Legal action?

Things to Think About Before Hiring a Collections Agency

Collecting accounts receivables promptly is essential for a healthy business cash flow. But how do you properly deal with non-paying (and subsequently unresponsive) clients? What’s the best way to manage credit collections for unpaid invoices?

Picture this scenario: You are in a recurring buyer-seller relationship with a certain Client A. They’ve chosen you as the supplier of a crucial component of their flagship product. Every month, Client A sends you a 50% down payment for the products. Upon receipt of the down payment, you promptly begin to manufacture and then deliver the requested supplies on time. Upon receipt of the products they ordered, Client A sends you the rest of the payment, and the cycle continues.

However, on the ninth month of the relationship, Client A fails to remit the rest of the payment. You wait another month. Unfortunately, Client A goes from apologetic to uncommunicative.

Going forward, there are a few ways to go about this.

1. Send a demand-for-payment letter.

Send a demand letter first. Typically, a demand letter is certified by your attorney and mailed to the client. In this letter, you give your client payment options on how best to settle their financial obligation, such as letting them pay in installments. The language you use can go from pleasant to mildly threatening, whichever you or your lawyer prefers. But the principal message is the same: Pay up or face “legal consequences.”

A caveat: The thing about demand letters is they tend to get ignored and usually do not lead to the results you want, which is to collect long-overdue payments. What demand letters can certainly do is allow you to set a timeline for your non-paying client to respond. If they fail to act on your request beyond the prescribed timeline, you and your counsel can then formally launch the next step, which is more expensive and headache-inducing: going to court.

2. Hire a lawyer

When going this route, the message you send is decidedly more serious and threatening, as is generally the case in situations involving lawyers.

Now that you’ve taken out the big guns, you can perhaps imagine what this can do for your bottom line. Lawyers don’t come cheap, so this means that whatever amount your non-paying client owes you, it must be substantial enough to get a lawyer to help with the credit collections.

Once you involve a lawyer, the defaulting client may realize that the incoming costs and hassle are not worth it from a practical point of view and may be forced to settle. At least, that’s the scenario you can hope for.

3. Hire a collections agency

When you hire a collections agency, you face a couple of options:

  • One, the agency buys the debt amount from you, usually at a very low price. Going back to the example of Client A, let’s say the unpaid invoice amounts to $45,000. The collections agency then assumes Client A’s credit balance and buys the debt from you at a price as low as $15,000. If they manage to successfully negotiate and push Client A to pay up, the collections agency gets the rest of the amount. The upside to this setup is at least you get payment for a fraction of the amount owed. The downside? Well, you only get paid a fraction of the invoiced amount.
  • The second option is to allot a percentage of the collected amount as payment to your agency. Say, you and the agency agree on a 35/65 split. So if Client A agrees to pay $30,000 out of the $45,000, the hiring agency gets 35% or $10,500, and you get 65% or $19,500. $19,500 may look like a sad figure compared to the original $45,000 you were supposed to get, but options can be stark in situations like these.

If you want to recoup a little bit more, you can wait for a court judgment or an arbitration award in your favor. Collection agencies will pay more to collect debts with court backing.

How credit management software can help

Credit management platforms allow business owners to extend credit to their clients, increasing the range of payment options for B2B buyers without the seller worrying about tied-up capital or the often frustrating world of accounts receivable management.

One example, Apruve, lets sellers extend credit to their business buyers, but sellers still get paid immediately (usually within 24 hours) through a revolving line of credit. With mutually beneficial payment options, it’s less likely for your client to shun friendlier installment terms, which is also a plus for your business. With such convenient terms between buyer and seller, you might not even need to hire a collections agency at all.

Final word

As a business owner, you want the most cost-effective means of ensuring your accounts receivables are collected on time. Lawyers and collections agencies are always ready to back you up when push comes to shove, but where there’s a way to negotiate better payment terms, credit management software can prove more useful.

Paperwork

Creating Terms and Conditions For Your Invoices

Are you tired of cash flow problems? Do you wish your customers would pay you what you want when you need it? Are your worried that your business is not as protected as you want it to be?

One of the best things you can do to get your small business paid on time is setting strong terms and conditions for your invoices. The trouble is, setting the right terms and conditions can be difficult and confusing. Also, if you don’t set them up correctly, you may have trouble getting your clients to pay you when your business needs cash.

Don’t worry though, we’re here to help you through the process.

Make a list of everything you need to cover with the statement.

First, consider all the possible legal issues you may run into because of the transaction. Here’s a list of questions you may want to consider as you’re writing out your statement:

  • What happens if the client doesn’t pay?
  • What happens if you’re late on the delivery of your product or service?
  • What if your customer is dissatisfied with your product or service?
  • What happens when the product is damaged on delivery by your client’s delivery service?
  • What happens when your client pays late?
  • Are there any benefits if they pay early?
  • What kind of interest rate are you going to charge for late payments?
  • What if the customer wants to renegotiate the contract after it’s been signed?
  • Can your customer ask for a refund? What cases would allow this?
  • What happens if the scope of the services required grows?
  • If there was a misestimate on budget, who covers it?
  • In the case of the product breaking after the sale due to an accident, who is responsible?

Make a list of absolutely everything you can think of. The more items you cover in your terms and conditions statement, the more protected your company will be.

Write out your terms and condition statement. 

Next, you’re going to want to write out your terms and conditions. You can use a friendly tone, but be clear and professional. Make sure your client or customer understands exactly what they’re agreeing to when they use your products or services. Have someone who is familiar with your business read through it and see if they can clearly understand it. They may give you valuable feedback on items you want to add or remove.

Consult with a lawyer. 

Finally, after you’ve drafted your terms and conditions statement, you’re going to want to consult with a lawyer. While it will be expensive, they will be able to tailor your terms and conditions statement to protect your business as fully as possible. They will probably show you what you need to add to further protect your business.

Now that you have a terms and contract statement, with every customer, make sure your terms and conditions clearly state what goods and services are being traded. Every company has a different product and they all offer different services, so you need to make sure that each invoice matches the transaction. Update your terms and condition statement for each client, so that you have in writing what the transaction entails. This will help protect your company, as well as allow you to collect your money easier. 

You may want to run each invoice by a lawyer, just to make sure your bases are covered.

Creating a strong set of terms and conditions can be daunting, but it’s essential for protecting your business. A simpler option is using a B2B credit management platform that includes terms and conditions automation. With a B2B credit management platform like Apruve, you can know your business is being protected. Apruve handles your invoices so you don’t have to continue being the bank for your clients and customers.

 

 

 

Things to consider when writing a credit policy

Things to Consider when Writing Credit Policies

Writing a credit policy is different for every business. There are questions to be asked and considerations to be made to create a policy that protects the interests of the business and its customers.

In this post, we will discuss the key factors you need to look at when writing your credit policy. But first, let’s take a closer look at credit policies and what exactly they are used for in business.

What is a Credit Policy?

In simple terms, a credit policy is a set of guidelines that govern payment terms, particularly for B2B transactions. In most retail establishments, you rarely need a credit policy because immediate payments through cash or credit card are typically required.

Credit policies are essential risk management tools for businesses that deliver goods or services first before requesting for payments.

To start, a credit policy must clearly define four things:

  1. The criteria for customer qualification
  2. The TOC (Terms and Conditions) for delivering products or services on credit
  3. The process of collecting payments
  4. The necessary action(s) after customer delinquency

Looking at the list above, writing a credit policy may not be that complicated after all. However, a credit policy must be in tune with several factors such as the size of the business, its specific industry, and particular cash flow. You should also look at the current mood of the economy (global or regional – depending on the nature of your business).

Take note that making it easy to buy on credit may drive up sales, but it also increases risk. More active accounts mean more chances of nonpayment.

On the flip side, strict customer qualification or aggressive billing procedures may put off potential customers. But it does attract prospects who are serious about successfully transacting with your company. That said, you need to dig deep and conduct a thorough analysis to make sure your credit policy doesn’t undermine the profitability of your enterprise.

Writing an Effective Credit Policy

Obviously, there is no particular set of steps that can help you create a policy that’s tailored to your business. An expertly-written credit policy takes a lot of patience and time understanding your objectives, detailing out your billing procedures, and so on.

There are, however, general rules that can help you write an effective credit policy:

  • Focus on setting your credit limit(s). It must be made clear in exact dollar figures (or whatever currency you use) for each policy you wish to create.
  • Pay attention to your invoice structure. You can use an enterprise invoicing application to help with numbering, customer identification, and so on.
  • Provide clear steps for customers who may fail to pay. To increase the confidence of prospects, you should outline options should they find themselves unable to pay on time.
  • Establish a notification system. As the business requesting the payment, it is your duty to provide customers with quick reminders – especially if they’re already past due. You can use an automated system to save time and make collections easier.
  • Require deposits. If needed, you can request partial payments as a qualification requirement. This is a great strategy if you want to reduce risk further.
  • Don’t forget legal papers. A credit policy must be legally-binding. By acquiring and fulfilling the right legal forms, your business should be able to charge customers directly via credit or debit cards.
  • Consider write-offs for small charges. For some companies, it is entirely reasonable to write-off costs below $10.00 as bad debt. Just remember to provide step-by-step instructions for your employees to help them with these transactions.
  • Consider a third-party collection agency. 

Conclusion

Under the right circumstances, a credit policy will preserve the sustainability and growth of your company; it is not something you want to botch up. Pay close attention to every single detail and remember that problem with credit management can be very costly.

b2b ecommerce

7 Reasons Not to Launch Your B2B Ecommerce Site (Yet!)

The B2B retail market is expected to grow to USD 6.7 trillion by 2020. And with 68% of B2B buyers now making purchases online, B2B sellers would do well to capitalize on online sales platforms such as ecommerce sites.

But prematurely launching an ecommerce site is not always a good idea, and can even spell trouble for your business. Word goes around fast online, and if you screw things up, consequences will come immediate and hard.

There are valid reasons not to launch an ecommerce site just yet, and below is a list of seven:

Poor user interface design

Usability and ease of navigation are necessary for your site to make a good first impression. Poor loading speed negatively affects revenue, whereas an enhanced user interface drives up conversions, as evidenced by these case studies.

If you want to keep your target B2B buyers glued to your site and going from just browsing to purchasing, ensure that your ecommerce site is user-friendly, loads fast, has the right balance of functionality and aesthetics, and doesn’t make it difficult for your customers to buy.

Wrong ecommerce vendor

It’s not just some technology you plug in and play. As with a potential mate, choose the wrong ecommerce vendor and you’re bound to suffer.

If you opt for a cheap ecommerce platform with basic features, the odds are you’ll have to find another vendor as your business scales and your ecommerce needs become more complex. Opt for a multifaceted one when the need for it is yet to be established, and you’re likely to lose some hard-earned dollars.

Some key things to keep in mind when choosing an ecommerce vendor to partner with:

  • How long does it take to set up your store?
  • How much does the platform cost?
  • Is it easy to use?
  • What security features does it carry?
  • Is it customizable?
  • Is there an option to add features in the future?
  • How well does it work on mobile?
  • Does the vendor have a solid track record?
  • What support options do they offer?

No clear search engine optimization (SEO) plan

The search engines, to this day, are still widely used when it comes to finding information online. Approximately 6.5 billion searches are made each day across the world, with Google taking the lion’s share at 67.78% of all queries as of March 2016.

A search engine optimization initiative, therefore, is paramount for your ecommerce site to be highly searchable. When asked how to do exactly that, can you recall, off the top of your head, what the plan is? If not, can you point to someone on your team who can?

No dedicated content manager

Just like in regular brick-and-mortar stores, more foot traffic means more potential sales. If you have a site and an SEO plan but not enough content, don’t launch your ecommerce site just yet. Your SEO won’t run on technicalities alone. You need high-quality content, and for that, you need people to create those for you, as often and as reliably as possible.

According to HubSpot, more blog posts generate more traffic. In fact, a study they conducted concluded that:

“Companies that published 16+ blog posts per month got almost 3.5X more traffic than companies that published between 0 – 4 monthly posts.”

No dedicated customer service personnel

In the same spirit that you need someone to craft high-quality content to serve good SEO and user experience on your website, you also need someone to assist your B2B clients. According to several statistics pooled by data company InsightSquared, 66% of customers switch to competitors because of poor service, while a whopping 82% felt their original provider could have prevented them from switching.

So before launching your ecommerce site, make sure you have customer service personnel at the ready, dedicated to taking care of client relationships for you.

No robust security measures

In 2013, PCWorld quoted damning statistics from the National Cyber Security Alliance:

  • 20% of small businesses are likely to get hacked.
  • Of those 20%, 60% close up shop within six months after a cyber attack.

If site security is not something your budget can afford, better delay your launch plans. Security is neither optional nor a joke when you’re processing payments from B2B customers. And you certainly don’t want the backlash that will ensue in the event you fall victim to an attack.

While security is a feature most trustworthy ecommerce vendors are willing to provide, when it comes to your customers’ sensitive data, you can never be too secure.

Limited payment options

An increasing number of B2B buyers prefer and even expect an omnichannel experience when making purchases. We’re talking about customers who order online and pick up their purchases in-store the following day. Or customers browsing products using their smartphone, and then making credit card payments later via their desktop. In short, customers want a seamless shopping experience regardless of the device or purchasing method (i.e., in-store, online, or over the phone) they employ.

This is true for payment options, too. They want flexibility when buying from you. The more payment methods you offer them, the better for your business. Differentiate yourself by allowing your buyers to use a variety of online payment systems, from credit cards to PayPal, from Google Wallet to maybe even Bitcoin.

Another way to make your business stand out would be to extend credit to your B2B clients. At first glance, it may seem like a risky thing to do, but instead of financing this payment scheme yourself, you can look to partner with online payment companies such as Apruve, for example.

Final word

You don’t march into battle unprepared, and you don’t simply launch an ecommerce site just because you feel like it. So your B2B ecommerce site doesn’t fail before it even takes off, remember to launch only when you’re ready.

WooCommerce

How to Create a WooCommerce Wholesale System

 

This post comes from a guest blogger, Beka Rice from sellwithwp.com. You can find the original post here.

WooCommerce works out of the box for direct-to-consumer sales, but business-to-business sales require extensions or additional plugins. Creating a WooCommerce wholesale system also requires additional setup, as wholesale customers, pricing, and payment or shipping methods need to be created.

Fortunately, there are several plugins that can help you create your WooCommerce wholesale shop, and can create a store that sells wholesale products exclusively, or sells to both regular and wholesale customers. The plugin costs to create this system can range from $129 to $256 (plus annual renewals at 50% off), but this setup can also be customized with the help of a developer.

Creating WooCommerce Wholesale Customers

When anyone purchases an item in your shop and creates an account, they’re identified with the “Customer” role in WordPress. This ensures that they have only the capabilities on your site that customers should have (such as the ability to update account information in the “My Account” area on your site’s frontend), but don’t have further capabilities on your site (like adding blog posts).

There are two main ways you can create WooCommerce wholesale customers: create a wholesaler role, or create a wholesaler group. Each can be done with a free plugin.

Creating a new wholesaler role is fairly simple, I’d recommend this approach for most WooCommerce wholesale systems, as user roles are easy to work with and customize or extend, as there are several core WordPress hooks and functions you can leverage around user roles.

More WooCommerce extensions also support user roles versus groups, so you gain the ability to use plugins like Catalog Visibility Options with this approach.

To create a wholesale role, you can use the free User Role Editor plugin. Go to Users > User Role Editor and click “Add Role”. This will let you select an existing role to clone, so I’ll give wholesale customers all of the same abilities as regular customers by cloning the “Customer” role.

WooCommerce wholesale role

Create a Wholesale Role

Creating a wholesale group is easy as well, but I don’t recommend using this unless you have a specific reason to avoid using roles. Groups are basically a secondary way of categorizing users, but you won’t get the built-in WordPress structure that you do around roles, which makes it harder to develop custom code around user groups. There are also a couple of WooCommerce extensions that will integrate with roles, but not groups.

A group may be a better fit if your wholesale customers have a specific role on your site due to a subscription or membership (as they most likely have the “Subscriber” role), so you won’t want to change this. Roles are also used to give access to various parts of your site, so if you have a guest writer contributing to your blog, you probably have them set as an “Author” or “Editor” role, and thus couldn’t also assign a “Wholesale” role.

In this case, user groups can be useful, and can be created using the free Groups plugin. You can create a group by installing the plugin, then going to the “Groups” menu and clicking “Add New Group”. You don’t need to assign any additional capabilities to this group, as we’ll only be using it as user categorization.

WooCommerce wholesale group

Create a Wholesale Group

If you’d like to learn more about how I manage wholesale customer creation, applications, and approval, take a look at this more in-depth article.

Create WooCommerce Wholesale Pricing

Wholesale pricing systems can be created in WooCommerce using the Dynamic Pricing extension ($129), which will work with either wholesale roles or groups.

WooCommerce Dynamic Pricing will allow you to choose how your wholesale pricing roles should be configured. You can create global discounts for wholesalers based on your group or role by going to WooCommerce > Dynamic Pricing. You can turn on price or percentage-based discounts for your role or group here.

WooCommerce Group Percentage discount

WooCommerce Group Percentage discount

These global discounts will override any other rules you’ve set (for example, a product-specific rule), so you should ensure that you’d like this to apply to all products if set.

You can also create advanced category rules for wholesale products. These will let you choose how to apply discounts based on product category, and can be applied based on the line item quantity, or the total quantity of products in the category.

You can select which category must be purchased, which group or role this pricing applies to, and then which category should be discounted. You can also set minimum and maximum purchase quantities for this pricing to take effect, which is a requirement for many wholesale systems.

You can set several quantity rules to tier out discounts, i.e., quantities of 20-30 provide a 10% discount, while quantities over 30 provide a 15% discount.

WooCommerce Dynamic Pricing Category discount

Advanced Wholesale discounts

When these rules are met, the wholesale customer will see a discount reflected in the cart and at checkout:

WooCommerce wholesale pricing applied

Wholesale pricing applied

Order total discounts can be created as well, which are similar to category discounts. Instead of meeting an item quantity or category quantity, an order total or total spend for a category must be met instead to trigger a discount.

The final method that can be used to change WooCommerce wholesale pricing is per-product pricing. This gives you more granular control over your wholesale pricing, as you set product-specific rules.

When editing a product, you can provide discounts based on product quantity, variation quantity, line item quantity (all variations of a product), or category quantity. You can also create quantity tiers for discount amounts as well.

WooCommerce product wholesale pricing

Product Wholesale pricing

The thing I like about product-specific rules is that you can set a fixed price for the product for wholesale customers rather than creating a discount. This can let you create a system where regular customers pay $30 for a product, but wholesale customers pay $18, but only if a minimum quantity is purchased.

WooCommerce Wholesale dynamic pricing fixed price

Wholesale Fixed Price

WooCommerce Wholesale Product Catalogs

If you sell products to both regular customers and wholesale customers, you can probably stop your setup with Dynamic Pricing. However, many shops have products that are wholesale-only, and should be hidden from everyone but wholesale customers.

If this is the case, you’ll need another plugin to change your product visibility: Catalog Visibility Options ($49). Note that this plugin will work with user roles, but not with groups.

We covered this plugin more in-depth when we wrote about creating a customers-only store, but the setup for creating wholesale-only products is very similar. When this plugin is installed, you’ll be able to adjust visibility options for your products to determine which roles can see them.

You can do this on a per-category basis by viewing the product category and editing the visibility options:

WooCommerce Wholesale Visibility: category

Wholesale visibility: Category

You can also adjust visibility on a per-product basis with more granular control. You can select which roles are able to view products, which can view price, and which can purchase products, which lets you limit some products to your wholesale customers. Your regular customers will never see products that are wholesale-only.

WooCommerce Wholesale visibility: product

Wholesale visibility: Product

WooCommerce Wholesale Systems: Other Useful Extensions

There are several other useful extensions, but there are a couple that are particularly relevant for WooCommerce wholesale stores.

If you’d like to offer different payment or shipping methods to wholesale customers (for example, the ability to be invoiced for an order), you can do so using the Role-based methods extension ($49). This plugin integrates with both roles and groups to limit your shipping and payment methods to particular customers.

For example, you can choose to provide invoices to wholesale customers only, while also disallowing free shipping for wholesale purchases. We have an in-depth article on using Role Based Methods here.

While Dynamic Pricing allows you to set minimum quantities required for wholesale discounts or pricing, you may also want to completely limit the checkout to minimum purchase quantities. In this case, the Min/Max Quantities extension ($29) should be helpful. This lets you create minimum and maximum quantities allowed during the checkout process, so orders that contain a quantity lower than the minimum cannot be placed.

Min/Max Quantities can also restrict checkout based on the order total instead of item quantities, and you can opt to omit certain products from these rules.

Summary: Creating a WooCommerce Wholesale System

Creating a basic WooCommerce wholesale system is fairly simple and requires the help of a couple of plugins.

You can create your wholesale customers by adding a new role (preferred method) with the User Role Editor plugin, or by creating a new group (if you cannot adjust roles) with the Groups plugin. Both of these plugins are free. You can then take wholesale customer creation a bit further with our tips on managing wholesale customers.

Once you’ve created your wholesale customers, here are the extensions we’ve mentioned that may prove helpful in creating your WooCommerce wholesale system:

Plugin Price Works with Function?
Dynamic Pricing $129 Roles
Groups
Creates pricing rules for quantity, role, or group discounts
Catalogue Visibility Options $49 Roles Restricts product visibility or purchasing to specific roles
Role Based Methods $49 Roles
Groups
Selectively enables / disables payment and shipping methods for users
Min/Max Quantities $29 All customers Restricts checkout to min / max quantities or order totals
Extend credit with Apruve

Why Should Businesses Extend Credit?

While a lot of business owners can easily dismiss the option of extending credit and terms — for fear of delayed or default payments from their customers — there are those who opt to travel the opposite route.

Because you’re reading this article, I’m guessing that you’re probably at a crossroads right now.

Am I right?

Are you considering the option of extending credit to your customers but you’re unsure if that’s a good decision?

Well, allow me to share the benefits associated with extending credit and terms to your business customers.

At this point, let’s focus on the benefits that you can reap from extending credit and terms to your business customers.

Let’s hop right in.

1. Increase your CLV (customer lifetime value).

It costs 4-5 times as much to win new over a new customer compared to gaining repeat purchases from existing ones. The figure gives us a clear perspective as to why there is a need to nurture our relationships with our existing customers.

The thing is, most businesses are tunnel visioned about bringing in new customers that they forget to nurture their current relationships. Sadly, their existing customers end up leaving.

Don’t make the same mistake.

You’d be burning truckloads of money if you fall into the same mistake.

The good news is it isn’t difficult to nurture your existing customer relationships. By simply extending them credit, you’re practically showing that you value them and that they are important to you.

Just by doing that one trick — extending them credit — you’d be able to increase your customer lifetime value.

2. Skyrocket your sales.

If you’re giving your customers a flexible payment option, you increase the chances of getting repeat orders.

I’m sure there were situations in the past where you would have bought more from a store if you had the resources to do so. Because you didn’t have enough money at that time, however, you end up buying less than planned.

Now imagine what would have happened if the store owner extended you credit. You likely would have ordered more and paid for them on or before the time that you both agreed upon, right? When scenarios like this occur, it results in a win-win situation. You get the necessary products, and the business owner gains a loyal customer.

At the end of the day, we need to realize that when we give our customers flexibility on when and how they pay, they’ll end up ordering more knowing they have more than enough time to pay for their orders.

3. Gain an unfair advantage over your competitors.

Here’s a question: If you extended credit to your customers and your competitors do not, who do you think your customers will choose to do business with?

The answer is pretty obvious.

Extending credit to your customers gives them payment flexibility. Business owners appreciate the availability of credit and terms with preferred vendors. It offers greater flexibility to grow their business and create lasting relationships.

4. Build long-term relationships with your customers.

When you’re offering credit to your customers, you convey all sorts of messages about your company.

You also build trust. After all, if you didn’t trust them, then there’s no way you’d extend them credit.

Trust, as we all know it, is a must-have component when building long-lasting relationships (may it be personal or professional). The fact that you’re showing customer trust by extending them credit can easily pave the way for a long-term business relationship proving to be profitable for both you and them.

What’s next?

Have you been extending credit to your customers? If you answered “yes,” how have you managed that process? Is it adding overhead, increasing risk and ruining cashflow? We are here to help!

If you answered “no,” fill out the form below to see how easy extending credit can be!

Credit Insurance

Credit Insurance: Do You Need It?

Missed payments, customers defaulting on their loan obligations – they’re every merchant’s nightmare. Among other things, defaults weaken a company’s operational and investment capacity. To mitigate the risk of customer insolvency, many businesses take out credit insurance to protect their cash flow.

Some business owners say it helps them sleep better at night, knowing they have a risk management system in place. But credit insurance plans can be costly, so most businesses only take out plans that apply to their largest customers.

What happens when it’s a small customer that defaults? Accept the loss and hope it doesn’t happen again?

That may be the case for large enterprises. But for smaller ones with equally small profit margins, that could be detrimental to the bottom line.

So the million-dollar question remains: Do you need credit insurance?

To help you figure that out, here’s a look at the basics of credit insurance and some possible alternatives in case you decide it’s not for you:

What is credit insurance and how does it work?

When a business applies for credit insurance, an underwriter performs a risk assessment evaluating the creditworthiness of its customers. The underwriter then assigns each customer a grade or rating to determine how much credit limit to grant. Should a customer default, the insured business can claim the equivalent of (or less than) the bad debt amount, depending on the terms of the coverage.

Underwriters consider a number of factors when calculating the credit insurance premium, such as the company’s industry, insurable turnover or amount insured, and past bad debt history.

Credit insurance policies cover domestic or international sales, single or total transactions. Additional charges may apply on top of the premium, like insurance taxes.

Advantages
  • Business continuity. For small businesses that depend on just a few large clients, one missed payment can signal the end of their operations. Credit insurance can keep them afloat.
  • Better borrowing terms. Accounts receivables can be used as business loan collateral, but only if the amounts are insured.
  • Additional capital. It frees up additional operational capital by reducing bad debt reserves.
  • Stronger bonds with customers. It can build stronger relationships with the customer, as additional credit can be extended to them based on periodic evaluation by insurers during the term of the policy.
Disadvantages
  • Commercial credit insurance isn’t first-dollar coverage, meaning it doesn’t cover the whole amount on the policy. Annual deductibles, as well as per-loss deductibles, typically come with it.
  • Policyholders aren’t reimbursed for disputed amounts. Unfortunately for certain businesses, some customers claim the receivable to be in dispute to prolong the collection process, and credit insurers cover the bad debt only when the dispute is resolved.
  • According to trade insurance company Euler Hermes, a business generally needs an annual sales amount of at least EUR 1 million to make the program cost-effective. 

I don’t want to incur any credit insurance expense, now what?

Consider credit insurance only if you’re comfortable with the payment and terms. If not, there are other available options to mitigate the risk of nonpayment, including:

  • Factoring. Factoring is the process of selling receivables to a financial intermediary, where the funding source deducts an amount for commission and fees from the total value of the invoice.
  • An effective credit management system. They say prevention is better than a cure. Platforms like Apruve provide an easy way for B2B ecommerce businesses to automate and simplify the way they manage customer credit. From new credit approval to customer onboarding, from end-of-month statements to digitized payment details, Apruve has built-in tools to monitor the overall health of an individual customer account or the entire credit program. Apruve even takes on the risk when offering business buyers revolving corporate credit accounts.

Conclusion

In sales, commercial risk is all part of doing business. Just another day at the office, as most people are inclined to say. If you choose to take the plunge and buy credit insurance, make sure you understand the terms and conditions, the exclusions and limitations, and if a refund can be obtained should you wish to cancel. Otherwise, it may be wise to consider other alternatives.

B2B eCommerce website tactics

8 Great B2B eCommerce Sites

In the mega-lucrative but increasingly specialized world of B2B eCommerce, what are the best strategies for hitting the top ranks? What are the top ranking B2B sites doing that their competitors are neglecting?

In this article, we take a look at eight dominant B2B eCommerce sites and examine the top strategies they have nailed perfectly, driving awesome results.

8 Great B2B eCommerce Sites

1. Alibaba

Launched in 1999, Chinese-owned Alibaba is hands-down the world’s largest global eCommerce site. Showcasing products from SMEs ranging from finished products to raw materials in over 40 industry categories, Alibaba serves over 18 million buyers and sellers from over 240 countries and regions. The full range of B2B strategies and tactics are in full play at Alibaba, and its success is beyond phenomenal.

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2. Amazon Business

The B2B experience that Amazon Business delivers is a tightly refined, 5-star enterprise packed with every possible feature to meet both buyers’ and sellers’ business needs.

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3. Quill

Owned by Staples, Quill was intentionally designed for B2B eCommerce. Trailing a close 2nd behind Amazon, Staples has also perfected the business customer’s shopping experience on Quill, through comprehensive categorization, guided navigations, and filterable search results.

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4. Zendesk

Like a story within a story, Zendesk offers an innovative B2B solution simplifying the complexities of incorporating customer service within a B2B website. Zendesk’s ingenious central framework and integrations allow a B2B company’s customer service agent to easily respond to customer reviews across a broad spectrum of online review sites and communities.

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5. OverDrive

Building long-term partnerships through successful business relationships, OverDrive’s B2B site serves a global network of publishers, libraries, schools, and retailers with one of the largest online catalogs of digital content in the world.

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6. Medline

Offering over 350,000 healthcare products on Medline’s top-ranking B2B eCommerce site, interactive features help guide the business customer’s experience, efficiently honing in on exactly the information and/or product(s) needed.

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7. Grainger

As one of the first major players on the B2B eCommerce field, Grainger has a major advantage over most of its competitors with its rich, tightly designed customer interface. Every component is intuitively tied together, from mega-menu style type-ahead results while searching, to search boxes embedded within navigation menus.

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8. Iron Planet

This B2B site provides online auction solutions for international buyers and sellers of used heavy equipment. The entire B2B customer interface revolves around meeting business customers’ needs. Also, Iron Planet offers an “Iron Clad Assurance” of satisfaction, backed by a team of certified inspectors who conduct a thorough review of every piece of equipment.

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10 Strategic Tune-Up Questions for B2B eCommerce Sites

The top ranking B2B eCommerce sites know that profits rise or fall according to how well they meet their customers’ needs. Check if your B2B eCommerce site needs a tune-up by considering the 10 following strategic questions:

  • Have you created high-priority customer personas and tracked their potential transactions all the way through your site? What needs improvement?
  • Are you performing random product searches regularly throughout your site’s navigation and search boxes? Any missing products or details?
  • Is your product catalog filterable by multiple attributes?
  • Are product images high quality and zoomable? Are there multiple product views?
  • Are you prominently cross-selling products according to relevant relationships?
  • Do all landing pages and product ordering pages display shipping and delivery details? Is there also a shipping/delivery page? Can deliveries be tracked?
  • Is your data system tracking new business customers’ orders for trending inventory and potential increases in product reorders?
  • Are product reorders one-clickable and/or able to be scheduled automatically?
  • Does your site offer B2B configuration to handle various customers’ roles, order authorizing policies, spending limits, etc?
  • Does your site offer integration with customers’ financial book-keeping data systems?

Just as retail customers are increasingly shopping online, business buyers are also turning more readily to B2B eCommerce websites for making purchases. Making your customers’ job easier by streamlining the purchasing process to meet their needs more efficiently will quickly pay off. We are all motivated by our emotions–positive purchasing experiences are key to achieving the top ranks of B2B eCommerce websites.

 

Extend Credit

Why Extend Terms to Your Customers

Extending credit to B2B customers is a double-edged sword. On the one hand, you attract more customers. On another, you enter “possible missed payments” territory, which can spell trouble for your cash flow in the long run. Running out of much-needed cash to fund your day-to-day operations isn’t a scenario to smile about.

But business, as they say, is about taking risks. Extending credit to customers is a risk far too many businesses are willing to take, regardless of their size and industry.

Here are the top six reasons why:

1. Attract a wider customer base

Businesses allow credit purchases to draw more customers to their products or services. It’s a no-brainer. People love to buy but hate parting with their money. If they can buy now and pay later, most will.

2. Avoid unnecessary fees

The average consumer who uses credit cards for purchases can avoid credit card fees if they don’t carry a balance. But merchants, unfortunately, aren’t afforded the same luxury.

Each transaction entails an extra 2% to 5% of the purchase amount, which is why “many businesses avoid accepting credit cards when selling B2B,” says BluePay in a blog post. It’s the same reason why “credit card use represents less than 10% of all B2B transactions.”

A PYMENTS.com article echoes the same sentiment. Credit card use is “an easy way to extend time to payment, and transaction processing cost to the purchaser is low. In addition, companies can often accrue rebates and rewards. But for B2B sellers, the cost of accepting credit cards far outweighs the benefits.”

So what can a B2B eCommerce business that’s had enough of these credit card fees do?

Allow credit. B2B customers prefer to buy with credit because it lets them make money off their purchases before paying. Depending on the net terms you’re willing to offer, say, 30 days, customers’ time to payment is extended, and you avoid the dreaded fees.

3. Nurture trust and good customer relations

It takes a certain level of trust to extend credit to a customer. Trust equals goodwill, and goodwill equals a happy camper. The next time the same customer makes a purchase, odds are they’ll buy from you because a relationship is already in place.

Repeat the process where it makes sense for your business, and before you know it, you’ve built a loyal following.

4. Increase sales

When customers aren’t required to pay on the spot, you encourage large purchases and add-on sales. Reasonable B2B payment terms also focus your customers’ attention on your products and services, instead of the price.

5. Boost your reputation

Savvy businesses don’t extend credit just like that. In fact, not every business can afford to extend terms to their customers. It’s a risky proposition, and the decision to allow them to purchase with credit often stems from careful planning and investigation.

This being the case, the fact that you allow credit boosts your reputation, with people perceiving your business to be financially stable.

People will start talking about you. Especially if your products and services are top-notch, word of mouth is powerful marketing.

6. Gain competitive advantage

Even in industries where extending credit is considered standard practice, such as in construction, organizations with “absolutely no credit” policies exist. If they’re your competitors, you’re in luck.

Between a merchant who maintains a cash-only policy and another who leverages credit extension as a value proposition, customers will do business with companies that offer flexible and convenient payment terms.

FINAL WORD

It’s a dog-eat-dog world out there, and competition in business can only grow stiffer. Allow credit to generate more revenues, but take heed: Don’t take it lightly. While it can push your business to new heights, without due diligence, extending credit to every customer that comes your way can also run you out of business.

B2B buying

How B2B Buying Negatively Impacts Business

Businesses of all sizes, across all industries, often struggle with growing their business while waiting for payment on products and/or services they have delivered. Payment terms of 30, 60 days or more are convenient for buyers, but delays the benefit of the payment to the seller. Some transactions can be processed by credit cards, though most high-value transactions end up in the accounts receivable column of a company’s balance sheet.

Buyers immediately benefit from what they buy, whether it is a capital equipment purchase or professional services. The seller needs to wait to pay their staff, pay their taxes or make other strategic investments with the funds from the transaction. Waiting for checks to arrive, electronic funds transfers to arrive in the bank or other payments to be made is like watching a pot boil. It takes a long time, and a lot can go wrong when you are waiting. Consider what might happen if your business was not able to make payroll, remit on taxes or pay your office lease on time because of a delayed customer payment.

Accounts Receivable Collections Done Right

In some industries like logistics and transportation, companies will expedite payment of their invoices by contracting a freight bill factoring service provider. Credit management software is a more affordable and fiscally responsible arrangement.

Completing offline credit checks, extending terms which facilitate large sales and waiting for payment is a traditional, but inefficient way of doing business. B2B credit management software is not just for large companies; small businesses are often the most vulnerable when accounts receivables are not paid on time. If a company is looking to get acquired or expand through investment itself, banks and investigators do not like to see patterns of slow receivables collection.

B2B eCommerce

Secure online transactions provide convenience and ease of ordering for the buyer. Popular e-commerce engines like Shopify, IBM WebSphere and SparkPay provide powerful API’s for integration with accounting systems and credit management software. Ensuring a buyer is credit worthy before shipping product greatly reduces the risk of non-payment. B2B sales portals require significant investment to build and maintain, so expediting payments from your website should be a priority.

Ease of doing business and effective credit management are often primary considerations for companies shopping for a new vendor. The buyer can get the product and value they are looking for faster. The seller’s assurance of quick on-boarding time can be a strategic differentiator. Not extending credit to customers, or taking a long time to do so can cause you to lose business to those that do. Since your core business focus is likely not pursuing delinquent accounts, the expense of paying a collection agency can erode your profitability on the revenues you manage to recover.

Instead of missing out on recognizing a critical transaction for the fiscal year or quarter, ensuring a customer is credit-worthy before closing out the transaction tends to make auditors happy. If you have worked with auditors, you will know making them happy can be a difficult task.

Accelerating Days Receivable Turnover

The cost of contracting for cloud-based credit management software are far outweighed by the benefits of getting paid faster. Consider the peace of mind of not needing to worry about whether you can meet your own obligations while you are waiting for customer payments. Fast client credit approval will translate into customer loyalty. Your sales and service personnel can spend more time building high-value customer relationships instead of chasing bill payments.

Ensure the stability and growth of your business by ensuring online and offline transactions are secure, and leverage the increased cash flow to meet your obligations. If you can realize savings from early invoice payments, consider Apruve to be a way of offering your clients the same courtesy.

Call it a win-win.

To learn more about how Apruve credit management software can help your company to reduce the risk of extending credit for B2B transactions and accelerate payment, check out our data sheets page, or arrange a phone call with an Apruve solution expert.