Developing a Sound Strategy for B2B Cash Flow

B2B Cash FlowManaging your cash flow is fundamental in business. But when your product or service is delivered to other businesses, known as B2B commerce, things can get a little complicated.

On the surface, B2B transactions are not so different from B2C, or business to consumer, transactions. A good or service is provided in exchange for payment. The biggest differences are present in the way your business will interact with the other business to attract new customers, deliver on your goods and services, and get paid.

Marketing for B2B requires a different tone and a certain mutually acknowledged respect. The standards will simply be higher, which will also impact service or product delivery. But the biggest difference is in billing and cash flow management.

In general, a B2B transaction is between two business savvy organizations, both of which are looking to get the best deal possible on the work. Consumers just aren’t as cutthroat about shopping around or the end results as a business will be. As such, your organization will have to act accordingly to make sure you get paid consistently and on time.

Below are some effective policies for managing your B2B cash flow, to protect yourself and to provide professional services for your clients.

Put everything in writing.

As nearly every source will tell you: when you start a business relationship, always get the details in writing. Expectations, dates, and payment terms should all be thoroughly detailed and agreed upon by both parties. There are several sample contracts available online that you can base your agreement on. If your company is larger and responsible for more valuable services or products, hiring a lawyer may be advisable to make sure you have sorted all the important details, caveats, and information.

Get a deposit.

For a smaller business, it can be intimidating to ask for a deposit on your services. In fact, it can be terrifying. However, a deposit is actually a common and well-accepted B2B practice that will add professionalism to your business dealings. It will cement the agreement from both sides and ensure that your organization is properly compensated for your time.

Invoice promptly and often.

The invoice is one of the most important parts of a B2B relationship, so make sure you’re on top of it from start to finish. You should send out invoices promptly, on the date of service if possible, and set clear deadlines and expectations for payment. If payments are not prompt, have an action plan in place to collect on those funds. As with a B2C situation, you are perfectly within your right to protect your cash flow by requesting funds you are owed.

Assign a dedicated accounts manager.

Managing cash flow in any situation is easiest when there is a dedicated manager set up to take care of accounts payable and receivable. No matter the size of your business, someone needs to be dedicated to this task, so you can make sure it gets accomplished. Even more, your accounts manager or business manager can build a relationship with your clients, which is extremely important in B2B. While collecting is within your rights, the mood and tenor of collection is very different from a B2C relationship.

Don’t be afraid to set deadlines, send reminders, and follow up.

If your agreement is not being adhered to by the other party, don’t be afraid to set clear deadlines, revisit expectations, and follow up on fulfillment. If the payment still doesn’t come through, terminate service immediately. Money isn’t everything, but it’s definitely the lifeblood of your business, and another company’s inability or refusal to meet the terms of the agreement is legitimate grounds for ending services or no longer providing products. This should have been clearly stated in your agreement from the beginning, so it shouldn’t be unexpected.

In the end, businesses thrive or die on cash flow, even B2B businesses—and who better to understand that fact than another business. If your cash flow hasn’t been what you expected or if you’re just getting started, us the tips above to help you get your money management situation on track quickly and efficiently. Cash flow doesn’t have to be a problem, as long as you make it a priority in your day-to-day operations.

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Ashley.jpgAbout the Author – Ashley Choate is a native of Jacksonville, FL where she lives with her son, dog, and three cats. She graduated Magna Cum Laude from Jacksonville University with a BA in English and holds an MAED in Adult Education and Training. She lives for reading and writing, learning and teaching, and figuring out the day-to-day traumas and joys of mommyhood. .

 Top Photo Courtesy of Google CC.