reasons why managing B2B finance is more difficult than B2C

Sarah-Jayne Martin
B2B vs B2C

In many ways, business-to-consumer (B2C) expectations and demands are impacting how business-to-business (B2B) companies manage their operations. In both realms, we expect information to be readily available online, 24/7. We expect to be able to manage our own accounts, order products and track fulfillment. We communicate via email and web portals and receive confirmation via SMS and text. Yet despite these shifts in how we expect to work and communicate in any environment, there are some aspects of the B2B world that remain more challenging.

Finance leaders have the most complexity to manage when it comes to meeting customers’ ever-changing expectations and still ensuring smart business practices. Three core elements in the AR process where this is most evident are:

  1. The purchasing process
  2. The payment process
  3. Relationship management

Let’s explore what makes these parts of the credit-to-cash process both critical and complex to business health.

The Purchasing Process

In the B2C world, instant gratification is the name of the game. Consumers are able to easily click a button online or walk through a physical store and pick their products. It’s a quick and direct process, and often based on the mood or emotion of the moment - this is where “impulse shopping” can often have an impact on the total amount spent. In the case of consumer shopping, product placement - both online and in physical aisles - plays a role in the value of the purchase. Transactions are typically high volume but low value - think of grocery shopping, or even replacing a wardrobe. You might buy that extra candy bar or bag of chips in the checkout line, which increases your product volume, but it only nominally increases your overall purchase value.

By comparison, the B2B buyer doesn’t fall prey to “impulse shopping". Patterns and tends to be more emotionally detached from their buying choices. Purchases are often planned out, sometimes months in advance. This leaves little room for pure emotions or instant gratification to slip in.

Also factored into this is that often in B2B buying, there isn’t just one decision-maker. Members from technical, business, financial and operational departments - depending on the type of purchase - may be weighing in, and each of them have veto power.

B2B shopping more commonly features large ticket items. For example, a 3D printing machine, or software, are items that a business can purchase frequently. And for the lower cost products, such as office supplies, businesses often buy in bulk.

Because of the high final sales price and the specific customizations the business might need, final sale prices are often negotiated and price may vary by customer. Customers who agree to place large orders or negotiate special terms pay different prices to other customers.

The Payment Process

The payment process is straightforward in the B2C world: the consumer has cash, credit, or checks. They offer payment at the point of sale using one of several traditional or electronic channels. This simplicity is supported by a simple business system, too. Products and prices are available - on a website, in a physical store - and there is a process for collecting customer data and accepting payment.

The basic B2C business system is relatively simple. You need a method of displaying products and prices on your website, a mechanism for recording customer details, and a checkout to accept payment.

The business buyer has a completely different payment landscape, and business system, to navigate. When it comes to payments, there’s typically an invoicing process involved, rather than a point of sale payment. This extends the time to cash on hand. And business buyers, who are making larger purchases, may pay with a business credit card, a line of credit, make payment installments, or even take out a loan. This means more payment flexibility and the added burden of credit management is incorporated into the process. All of these options are more complex processes to manage, are more costly, and eat into business profits.

Additionally, the business system supporting the transactions needs to be capable of accepting orders in different formats such as email, documents, or electronic orders. It should integrate order capture with your other administrative systems such as invoicing, customer records, and accounting.

Relationship Management

In both B2B and B2C environments, relationships are critical to success. We are all well-versed in the phrase “customer experience” and understand that interacting consistently at all customer touchpoints is important to ensuring that customers are not just happy, but loyal.

And in every relationship, the foundational factor of success is the level of trust that can be cultivated. This is earned through transparency in information, consistency in communication, and alignment between your brand and that of your customer - B2B or B2C. Trust is the necessary factor that says, I believe you are going to provide me with what I need, so I am willing to exchange these dollars for that product or service.

What is different between B2B and B2C is how we get to that level of trust. In a consumer interaction, you have a single buyer. Sometimes a spouse/partner or other influencer is involved in the process. They are solely responsible for the research and decision-making that brings the buyer to the point of purchase. With bigger ticket items such as cars, or home improvement equipment, they might add in the opinion of a professional. But oftentimes, purchases merely happen. The consumer goes out to buy a pair of brown shoes, and comes home two hours later with brown shoes. And maybe a nifty pair of running shoes. And a pizza.

In the B2B process, there is not so much autonomy. First, the person doing the research is not always the actual decision-maker. And before committing to a purchase, there is not just one or two advisors, but a committee of opinions that must be factored in. If it’s physical equipment, there may be a “test drive”, a “sandbox”, or a “proof of concept” engagement before agreeing to purchase.

This step to building trust elongates the buying cycles. Bringing in the committee of opinions lengthens the decision-making process. And finally, negotiating the price can be the final stretch. The consumer did not get to the cash register and haggle for an extra $10 off the brown shoes. But the business buyer will absolutely ask about deals, rebates, and bundling that can impact pricing. The longevity of the relationship is also a factor. There’s negotiation, discussion and a bit of a dance when it comes to finalizing pricing in the B2B realm. And the ability to deliver this to both parties’ mutual satisfaction resides in the strength of the relationship.

Smart AR Automation Simplifies B2B Finance

When it comes to managing B2B finance, there are many layers of complexity that a B2C finance leader doesn’t need to navigate. However, with modern tools, like a smart AR platform that automates AR processes and communications, AR teams can smoothly and successfully manage and scale the three core elements of the credit-to-cash process: the purchasing process, the payment process, and the relationship with the buyer. Managing the process effectively impacts a business’ bottom line and ability to achieve healthy growth - and this is what every finance leader aims to accomplish.


Sarah-Jayne Martin
About the Author

A Finance Professional specializing in the areas of Credit Management, Payment Processing, Collections and Accounts Receivable. Possessing over 20 years’ experience in the field managing large global teams with a strong focus on improving efficiency within the Order to Cash cycle. Hailed as an industry expert in the field, Sarah-Jayne makes active appearances in the space, frequently featuring on thought-leading panels and discussions.

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