This is a guest blog post in collaboration with Balance, a B2B payments partner for the Everything Marketplaces community.
Finding an effective way to manage payments as a B2B marketplace is no simple task.
To meet the demands of buyers and vendors, marketplace operators often encounter complex payment requirements that cannot be addressed by out-of-the-box processing solutions. As a result, achieving the most basic functionality quickly becomes a complicated process: from working with third-party lending solutions, extensively customizing APIs, to integrating and combining in-house tools with external ones.
The problem with managing payments in this way is that it opens a whole new can of worms (or problems): including limitations in the buyer experience, development roadblocks, and reconciliation challenges. And, it makes changing anything quickly a near-impossible task.
In this blog post, we will explore in-depth the real pain points that arise.
Creating a unified marketplace experience is key. And this is perhaps one of the greatest payment challenges of a marketplace. Regardless of the vendor they transact with, buyers should encounter a seamless payment process. This consistency not only improves the buyer experience but also simplifies operations for vendor, which is a critical value-add for your marketplace.
The trade credit process is a perfect example of where this can get messy.
Imagine a B2B marketplace where the net terms experience is not owned by the operator but rather some vendors offer net terms to select buyers, while others do not. Buyers would need to establish separate credit arrangements with each individual vendor. This vendor would need to manage multiple credit accounts, each with its own set of payment terms, billing cycles, and invoicing procedures. Buyers would have to track and manage payments across various systems or interfaces, making it challenging to maintain a clear overview of their outstanding obligations.
Now consider the experience of a unified net terms offering, where the buyer would have a single credit account and a consistent payment process across all transactions. They would be able to view and manage their invoices, payment due dates, and outstanding balances within a centralized platform. This streamlined experience not only simplifies the buyer's financial management but also fosters trust and loyalty towards the marketplace.
Overly manipulating a retrofitted solution or creating in-house workarounds also incur costs in terms of time and resources for development teams. When integrating payment solutions, each one has its own distinct data structure and integration flow, necessitating substantial development efforts to establish the necessary connections for seamless visibility of payment flows.
Consider a marketplace that utilizes a payment processing provider, manages credit terms internally, and relies on NetSuite for reconciliation. While some marketplaces may have ample development budgets and teams, relying on multiple solutions for payment-related tasks always increases the risk of errors and inaccuracies in financial data.
Crucial data points for marketplace operations, such as payment arrival status, refund issuance procedures, and accurate reconciliation of invoice amounts, become more susceptible to errors. These mistakes have a direct impact on the overall financial management and reporting processes of the marketplace.
A crucial function in a B2B marketplace is ensuring a smooth process of reconciling payments received from buyers and ensuring accurate payouts to vendors.
The reconciliation process involves cross-referencing payment details such as transaction IDs, timestamps, and payment statuses to achieve accurate matching and identification. Any discrepancies discovered during reconciliation must be promptly investigated and resolved to maintain financial accuracy and foster vendor trust.
Managing refunds, for example, can expose some of the more complex payment processes that add additional work and time to a marketplace.
This complexity arises from several factors:
By leveraging a payment solution with comprehensive transaction management features, B2B marketplace operators can efficiently track and manage refunds, maintain accurate financial records, generate necessary reports, and simplify overall financial tasks associated with refund management.
Putting the financial resources aside, partnering with a B2B payment provider brings the advantage of accessing industry best practices and expertise. These providers have in-depth knowledge of B2B payment flows, compliance requirements, and risk management strategies.
By leveraging their expertise, marketplace operators can navigate complex payment landscapes more efficiently and ensure a secure payment environment for all stakeholders.
And of course, all of this means that marketplace operators can redirect their development resources towards initiatives that fuel growth and innovation. This could mean implementing new features, expanding into new markets, or optimizing existing processes to meet the evolving needs of buyers and vendors.
Instead of getting caught in the messy web of multiple payment solutions, marketplace operators should explore partnering with comprehensive payment service providers. Fortunately, today, as the number of B2B marketplaces continues to grow dramatically, these approaches are becoming more readily accessible.
By partnering with a B2B payment solution that can handle the end-to-end flow of funds and reconciliation, all under one hood, marketplace operators can simplify payment processing, trade credit operations, and reconciliation, ensuring a seamless experience for buyers and vendors.
Want to access the Balance member deal? You can request to join Everything Marketplaces here, which will give you access to our Balance member deal, resources, and even the Balance team in the community.