What are B2B Instalment Payments?
B2B instalment payments offer business buyers the ability to spread out the cost of products or services over a specified period, enabling buyers to ease cash flow constraints by paying in regular increments.
It’s no surprise that B2B instalment payments have grown significantly in usage over the last few years; Merchants that offer instalment payment options have been able to benefit from increased average order value, conversion rates and repeat business. With the cash flow management benefits for buyers, B2B instalment payment represents a win-win scenario for both parties.
Solutions like PayLater are now also providing additional benefits to merchants, like automated payment instalment collection, getting paid in full upfront and using technology to streamline account management processes. In this article we’ll cover how your business can capitalise on the value of B2B instalment payments.
How do B2B Instalment Payments work?
When looking to offer B2B instalment payments, there are two core options for businesses to choose between.
Traditional Trade Credit
Traditional trade credit has been ubiquitous within B2B trade for time immemorial. Merchants offer payment terms to buyers whereby they purchase & receive goods or services, and then pay in instalments over an agreed period of time. Typically, trade credit applications are made by the buyers and provided to the merchant for review. It is then at the merchant’s discretion on how much credit to offer the buyer & the payment terms the buyer must follow.
It’s important to be clear about the limitations of traditional trade credit;
- Typically, it is the merchant that takes on the credit risk for any purchases that go unpaid - unless a trade credit insurance policy covers the transaction (incurring additional cost)
- Traditional trade credit has been limited to offline sales
- Traditional trade credit involves a significant amount of administrative process & account management from the merchant
PayLater
Similar to trade credit, B2B Buy Now, Pay Later (B2B BNPL) is a payment solution that enables business buyers to make purchases while deferring payment over flexible payment terms. Like trade credit, PayLater services enable merchants to provide an extended form of credit that allows buyers to receive goods or services first and pay in instalments later. However, unlike trade credit, the merchant receives the cash upfront from the PayLater (or B2B BNPL*) provider.
PayLater solutions (like Kriya) digitise the traditional trade credit process, making it instant and available across online and offline sales channels. With benefits like automating decisions on credit, and embedding into eCommerce checkouts, it is considerably more scalable.
*B2B BNPL means B2B buy now pay later. Kriya’s PayLater solution offers the same benefits as B2B BNPL.
Benefits of Utilising B2B Instalment Plans
Offering B2B instalment plans can bring various advantages to businesses of all sizes, let’s dig into the top benefits for sellers and buyers.
Improved Conversion Rate
Business buyer expectations are higher than ever when it comes to payment experiences. Not only do they want the process to be quick and easy but they have specific demands when it comes to spreading the cost of purchases. Offering flexible payment plans drives conversion rate improvements: Kriya merchants see an 82%+ increase in likelihood to convert.
Increased loyalty
Offering flexible payment terms is an effective way to increase loyalty with your buyers. Consistently offering flexible payment terms according to your buyers preferences, is proven to increase repeat purchases: Kriya merchants drive 2x repeat business after adopting PayLater.
Better Cash flow
PayLater Providers - like Kriya - will not only handle the credit checks, limit setting & payment collection, but they’ll provide the cash to the merchant upfront.
Competitive advantage
Businesses that provide better payment experiences & superior payment terms are more likely to stand out from their competitors and attract a larger share of the target market. This point of differentiation can represent a huge advantage in competitive markets.
Factors to Consider When Implementing B2B Instalment Options
When considering implementing B2B instalment plans, businesses must take several factors into account.
Payment Terms - Consider your buyer preferences: what are their preferred terms, instalment frequency and payment periods? In order to satisfy these preferences you’ll need to decide if you’re able to manage this internally or you need to engage a supplier.
Creditworthiness of customers - Offering credit to your buyers always introduces an element of risk. You’ll need to consider how your business assesses prospective buyers and sets credit limits to mitigate the risk of non payment & fraud. With PayLater solutions like Kriya, this process is done instantly & seamlessly at the point of purchase.
Tech requirements- Offering instalment payments requires substantial administration and account management. Look for platforms that will connect with existing business systems such as billing, eCommerce software and ERP platforms to help streamline the process.
Cash flow management - When offering trade credit merchants need to forecast cash flow accurately to make sure they have the liquidity to meet their buyer agreements.
Internal Communication - Establishing clear communication channels and customer support processes is vital when implementing B2B instalment options. Providing timely support and addressing any payment-related queries promptly can enhance customer satisfaction and loyalty.
Leveraging Technology for Streamlining B2B Instalment Transactions
Where traditional trade credit has played a key role historically in these types of payments, PayLater is taking on the mantle while offering numerous additional benefits including; improved payment experiences, minimised credit risk for merchants, streamlined credit checking & authentication, and a significant reduction in administrative effort.
Automated Payment Collection
Traditional trade credit provides flexibility in offering payment terms but the collection of payments remains a costly process, from a time and resource perspective. Platforms that automate payment collection streamline the entire payment process, from invoice generation to payment collection, reducing administrative burdens and ensuring accurate and timely transactions.
Authentication drives growth
One of the limitations of traditional trade credit has always been the level of risk that merchants need to take on. With PayLater providers like Kriya, credit checks are done instantly & seamlessly, providing appropriate credit limits for each buyer in a single flow. With Kriya, the risk for authenticated buyers is then all passed on to us.
Learn more about Authentication with Kriya
Upfront over deferred payment
Merchants leveraging PayLater don’t need to worry about unpaid instalments. Once the buyer has been authenticated and the transaction has been made, the merchant can receive the funds in full, up front. With traditional trade credit, the merchant must wait until the end of the payment plan to receive the full funds. For fast moving enterprises this instant cash flow improvement means quicker investment of cash in other areas of the business.
Final thoughts
We’ve covered how B2B instalment payments offer merchants a flexible and efficient payment method that can boost sales, foster customer loyalty, and improve cash flow.
But, where traditional trade credit has played a key role historically in these types of payments, PayLater is taking on the mantle while offering improved payment experiences, reduced credit risk, upfront payment to the merchant and streamlined admin processes.
Businesses that opt for the integrated, digital approach are seeing the gains in their conversion rates, repeat business and average order values. If you’d like to learn more about how your business can adopt PayLater, talk to our team today.
Avoid leaving money on the table with Kriya’s PayLater solution
Kriya is the Enterprise PayLater solution. Having processed over £27B of B2B payments over 12 Years, we help businesses offer buyers flexible payment terms across all sales channels.
Rather than cumbersome loans, or traditional trade credit, our merchants are able to offer buyers flexible payment terms at purchase, whether at online checkout, or offline channels such as over the phone - or even in store. In addition, PayLater offers instant buyer onboarding, fully managed repayments and reconciliation service, and full upfront payment to the merchant.
