Business-to-business relationships are highly complex. Compared to a business selling to consumers, where there could be a multitude of consumers purchasing from the business, corporate relationships between two businesses go deeper. There are fewer customers, a much longer sales cycle and larger invoice amounts. If an invoice goes unpaid in a B2B business, the lack of cash flow greatly affects operations.
Understanding what makes business-to-business different will offer clarity to the B2B collections process.
B2B vs B2C
Let us first examine the general differences between B2B and B2C styles of business:
Sales - The sales process to a consumer is substantially shorter than building a relationship and partnering with another business. Corporate decision -making involves an evaluation of needs and a search for a suitable partner to fulfill those needs.
Stakeholders - In an environment providing consumer goods and services, the customer is the decision-maker, the consumer of the good or service and responsible for payment. With a commercial transaction, there are more people involved including ownership, management, business development or more.
Relationships - The extent of a customer relationship may last as long as the transaction. Corporate relationships take longer to establish and a partnership will typically benefit both businesses, A business relationship becomes an asset and often affects the success of the business.
Billing and Collections - Customers are billed for their consumption of a business' good or service at the time of the transaction or through a payment plan. When a customer does not pay on time, an organization may terminate service, reclaim a product, evict a tenant or hire a collections agency recover lost payments. In a B2B or commercial contract, billing includes a relationship with accounts payable and accounts receivable and may involve an agreement, credit, financing and invoicing. Commercial payments are typically made on a regular basis and may require approval before processing. If a commercial bill is past due or remains unpaid, options include hiring a collections agency or going into litigation.
Hiring a Commercial Collections Agency
With so much more at stake, businesses in B2B relationships have the option of hiring a collections agency before damaging the business relationship in a lawsuit. A longer sales process means fewer leads and sales opportunities so the value of a relationship but be acknowledged by the collections agency. Lower volumes and larger balances means the right collections agency could successfully recover debts and save a business the time and finances they'd spend in litigation.