Optimizing Working Capital Management with B2B BNPL: A Comprehensive Guide
Working capital is the lifeblood of business, if it’s unstable then your business will falter and cease to exist. While a variety of financial tools can help ease cash flow issues and help with working capital management, one new tool has arisen in the B2B market to help both buyers and vendors.
B2B Buy Now, Pay Later is here to help make embedded finance easier, and with it comes a slew of benefits. For instance, BackdPay lets buyers purchase additional products with increased cash flow while also letting vendors get paid instantly and stack up a commission of up to 1% on all orders. Let’s take a look at how B2B Buy Now, Pay Later can help improve your working capital management and learn why you should integrate BackdPay into your marketplace today.
What is B2B Buy Now, Pay Later?
B2B Buy Now Pay Later is a finance payment option that allows one business to purchase items from another without paying the total sum at checkout or invoicing. This flexible payment method is serviced through a third-party provider who pays the merchant the total amount (usually minus a percentage-based facilitation charge). Then it allows the buyer to pay them that amount with interest over an agreed-upon period of time.
There are several benefits on both sides of the transaction with increased flexibility and minimum risk, as the third party shoulders the financial burden of the initial payment. Let’s take a look at how implementing B2B Buy Now Pay Later in your checkout impacts your working capital management.
B2B BNPL and Working Capital Management
Offering B2B Buy Now Pay Later (BNPL) as a financing option can have several impacts on your working capital management. Here are some key impacts to consider:
1. Improved Cash Flow
B2B Buy Now, Pay Later allows your business customers to defer payment for their purchases, which can help improve their cash flow while your cash flow also increases. While many Buy Now, Pay Later solutions will allow you to receive payments over a period of time as customers pay their installments, BackdPay allows you to receive your full amount at the time of purchase. This can provide your business with a steady stream of cash flow and help manage day-to-day operational expenses.
2. Increased Sales and Customer Retention
By offering B2B Buy Now, Pay Later, you make it easier for your customers to purchase, especially for larger or more expensive orders. This can lead to increased sales as customers may be more inclined to buy when they have the option to spread out payments. Additionally, offering flexible payment terms can enhance customer satisfaction and loyalty, leading to higher customer retention rates.
3. Potential Increase in Average Order Value
B2B Buy Now, Pay Later can encourage customers to spend more by providing them with the ability to make larger purchases without immediate payment. This can result in an increase in the average order value as customers take advantage of the financing option to buy in a larger quantity or increase how much they are willing to spend on specifically priced products or services. Upselling becomes much easier when the cost increase is spread over time.
4. Impact on Inventory Management
Offering B2B Buy Now, Pay Later can affect your inventory management. If customers take advantage of the financing option to make bulk purchases or order larger quantities, it may require you to adjust your inventory levels accordingly. This could involve managing higher inventory levels to meet increased demand or optimizing procurement processes to align with customer purchasing patterns. With an increase in inventory comes the chance to scale and grow your business in order to better cater to your growing clientele.
5. Credit Risk and Collections
While B2B Buy Now, Pay Later can boost sales, it also introduces credit risk to your business. Extending credit to customers means there is a possibility of late or missed payments, which can impact your cash flow and working capital. It is important to have effective credit risk assessment processes in place to mitigate the risk of defaults and to ensure timely collections.
The good news is, when you implement BackdPay, Backd will handle all credit checks and assessments. As previously mentioned BackdPay also allows you to get paid upfront, eliminating the risk of not getting paid when customers default.
6. Financing Costs and Partnerships
Offering B2B Buy Now, Pay Later may involve partnering with a third-party financing provider or setting up your own in-house financing program. Depending on the arrangement, there may be associated costs, such as transaction fees or interest charges. It is essential to evaluate the financial implications and ensure the financing terms are sustainable and align with your business objectives.
With BackdPay, your business pays nothing for offering flexible financing to your customers. Backd is dedicated to ensuring that small and medium businesses have the support that they need to manage their working capital effectively, that’s why we pay our BackdPay partners at the time of purchase and reward them with up to a 1% referral fee on all financed purchases.
Enhance Your Working Capital Management
To effectively manage the impacts of offering B2B Buy Now, Pay Later on your working capital, it is crucial to closely monitor cash flow, credit risk, and inventory levels. Implementing robust financial management practices, such as cash flow forecasting, credit risk assessment, and inventory optimization strategies, can help mitigate potential challenges and maximize the benefits of this financing option.
Buy Now, Pay Later: Powered By BackdPay
At Backd, we understand that a need for capital is a reality for so many business owners, it’s what we were founded on and what continues to drive us. We know that traditional financing solutions don’t always help meet the needs of businesses across the country and that’s why we continue to expand our offerings to help support your business.
Whether you want to boost your sales or just offer your customers a more flexible payment method, BackdPay is the new way to let your customers pay. BackdPay can be easily integrated into your checkout and offer your clients the ability to finance their purchases while you get paid at the time of ordering.
BackdPay has the potential to increase your average order values by +150% and grow your customer base by 30%, all while still getting paid instantly for the purchases that your customers make. Backd offers an effortless integration so that BackdPay works for your checkout and our team handles all necessary credit checks.
Offer your customers the flexibility they need today with BackdPay, call (737) 256 7458 to talk to our team and learn more.
