The Big Bogey, Term

In the B2B supplier world, can offering Term to a buyer co-exist with the offering of cards as a form of payment? This is an interesting question and one we see play out over and over again in B2B businesses that fail to establish a credit acceptance policy that makes sense for their business. Unfortunately, term and card acceptance cannot exist where you will have a 100% happy merchant supplier, where they are happy to accept Card as a form of payment from all buyers.

Accepting a card post-term at the very least doubles the cost of collecting the receivable. If you were the supplier, ask yourself this one question. Why would you want to finance the receivable for the Term and then agree to bear the cost of accepting a piece of plastic at the end of that term or even later? The simple answer is you would not. It is a losing proposition.

If we really want to look at the reason why this issue has manifested itself, we need to look back at the way for years Merchants have been sold credit card processing. Agents and companies selling Network Cards have mainly sold in price, first to B2C merchants and now many are starting to do the same to B2B merchants. “Mr. Merchant, do you have a statement, I think, I can save you a penny or two.” Sound Familiar?

Do we really believe that merchant suppliers who believe their cost of 3%-4%, are interested in saving a penny or two when they are hemorrhaging line-item cost? So why do Merchant Sellers do this? Primarily, because the industry has not shifted its selling practices developed in years of selling in the B2C segment. Sellers have without direction run with a process of selling they know, and which was quite frankly very good to them in B2C. In B2B selling price will only get you to the tolerance of the line-item budget for card. Furthermore, our 8% penetration into B2B payments shows we lag severely behind ACH (38%) and check at (36%) and the latter is dying faster than a bug hit by a windshield.

Secondly, suppliers have never been sold a credit strategy as part of their Card processing sale. “Hey there Mr. Merchant, you should accept Card payments, and here is how you should consider doing it and why.” This never happened because agents were again still caught up selling price as they did in B2C.