B2B Credit Management

For a successful business, you need to optimize your accounts receivable to ensure a constant cash flow. This includes products and services sold to businesses and consumers. Since selling to a business is a little more complex than a consumer, it’s good to ensure your AR department is well equipped to handle larger orders, a constantly open credit line, and a B2B collection payment.

What Is B2B Credit Management?

B2B credit management is used by B2B accounts receivable teams to distinguish between collecting payments from businesses vs. collecting payments from consumers. While the payment and collections process can vary depending on the industry, a typical management system will consist of:

Collecting outstanding debts
Establishing a credit policy
Handling default accounts
Handling recurring credit card payments
Managing cash flow
Processing a B2B credit application

An adequate credit and collections management system for B2B management is essential to your company’s success.

Why Good Credit Management Matters

Unpaid invoices from B2B clients is going to happen. A good credit management system will improve your cash flow and lower your risk of late payments and ongoing outstanding debt. Having good credit can influence your customer relations, the amount of bad debt in your portfolio, and if you have a higher or lower DSO (days sales outstanding).

Do You Have Good B2B Credit Management?

To determine if your credit management is adequate for your growing business, you’ll want to ask yourself a few questions.

How do you assess B2B credit risk management?

New customers are an unknown factor. When a new business asks for goods or services on credit, you’ll need a way for them to not only apply for credit but a way for you to assess the risk of non-payment. Take a look at their credit rating by assessing reports from multiple credit agencies before making a final decision.

Is your invoicing process reliable?

While many businesses are still using manual invoicing processes, this isn’t the most reliable way of processing your invoices. Unlike consumers, businesses often require unique invoices that can lower the efficiency of your AR department. Using automation software will keep track of your outstanding debts, mitigate your risk for human error, and improve cash flow.

How are collections handled?

You’ll need an efficient way for your AR team to collect payments and match them to your invoices and client accounts. For clients that fall behind on payments, having a system that tracks outstanding debt and sends out payment reminders will improve collections.

Can your AR team efficiently handle all AR processes?

While you can have a successful AR department that handles all tasks manually, investing in automation software can greatly improve the reliability of your credit management process. By taking on more business clients, your AR team will need to handle large orders and increased payments which could result in more errors.

Whether you choose to conduct your credit management manually or use automation software for more reliable processes, optimizing your credit management system for B2B sales will ensure smoother payment collections and limit your risk of bad debts.

Find out more about how Gaviti’s automation software can streamline your B2B credit management system.