How can you mitigate the risk of non-payment for your B2B business?

Disastrous consequences for B2B companies

Faced with a backlog of unpaid invoices, B2B business owners can sometimes find themselves in over their heads. Indeed, this phenomenon can have a real financial impact, especially for SMEs and start-ups. If they occur on a regular basis, unpaid invoices and late payments can lead to serious cash flow problems for B2B merchants, who may find themselves forced out of business.

There are several reasons for customer non-payment:

• Oblivion,

• Inability to pay,

• A dispute or disagreement concerning the goods or services supplied,

• Long, complex invoicing processes.

As for the profile of these late payers, it's not what you might imagine. In fact, more than one large company in two pays its invoices late, compared with one SME in three. A figure that may seem astonishing, but can be explained by poor management of the payment chain. These late and unpaid invoices weaken B2B companies and can hinder their development. That's why it's so important for B2B merchants to protect themselves against bad payers, and to anticipate these risks.

How to prevent the risk of non-payment in B2B?

Taking precautions is a golden rule when working in B2B with large companies. Knowing the risks of late payment, or even non-payment, it's vital to protect yourself. To this end, there are a number of rigorous processes to be implemented internally.

Credit insurance

To prevent the insolvency of a B2B customer, credit insurance comes into play at three key points in the transaction:

• Before the sale, to assess the customer's solvency and ensure that he or she has no previous credit history.

• In the event of late payment, thanks to a collection service. The insurer will collect your debt from the defaulting insurer by means of reminder e-mails.

• In the event of total non-payment, by paying you an indemnity.

Factoring

Also known as factoring , l' affacturage For a B2B company, this means transferring your receivables to a specialized organization, such as Hero, which will then manage your cash flow. In this way, you can collect your invoices without waiting for the payment due date. The financial institution, known as the "factor", takes care of all matters relating to invoice management: handling unpaid invoices, monitoring payments, carrying out dunning and collection, etc.

There are different types of factoring namely :

• Classic factoring,

• Confidential factoring,

• Spot factoring,

• Le reverse factoring ,

• Import and export factoring.

Payment facilities

Another alternative for anticipating late payments is to offer payment in instalments and deferred payment . By offering payment terms to your B2B buyers, you reduce the risk of late payment. This allows customers to spread payment over several months, or to pay after the order has been placed, so that they can arrange to have sufficient funds in their account.

The collection company

The last solution in the event of non-payment is to call in a collection company. Although this is a fairly costly solution, it is nonetheless quite effective. What does it involve? It's quite simple: the organization you contact takes charge of its customers' unpaid invoice files and obtains payment from the debtors. In other words, if you are unable to recover the sums owed to you by your customers, the collection company will take care of it. But this solution can seriously damage your customer relations, and can be quite costly.