Patience is an increasingly important virtue for B2B businesses. According to a study of 27,000 companies around the world, the average days sales outstanding (DSO) is 64 days. Meanwhile, one out of every four businesses wait at least 88 days before being paid.
Take back control of your cash flow with strategies that deliver payments sooner rather than later. From implementing Credit as a Service (CaaS) to providing additional payment options, identifying ways to minimize DSO can eliminate many of the challenges that contribute to restricted cash flow.
Offer Credit as a Service
With CaaS, B2B organizations no longer need to play the waiting game. Sellers can extend terms and risk-free lines of credit to customers and still be paid in as little as two days. The result? More reliable cash flow, not to mention increased share of wallet and loyalty.
Instead of cutting back on the size of their purchases or looking for greater flexibility from the competition, buyers gain the luxury of accessing a line of credit when cash is tight. This boost in purchasing power can motivate buyers to purchase more than they originally planned and even pave the way for repeat business.
Give buyers a reason to settle invoices early by offering discounts to those who make payments within a few weeks. Whether it’s knocking down the price of their current purchase or taking 10% off the next one, rewarding buyers who are on top of invoices can help earn their appreciation and incentivize others to make their payments earlier.
Expand your payment options
In addition to giving buyers a reason to make payments sooner, eliminate some of the roadblocks that may keep payments from coming in. If buyers don’t see their preferred payment option, it may take longer to receive payment. Cater to buyer preferences by implementing the payment options that work best for their businesses.
Although buyers used them to complete 81% of B2B payments in 2004, checks are quickly falling out of favor. In fact, the paper check payment method accounted for just 51% of B2B payments in 2016. To satisfy the needs of today’s buyers, consider introducing automated clearing house payments (ACH) and other emerging options into your payment process.
Take advantage of technology
Payment application can prove challenging – especially as more buyers are brought into the fold. Leverage automation to ensure customer payments are applied to the correct invoices. Rather than dealing with errors that routinely postpone payments, you can increase the efficiency of your invoicing process and reduce DSO.
Take things a step further by integrating with your key customers’ account payable systems. The ease and simplicity brought about such an integration promises to open the door for transactions that are anything but drawn out. Time previously spent waiting for payments can instead be dedicated toward more pressing matters such as capitalizing on increased cash flow.
Lack of cash can cripple any business, so it’s critical to reduce your DSO. Simple actions – such as offering CaaS or incentivizing early payments – can go a long way toward shortening payment cycles and improving your organization’s cash flow.
About the Author
Brandon Spear is the president of MSTS, a global B2B payments and credit solutions provider. Brandon excels at managing large, diverse global teams while connecting with and motivating staff across all levels of an organization. He helps companies overcome challenges with an entrepreneurial spirit and a technology-first focus. Connect with Brando