Should You Build or Buy? A Retailer's Roadmap to Offering Net Terms

As the lines between B2C and B2B continue to blur, many traditionally consumer-focused companies are expanding into the B2B space. This shift opens up new revenue streams and growth opportunities but also brings with it unique challenges, particularly around offering net terms to business buyers and managing credit risk. For B2C companies venturing into B2B, one critical decision is whether to build an in-house accounts receivable (AR) team to support activities such as credit risk assessment and net terms management or to partner with an external solution provider.

For companies considering building their own accounts receivable and credit risk management teams, several challenges and considerations need to be addressed. In this blog we’ll explore the key aspects that you should take into account when evaluating the best path for your business.

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What is Accounts Receivable?

Before diving into the considerations, it's important to gain a full understanding of the roles and responsibilities of the accounts receivable team:

An accounts receivable team plays a vital role in managing the financial health of a business by ensuring that money owed by customers is collected in a timely and efficient manner. Their responsibilities include generating and sending invoices, monitoring payment due dates, and following up on outstanding balances. In some cases, accounts receivable teams also handle credit risk assessments, ensuring that customers are reliable before extending credit terms. Additionally, they manage collections and work closely with sales teams to address any payment discrepancies. By handling these tasks effectively, AR teams ensure that businesses can maintain financial stability while minimizing risk and ensuring smooth operations.

Here’s an overview of the main day to day activities of accounts receivable teams:

• Invoicing and Billing
  • Generate and send accurate invoices based on goods or services provided.
  • Ensure billing details, terms, and conditions align with the sales agreement.
• Payment Tracking
  • Monitor payment due dates and outstanding balances.
  • Use systems to track payments and automate reminders to customers.
• Credit Risk Assessment
  • Evaluate customer creditworthiness before offering credit terms.
  • Conduct credit checks, reviewing financials, and assessing risk profiles.
• Collections and Payment Follow-up
  • Issue payment reminders for overdue accounts.
  • Offer payment plans or escalating delinquent accounts to collections.
• Dispute Resolution
  • Collaborate with sales and customer service teams to resolve billing disputes or discrepancies.
  • Address customer concerns that may delay payment.
• Reporting and Cash Flow Management
  • Maintain accurate records of receivables.
  • Generate reports to track payment trends, overdue accounts, and the overall health of cash flow.

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4 Key Considerations: Building Your AR and Credit Risk Management Teams

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#1: The Cost of Building an Accounts Receivable Infrastructure

In-House: 

Building an AR team for a B2B business requires substantial resources, both in terms of staffing and costs. A mid-sized business typically needs a team consisting of accounts receivable officers and management accountants, all of whom are essential for invoicing, collections, credit assessments, and dispute resolution. The size of the team can vary, but even small AR departments can be costly. Furthermore, as your B2B operations grow, your in-house solution must scale accordingly.

Partnering with Balance:

By adopting a solution like Balance, you can benefit from end-to-end automation of the entire process, from onboarding and invoicing to collections and cash application. This automation allows you to offer the payment terms buyers expect while avoiding the overhead costs of setting up a dedicated accounts receivable department.  

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 #2: Your Risk Exposure  

 In-House: 

Accurate credit risk assessment is essential for minimizing bad debt.  Building an effective credit risk system requires expertise in financial analysis, data science, and an understanding of industry-specific risks.  Furthermore, traditional methods often depend on static and limited data which can lead to underestimating the true credit risk, leaving businesses exposed to potential financial setbacks. When done in house, you bear the full risk of customer defaults. If a customer fails to pay, it directly impacts your company's cash flow and financial health. A recent Dun & Bradstreet report revealed that in Q1 2024, approximately 10% of U.S. B2B credit-based sales were severely delinquent (91+ days late). These payment delays or defaults arise from factors such as liquidity problems, invoice disputes, and extended payment terms. 

Partnering with Balance:

When you offer net terms through Balance, bad debt becomes a thing of the past. We assume the risk for every buyer we approve, so you can focus on growing your business without worrying about payment delays or defaults. You receive payment upfront, and we handle the rest. This means you can confidently provide flexible payment options to your customers without sacrificing financial security—because we’ve got the risk covered.

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#3: Your Buyers’ Experience (Time to Approval & Approval Rates)

One of the biggest hurdles in ecommerce is cart abandonment, which remains a persistent issue for B2B buyers as well. The buyer experience at checkout plays a critical role in converting sales and fostering long-term brand loyalty. A major contributor to cart abandonment is inconvenient payment methods. This issue is often magnified in the B2B space due to the complexity of transactions, which typically involve multiple users, approval workflows, and larger transaction sizes.

Offering seamless net terms at checkout can be a game-changer, but success depends on two key factors: the approval rate and the time it takes to get approved. A smooth and efficient approval process not only helps reduce friction but also encourages repeat business by meeting the buyer's financial and operational needs at critical moments in the purchase process.

By improving payment flexibility and reducing the approval timeline, businesses can significantly decrease cart abandonment rates and improve overall buyer satisfaction.

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#3.1: Time to Approval

In-House: 

Approving a B2B buyer for a credit limit typically takes anywhere from a few days to several weeks, depending on the buyer’s financial complexity and the depth of the credit checks. Even with the adoption of automation tools aimed at speeding up this process, approvals still present challenges. While automation can reduce the approval time to just a few hours or days, many businesses still face hurdles in streamlining the process, which can create friction for buyers eager to complete their purchases quickly.

Partnering with Balance:

Unlike traditional methods that can take days or even weeks, our advanced algorithms assess creditworthiness instantly. With Balance, buyers can be approved for net terms in seconds and this process is fully integrated into the checkout experience, making it easy for your customers to choose to pay with net terms without any extra steps or delays. By offering net terms directly at checkout, you reduce friction and improve cart conversions, allowing buyers to complete larger purchases without upfront payments. 

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#3.2 Approval Rates

In-House:

Traditional credit assessments, which rely on gathering financial reports, trade references, and credit scores, are not only time-consuming but also tend to result in low approval rates. This is particularly true for SMBs. Underwriting credit for small businesses often pose a challenge as they typically lack sufficient credit bureau data or other reliable financial information, making it difficult to confidently extend credit. As a result, many SMBs are either denied credit or overlooked entirely, leading to missed sales opportunities and lost revenue.

Partnering with a Balance:

By using AI-powered underwriting that taps into additional data types, Balance significantly outperforms traditional credit assessments, quadrupling approval rates for small and medium-sized businesses.

This means that with Balance you can evaluate businesses that might otherwise be overlooked due to insufficient credit history, capturing more opportunities within the long tail of smaller buyers without the risk or the accounts receivable overheads.

Another key advantage of automating credit risk management with Balance is automated credit increases. By continuously monitoring buyer purchase history and repayment timelines, the platform adjusts credit limits automatically, giving buyers greater purchasing power and driving your growth.

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#4: Time to Market 

Building an in-house team and processes from scratch takes time. During this period, your competitors might already be offering seamless credit terms, gaining market share, and strengthening customer relationships. The opportunity cost of delayed implementation can be significant.

Partnering with a Balance you will streamline the path from concept to execution. You can be up and running within 3-6 weeks.

Conclusion

For B2C companies expanding into B2B, having the ability to offer net terms to your buyers is crucial for doing business.

While building an in-house solution is a possibility, it comes with significant costs, risks, and operational challenges. In contrast, using an automated platform like Balance provides a streamlined, risk-free solution that not only simplifies credit management but also improves cash flow and eliminates the need to build an accounts receivable team in house.