09 Dec The Hidden Cost in B2B eCommerce
What was it like being a B2B company before e-commerce existed? B2B enterprises sent out catalogs, worked the phones and hired sales reps to criss-cross the country. When sales reps made a sale, credit was the norm. Net 30 was the courtesy extended to all (ahem, after a credit check that is). In order to get paid, companies had massive accounts receivable overhead. It was the cost of doing business.
Fast forward to 2014 and B2B is now an online game with over $1 Trillion projected to be transacted this year. B2B companies have moved many of their operations from offline to online. Companies have eliminated many inefficient processes and had tremendous visibility into how the customer pays. The “e” in e-commerce might as well stand for “efficiency.” Or at least that is what was supposed to happen.
B2B e-commerce still ain’t that efficient
For more most smaller to midsize b2b companies, cost per invoice (CPI) is STILL estimated at $22. When B2B organizations examine their processes, they find that many processes are the same pre-online as they are today. Why?
Let’s examine the steps B2B companies still go through to onboard customers in this new online world.
- To establish a corporate account, the potential customer makes contact through the website.
- Customer service sends an email with a PDF attachment of a credit application.
- The potential customer manually fills out the form (remember pens?) and sends the application back through email or fax. Yep, the good ole facsimile.
- After receiving credit approval, customer service still has to enter them in their ERP system.
- Your almost customer requires multiple buyers on their account. Customer service sends them an excel template to enter their users.
- Your almost customer sends back the excel spreadsheet, and the web team enters the users into their e-commerce system.
These steps are pretty simplistic and don’t take into account contracts, terms and conditions, and pricing agreements and a host of other details. Think all that is not efficient? Ask these questions to:
- Do you offer payment terms? Net 30? Net 15?
- Do you have a discount for paying early?
- How do you make sure you’re getting paid on time?
- Is it different for every customer?
- How do you keep it all straight?
Most B2B companies handle these inquiries through multiple emails, phone calls or snail mail.
Why isn’t this entire process online, tied directly into the transactions your customers are making?
It boils down to paper, labor, and time
Paper, labor, and time are three old-world components of corporate accounts management that B2B businesses still depend on, but don’t have to.
According to Bank of America, the invoice processing costs for industry best-in-class companies were 84% less than their peers. Invoices, on average, were processed 59% faster, and the overall average cost per invoice was $2.18 vs. an industry average of $9.38.
As this article in the Huffington Post points out, B2B e-commerce CAN is as efficient as a B2C transaction if you take steps toward automating and streamlining the way you create and manage corporate accounts.
Putting your product catalog online is a great start. But if we are going to help B2B users do their job easier, as Justin King say, then B2B enterprises must bring their A/R processes online.
Michael Noble is CEO of Apruve, a SAAS platform that provides corporate accounts and A/R for B2B e-commerce.