Optimizing Your Net Terms Approval Process: Key Strategies and Best Practices

If you're engaged in B2B sales, you understand that offering payment terms is often non-negotiable for many business customers. It's a critical way to assist them in managing their cash flow.

But how can you provide net terms in the most effective way, ensuring an excellent customer experience, leveraging it as a competitive advantage, all while maintaining operational agility?

We cover it all in our latest guide, which you can download by filling the form below.

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What are Trade Credit and Net Terms?‍

Trade credit is an agreement between businesses that allows goods and services to be exchanged without requiring immediate payment.

‍Net terms, payment terms, and invoice payment terms all refer to the duration within which a buyer must settle payment after receiving an invoice. Unlike credit cards that defer payment until the end of the month, net terms offer extended time to make the full payment.

The payment period varies, with common terms including net 15, 30, 60, or 90 business days. This extends the buyer's time to pay, as the invoice date is typically set on the purchase date plus the agreed payment term.

To delve into the standard process of net terms for B2B suppliers, we've scrutinized over 100 trade credit applications. This analysis provides insight into the current industry landscape and suggests potential improvements for both potential buyers and merchants offering terms.

‍Based on these findings, we've developed a crucial net terms checklist encompassing the key components of a comprehensive trade credit application.

It's worth noting that the trade credit process can be segmented into three stages: approval and capital, point of purchase, and collections. In this guide, we'll primarily focus on the approval process.

‍Before diving into the application process, let's cover some basics.

‍How Businesses Provide Trade Credit

Currently, businesses have several methods to extend trade credit to buyers. The approach varies based on whether the solution encompasses the entire trade credit process or specific elements. Businesses may evaluate creditworthiness internally while using a business loan to extend the actual credit line. To assess risk, credit or finance teams might scrutinize buyer payment history and credit bureau data.

However, this becomes more challenging for new customers, as assessing risk at scale for unfamiliar business customers is complex. Risk management may involve late fees, upfront payments, or shorter payment terms like net 15 instead of net 45 or 60.

Alternatively, businesses seeking to offload non-payment risk might turn to invoice factoring. This involves "selling" some or all outstanding invoices to a third party to alleviate cash flow problems. However, high fees may apply—after all factoring companies won’t take over bad debt for nothing.

It's important to recognize that businesses still bear the responsibility of reconciling payments through accounts receivable.

Although many businesses currently opt to provide terms in-house, using their capital or bank loans, several challenges remain unresolved.

Challenges of In-House Business Credit Provision

• Poor data visibility. In-house net payment term applications often necessitate manual entry into management systems, leading to errors, data silos, and a cumbersome process.

• Slow onboarding process. Whether using PDFs or online forms, waiting for finance teams to manually approve each buyer results in a lengthy process.

• Inability to approve small businesses or small business owners (SMBs). Limited data resources hinder thorough vetting or approval of smaller buyers with minimal publicly available data. This exacerbates the challenging credit environment for SMBs, as about half of formal SMEs don’t have access to formal credit.

• Limited credit lines. Businesses struggle to extend higher credit lines to buyers, facing difficulties in offering revolving credit or real-time credit increases. They might also be restricted from offering longer payment terms due to risk concerns.

• Rising buyer expectations. Buyers now expect the same level of convenience and usability in business processes as they experience in the consumer world. This parallels the expectation for credit terms to mirror the convenience of credit card payments, a trend familiar to consumer-focused retailers.

‍Current Industry Landscape

Despite these challenges, many businesses still rely on outdated credit processes, creating friction in buyer transactions. To understand how net terms are typically structured today, we analyzed over 100 net terms applications across industries, uncovering common practices and gaps in the market.

Demographics

• Business types span physical goods wholesale, including automobile parts, electrical equipment, and industrial supplies.
• 98 out of 101 applications were from US-based companies, with the remaining three from the UK and Australia.
• Company revenue varied, encompassing small businesses, medium-sized enterprises, and large corporations.
• Most businesses fell within the $10M-$100M yearly revenue range.

Key Findings

Based on our research and analysis, below are some of the insights we found:

To get access to the full data, download the full guide here.

This data sample made one thing resoundingly clear: current industry practices are restrictive, static, and outdated. But the opportunity to differentiate by offering a digital net trade credit solution has never been greater. 

The Crucial Net Terms Checklist

A well-structured net terms program should balance risk management with a seamless buyer experience. Through extensive analysis of B2B credit applications across industries, key elements have emerged as essential for an effective and scalable approach.

By addressing common pain points—such as slow approvals, cash flow constraints, and fragmented underwriting—businesses can create a net terms process that enhances buyer trust and drives growth.

The following features are pivotal for an optimal net terms experience:

✓ Dynamic Credit Increase

While short-term payment terms are valuable, it's equally important to provide a range of payment options. Offering a minimum of net 30 to customers is a great start. But buyers deserve improved financing choices and rewards for prompt payments. With dynamic credit increase, buyers can access larger credit lines and extended terms by consistently paying invoices on time. This drives revenue growth through increased buyer spend and a superior customer experience.

✓ Flexible Financing Options 

Merchants can eliminate credit risk by using a solution that provides upfront payment upon invoice generation or ensures full payment by the due date.

✓ Merchant Dashboard

Offering net terms shouldn't detract from your core operations. A dashboard provides complete visibility and control. It offers access to buyer credit limits, purchase and payment records, as well as self-serve reporting and manual controls—simplifying payment and credit management for greater flexibility.

✓ Digital Credit Application and Custom Qualification Flows

Replace lengthy forms and PDFs with a credit application process that collects buyer information digitally, allowing buyers to apply for credit in just a few clicks for a seamless and frictionless process. Moreover, you can qualify buyers in multiple ways, including pre-qualification before purchase intent. Launch custom credit utilization campaigns with detailed reporting and visibility to drive net terms adoption and growth.

✓ AI-Powered Underwriting Engine and Instant Qualification

Manual underwriting is time-consuming and prone to errors. A digital underwriting process utilizing diverse data sources qualifies more buyers swiftly, ensuring thorough vetting.

An AI-powered underwriting engine delivers instant credit approvals and sets personalized credit limits within 30 seconds. By leveraging alternative data sources and real-time platform data, it boosts SMB approval rates by up to 4x. This increases SMB purchasing power and allows more buyers to quickly and efficiently access financing, transforming credit underwriting into a powerful revenue growth driver.

✓ Multiple Payment Options

Create a tailored payment experience by offering your buyers their preferred payment methods and terms. Choose from a range of payment methods, including ACH debit/credit, credit cards, wire transfers, and checks. Customize payment terms with options like pay by invoice, pay by statement, and net 30, 45, or 60-day terms.

✓ Automated Dunning and Collections

Automate dunning and collections to reduce DSOs, cut late payments, and streamline recovery through timely, customizable reminders.

✓ Smart Debiting 

Smart debiting automates bank transactions with precise timing, reducing payment failures and improving collection rates. Automatic retries and alternative payment methods help ensure seamless payment recovery with minimal manual effort.

✓ Automated Cash Application

Automated cash application instantly reconciles payments, manages partial captures, and handles multi-vendor transactions, refunds, and chargebacks. This streamlines processes, saves time, and ensures seamless, accurate payment management.

✓ Buyer Portal

A centralized invoice and payment hub offers your buyers full visibility and easy payment options like invoice or statement. Simplify the experience with on-file payment methods and automated debits for greater convenience and efficiency.

✓ Scalable Offering

A digital application ensures scalable credit provision, enabling business growth without continually expanding credit and collections teams.

✓ Advanced Integrations

Eliminate data silos with advanced integrations that seamlessly connect to your existing stack. Built-in integrations for B2B platforms, ERP systems, order management, ecommerce, and accounting streamline payment processes and enable a smooth rollout of payments and net terms without the need for custom development.

Differentiate Your Net Terms Offering with Balance

Net terms should accelerate sales—not slow them down or overburden your finance team. Yet, many businesses still rely on manual processes that create friction for buyers and delay approvals.

Digitizing trade credit simplifies onboarding, speeds up approvals, and reduces operational overhead. With a seamless application process, automated credit decisions, and integrated payment tracking, buyers get the flexibility they need—without added risk or inefficiencies.

The result? Faster conversions, larger purchases, and stronger buyer relationships.

Balance has assessed thousands of B2B buyers, from SMBs to large enterprises, to design a credit application flow that meets real business needs. We provide merchants upfront payment for the full invoice amount, eliminating cash flow concerns while instantly underwriting new and existing buyers. Our platform removes friction in the net terms process, ensuring ease, efficiency, and a better experience for both buyers and merchants.

Best of all, you can start using Balance today without disrupting your operations.

If you're ready to start, reach out to one of our experts.