Using B2B BNPL to Improve Cash Management in Your Business

A B2B BNPL solution can make it easier for customers to purchase goods and suppliers to manage cash flow. Learn more about the buy now, pay later model here.
Written by:  Mark Saltarelli
Last Updated:  September 23, 2024
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Optimizing cash flow is a top priority for businesses, and it’s especially important during times of economic uncertainty. To meet this need, suppliers and lenders continually look for new and creative solutions. This might explain the rising popularity of business-to-business buy now, pay later (B2B BNPL) purchasing platforms — but BNPL offers benefits beyond easy credit access. 

Today, we’ll cover BNPL basics and the ways it benefits both buyers and sellers, including: 

  • What is B2B BNPL?
  • How does B2B BNPL work?
  • Why does the market need B2B BNPL?
  • What are the benefits of B2B BNPL for buyers?
  • How can you decide if a B2B BNPL solution is the best choice for your business?

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What is B2B BNPL?

Business-to-business buy now, pay later is a payment option that allows businesses to purchase goods and services immediately and pay for them incrementally over time. While the consumer market has seen a steady rise in BNPL platforms such as Affirm, Klarna, and Afterpay, B2B lending platforms have only recently begun offering more flexible options.

Buying in B2B is often more complex than in the comparatively simple B2C (business-to-consumer) market. For this reason, B2B BNPL options have lagged behind more widely available B2C extended-pay options. SaaS and Fintech platforms are leveling the playing field for credit processors interested in providing extended installments, allowing businesses to take advantage of the same benefits as individual consumers.

How does buy now, pay later for B2B work?

BNPL is essentially a form of trade credit that spreads out the cost of transactions over a set period without exorbitant fees. This payment option is especially beneficial for small businesses that might not have the upfront resources to make large purchases. It’s also popular among mid-size companies needing flexibility in managing cash flows.

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BNPL vs. trade credit vs. credit card

BNPL offers similar flexibility to other forms of credit, such as net terms trade credit or corporate card purchases, although it approaches associated processes differently. 

  • Corporate card purchases use a company credit card for business-related expenses. This payment method streamlines expense management, improves cash flow, and often provides rewards or cash back. The purchases must be paid within the grace period or over time with associated interest.
  • Trade credit is a business financing agreement in which a buyer purchases goods or services using repayment terms like net 30, 45, or 60 days. Extended repayment terms can help businesses manage cash flow.

The buy now, pay later (BNPL) procurement trend offers advantages over traditional forms of business credit.

  • BNPL offers flexible payment terms, allowing businesses to tailor their expenditure and repayment schedules to align with cash flow cycles. 
  • Unlike fixed repayment terms often associated with trade credit, BNPL can adjust to seasonal demands or unexpected financial challenges. 
  • While corporate cards may provide rewards, they also carry the risk of high interest rates. BNPL plans often feature zero- to low-interest options for early repayments. 
  • BNPL services typically have a straightforward application process and require minimal upfront payments, removing barriers to access for business purchases.

Steps in a typical BNPL transaction

In B2B BNPL, the approval process usually takes only a few minutes and follows these steps:

  1. A B2B customer shops for the goods they need.
  2. At checkout, they select BNPL.
  3. They provide identifying information, such as business name, address, contact info, etc., for a quick, electronic background check and credit check to determine buying amounts, repayment terms, and fees (if any). 
  4. Upon approval, the customer signs a credit agreement outlining the terms and conditions.
  5. The merchant receives a confirmation for the approved transaction and a remittance schedule outlining when payments are due. 
  6. The merchant fulfills the order and delivers the goods to the customer. 
  7. Payments begin on schedule and continue until the balance is paid. Timely payments render the customer in good standing and increase the likelihood of accessing credit for future needs. 

Why BNPL is good for business

Traditional invoice-based payment processes for B2B sellers often have fees, strict deadlines, and limited flexibility. Companies must have the resources to pay the entire amount immediately to access goods and services, creating a potential barrier for small businesses. An inability to do so can lead to missed opportunities or slow growth if companies cannot take full advantage of products that could help them succeed. 

Sellers also face challenges with traditional B2B transactions. The invoice model leaves them vulnerable to nonpayment when selling goods on credit. As with any loan, there is no guarantee the buyer will pay in full or even make payments on time. This means sellers may bear the cost of unpaid invoices, absorbing losses that prevent them from reinvesting in their business. If a buyer defaults on an invoice, they might face legal fees associated with collecting the debt. 

The risk of nonpayment can be especially concerning for small businesses that don’t have large cash reserves and thus rely on timely payments for liquidity. Nonpayment risk has increased in recent years, and the default rate will likely continue rising due to continued inflation and tight credit conditions.

BNPL platforms allow B2B buyers to get what they need when they need it to drive production. They also protect sellers against nonpayment since they are paid in full before transferring goods. 

What are the benefits of a B2B BNPL solution for buyers?

BNPL enables safe and fast transactions for both buyers and sellers. But the perks of purchasing with a B2B buy now, pay later model extend well beyond that benefit. They include:

Easier approval: Setting up a credit account through traditional methods can be time-consuming since a credit application and supporting documentation are often required before you receive a credit decision. With B2B BNPL, sellers have an upfront guarantee of full payment. Since default risk is transferred to a third party, it's much easier for vendors to approve and fulfill orders.

Cash flow management: BNPL platforms allow businesses to manage their cash flow by making smaller payments over time. Smaller payments help them maximize sales revenue while avoiding risk. 

Faster business growth: BNPL platforms enable fast fulfillment — a huge advantage for small businesses and startups that don’t have large cash reserves. By using BNPL to access the capital they need, businesses can accelerate growth, invest in new products, expand distribution channels, or increase marketing efforts. Improved cash flow also helps companies stay solvent and maximize profitability by limiting late payments and fees due to invoice default. 

Secure payments: BNPL gives buyers and sellers a secure way to complete transactions, protecting both parties from risk. It holds buyers accountable for paying their balance in a timely manner, and sellers have peace of mind knowing they’ll receive payment before fulfillment. 

Fewer invoices: BNPL may reduce the number of invoices needing processing and, by extension, processing time. Instead of managing multiple individual invoices and terms, businesses use BNPL to make regular payments through the platform. This reduces paperwork and translates into more efficient payment management.

Budget planning: With traditional invoicing, estimating upcoming budgets can be daunting, as businesses must track multiple payables. BNPL gives companies a more predictable financial picture by allowing buyers to select optimal flexible payment terms and allocate funds accordingly. This helps small businesses make informed decisions about future investments.

The benefits of BNPL for businesses

Improved cash flow management: B2B BNPL solutions offer businesses immediate access to funds while providing the flexibility to pay over time. This improves cash flow management by allowing them to use sales revenue to pay for their inventory or services.

Access to a wider, more loyal customer base: BNPL opens up opportunities for customers who might not have access to traditional credit, helping companies reach a broader audience. It also introduces the possibility of more revenue over time since customers know you provide reliable access to your product with a flexible approach.

Reduced administrative burden: By consolidating payments through BNPL platforms, businesses reduce the time and effort spent managing accounts receivables. These processes happen through a convenient platform that ensures prompt payment and full transaction visibility. 

Enhanced budgeting and financial planning: With predictable payment schedules, businesses can better anticipate their financial positions and budget accordingly. BNPL makes estimating monthly recurring revenue (MRR) and annual recurring revenue (ARR) easier, enabling forecasting and decision-making.

Competitive advantage: Offering BNPL as a payment option can differentiate a business from its competitors, appealing to consumers' desire for flexibility and convenience. The ease and streamlined process of BNPL may make them more likely to choose a business offering this service.

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How do you know if BNPL purchasing is good for your business?

There are a few things to consider when weighing the benefits of a purchase using extended credit terms like BNPL. By evaluating the following factors, you can decide if BNPL is the right strategy for getting the most value out of an upcoming purchase. 

Examine your cash reserves: If your cash flow statement could benefit from more stability, it might be good to make the most of your reserves by spreading out payments using BNPL. In this way, BNPL can help companies avoid the feast-or-famine cash cycle that prevents them from growing efficiently.

Think about upcoming purchases: If you're making one or more large purchases in the near future, using BNPL to pay for them can help optimize cash utilization. BNPL can spread out the cost of upcoming purchases like new equipment, software, or inventory, giving you more flexibility for undertaking a major investment. 

Consider any fees: BNPL fees vary between providers, so it's important to look for plans with no setup costs and low or flexible payments. Be sure to compare the length of repayment periods, applicable interest rates, and potential late payment penalties or pre-payment fees. Lastly, determine any associated tax implications. You can then make an informed decision about BNPL versus traditional trade credit.

Look at pricing benchmarks: When considering a buy now, pay later purchase, ensure items' costs still provide a good total value. Conduct price benchmarking for your most frequently used items. Consider whether the savings through another vendor might outweigh the benefit of spreading out payments.

How to implement B2B BNPL

Implementing B2B BNPL payments can streamline purchasing processes and boost cash flow management. BNPL offers a flexible financing option that can adapt to your company's financial needs and purchasing cycles.

Here is a general approach to using BNPL: 

  1. Assess business needs: Evaluate your financial health and purchasing needs. Consider cash flow, frequently purchased goods and services, and how BNPL could improve your buying strategy.
  1. Choose the right B2B BNPL provider: Research B2B BNPL providers appropriate for your business model. Look for flexible terms, low fees, and seamless integration with existing financial systems. Pay particular attention to providers' customer service reputation and the technology they use.
  1. Integrate BNPL into your payment system: Work with your provider to integrate BNPL into your current payment system. This may involve some technical setup to ensure compatibility and enable smooth transactions for both you and your suppliers.
  1. Educate your team: Ensure all relevant team members are well-informed about how the BNPL system works. This includes training on new software or processes and guidelines regarding making purchases.
  1. Monitor and adjust: After implementing BNPL in your business operations, monitor its impact on cash flow, spending habits, and vendor relationships. Adjust policies based on performance metrics and team feedback to ensure the BNPL solution effectively meets business needs.

How Order.co balances cash flow and growth

Order.co brings together a robust, modern procure-to-pay solution and innovative working capital options for companies of all sizes. Using Order.co Financial Offerings, business buyers can access preferred vendors, dynamic spend analysis and catalog features, and up to $500,000 for necessary goods and supplies. 

Order.co Financial Offerings include:

  • Flexible payment solutions for better cash management 
  • Paperwork-free applications that take less than a week to approve
  • No surprise fees or delays in purchasing 

To grow your business with best-in-class access, features, and funding, schedule a demo of Order.co today.

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