net terms

Part 4 of a series on the Net Terms Economy

Remember the Beatles song Revolution? Let me remind you of some of the lyrics.

“You say you want a revolution.
Well, you know
We all want to change the world…
You say you got a real solution
Well, you know
We’d all love to see the plan

You ask me for a contribution
Well, you know
We’re all doing what we can.”

When it comes to all we’ve learned so far about net terms in parts 1-3 of the Get Paid Faster series, it seems a revolution is certainly in order. And we’d all “love to see the plan.”

First, a reminder of what we’re fighting for. According to our friends over at Fundbox, there’s approximately $3.1 trillion tied up in accounts receivable for all employer firms in the country. And there are only about six million companies with employees in the U.S.

We’ve talked about the hurdles in the previous articles in our series:

1—One of the challenges is to take as much risk out of assessment process as possible. How can sellers be better assured that buyers are credit-worthy? Is there a way to automate the process?

2—For the seller, getting paid quickly has always been an issue. The ideal would be for them to get paid as soon as the transaction is accepted. Can we accelerate the payment process?

3—The overall goal of the revolution is for sellers to sell more products, getting better terms from the buyers, increasing their average order value (AOV).

So how do we do it? How do we revolutionize net terms? By taking the heavy lifting and responsibilities away from both buyers and sellers and outsourcing them. Think of is as TaaS or “Terms as a Service.” So instead of both buyers and sellers bearing the heavy burden, outsourcing the terms programs removes the risk of credit default, enables sellers to sell to anyone and gives buyers more flexible terms and faster credit decisions.

Faster Payments & Access To Credit

Getting paid faster certainly tops most business’s most-wanted lists. Currently buyers, especially new ones, may have to wait a long time while the seller accesses the risk of extending terms to them. And after waiting, the seller may decide the risk is too great and denies the buyer terms. That’s cost everyone time and money.

But what happens when we get technology involved? A lot—and all of it is good for both B2B buyers and sellers. The solution, says Fundbox, is a new B2B e-commerce payment ecosystem. Within this ecosystem buyers would be able to get credit at the time of need—when they’re in the midst of making an online transaction.

This isn’t a future dream, this is reality. Fundbox says several new technologies have already emerged making it “possible to provide credit decisions and on-demand access to business credit in near real-time.” The technologies: data science, machine learning, and the ability to do business in the cloud have the ability to “fuel the rapid acceleration of B2B payments and credit.”

Let’s take a closer look at how these technologies can change the dynamics in the Net Terms Economy. Instead of the slower, laborious process of a seller accessing the risk of a buyer, machine learning allows sellers to make fast underwriting decisions, so quick, in fact, a seller can, says Fundbox, “extend financing from inside the checkout process, providing a better user experience with payment and credit options, contextualized at the point of need.”

As machine learning runs in the background it enables platforms to “connect to cloud-based transactional data. After a real-time analysis a credit decision can be made”—on the spot. This allows the B2B seller to get paid right away, freeing up capital that would have otherwise been off limit until the buyer paid it back.

The technology also enables the fintech (business capital) platforms to offer a “net 60” no-interest payment option during the online checkout process. And buyers may be able to extend their terms week-by-week (for up to a year) for a flat fee.

Buyer and Sellers are Unaware

The only way this works is if the e-commerce platforms and the business capital platforms work together so the buyers and sellers can get an immediate answer from the lending source. There is one hitch however—and it’s you small business owners. The Trade Credit Dilemma Report from reveals that while most business owners (54% of SMBs with less than $10 million in annual revenue) are “strongly enthusiastic” for these platforms, less than 14% of businesses surveyed currently use them. What’s worse—almost 20% of business owners are unaware these platforms even exist.

One of the reasons the survey respondents are excited about these new immediate payment platforms is they not only get paid quickly, but that enables them to turn around and buy supplies. The businesses found it particularly useful if this was a new relationship between buyer and seller. And most SMBs understand getting paid faster allows them to invest their time in the core parts of their businesses and spurs faster growth.

Net terms is not a new concept—it’s been around for hundreds and hundreds of years—which makes it ripe for a revolution. And now intelligent risk assessment and on-demand access to payments and business credit are revolutionizing the SMB marketplace as well.

Buyers and sellers had gotten complacent. Sellers were used to taking on the time-intensive task of assessing risk and giving trade credit to companies they had no history with and were accustomed to waiting weeks (or even months) for payments. While buyers knew they were likely to be stuck with payment terms at odds with their cash flow cycles.

In short, the system was broken and didn’t work for anyone. Getting paid immediately is a powerful and revolutionary concept—and it’s now a reality. The Net Terms Economy is being transformed, benefiting both B2B buyers and sellers and the national (and global) economies as well.

In partnership with Fundbox 

Crowd stock photo by Abscent/Shutterstock