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Don’t let the complexities of B2B pricing and payment terms deter you from automating your workflows, a DXP will orchestrate that for you.

B2B pricing is complex

B2B companies want to offer and experience frictionless payment to their customers but compared with online retail, their payment landscape is very fragmented. Just a third of global B2B spending is processed electronically; for B2C, the percentage is two-thirds.

There are many reasons for this lag. B2B pricing is more complex, and the value of individual transactions is a lot higher. The latter explains why instant payments, routine in B2C, are gaining limited traction in B2B where they are expected to account for just 6.3% of global spend by 2022.

What complicates the picture even further are the different payment terms across customers, industry verticals, and markets. These variations can be surprising. By industry, average payment terms range from 42 days for the chemicals sector to 21 for construction materials. At a country level, the average term for payment of a B2B invoice is 22 days in Germany, but 48 in Spain.

The need to create frictionless experiences

Paradoxically, this complexity makes the price itself somewhat less of a consideration. In B2B, if you offer your customers a seamless experience, you will be competitive without solely competing on price.

For a Digital Experience Platform (DXP) to create that frictionless, end-to-end experience, it has to make it simple for B2B companies to personalize prices and payment terms for different customers or types of customer (wholesalers, resellers, distributors, D2C i.e., end-users) across every sales channel. This is not for the faint-hearted and requires integrations with the ERP (where pricing is calculated) and the CRM (where order histories and terms are usually saved) as part of an e-commerce system that is native to the platform.

Just as you expect your DXP to localize content effortlessly across all your markets, you need it to adapt easily to the cultures of payment and taxation in each. These cultures can be remarkably divergent, even in the “aligned” economies of Western Europe.

Why your DXP needs to be adaptable

Recent research by Deutsche Bank find that penetration of B2B e-commerce and digital payment is patchy across the major European markets. Over the six months up to January 2021 it found that only 7% of B2B companies in Italy used a paper cheque for payment. In France, this figure was 59%.

Asked why they still used cheques to settle invoices, 16% of B2B companies cited this was necessary to pay trade suppliers. However, the largest single reason was inertia (24%).

Overwhelmed by the complexity of B2B pricing and payments, and comfortable in a status quo that they know is inefficient, many B2B companies are slow to digitalize their payment and accounts workflows.

For exporters, different VAT regimes are further barriers – an example is the VAT rate on timber for industrial use, for which there are as many as 10 different VAT tariffs across the EU, with Romania levying 19%, France 20%, Belgium 21%, Sweden 25% and so on. 

Perhaps more fundamentally, countries take a different approach to how electronic invoicing is regulated. Italy, for instance, follows the so-called clearance model where invoices cannot be issued directly between seller and buyer but have to pass through a government server first to allow for real-time transaction monitoring.

Most other EU member states follow the post-audit approach where invoices are exchanged directly, and tax authorities verify transactions after their completion. The way transactions are reported is not subject to EU regulation (and therefore another source of complexity) but SAF-T tax compliance software, first adopted in Portugal, is fast gaining traction.

Why your DXP must be a single source of truth

We’ve given just a snapshot of what B2B companies have to confront if they want to create a smooth payment experience. To tame this staggering complexity and harmonize it with the other workflows that determine “the feel-good factor” of the customer interaction, companies need a DXP that is both flexible and powerful. To help them explore new sales channels and new business models, they need a DXP that is extensible and future-proof.

One such model is D2C. Even before Covid-19, traditional B2B businesses were looking to bypass their wholesalers and reach some end customers directly. D2C accentuates the need for reconciliation and collection technologies that can handle large volumes of small payments (rather than larger B2B payments). Integration with the ERP extends payment functionality directly into the system of record, helping companies to automate invoicing and reconciliation.

Payment and invoicing are part of a complex of business processes that includes inventory management, customer information, product details, and order management that has to sync with your brand message, and speak with one voice on every sales channel and device. Your DXP will help you orchestrate and handle these complexities to create seamless experiences.

Businesses have had to re-examine the effectiveness of their existing sales channels and seize the opportunity to open new ones. Learn how you can diversify your digital sales channels today.