According to a recent study of the U.S. manufacturing and distribution marketplace, B2B e-commerce sales will grow eight times faster than total B2B sales, totaling $2.61 trillion in 2024. With more business being conducted online, the manufacturing segment – which accounts for one-third of B2B e-commerce sales – recognizes the massive benefits of adopting direct-to-consumer (D2C) models. Benefits include improved margins, better access to customer data and more control over the customer experience. But while the opportunity is high, companies see their resale partners doing more than sales. This leaves manufacturers needing to learn new skills and implement order-to-cash (O2C) processes.
The O2C for OEMs covers the full ordering flow. From onboarding fleets, offering/managing credit, producing/delivering invoices and collecting on terms, OEMs are often surprised that the payments process is a powerful loyalty builder. And building fleet loyalty in this industry is no easy feat, requiring tight alignment with dealers to deliver consistency and automation. Automating legacy payments processes must be a priority to make the second half of 2024 strong.
Let’s have a look at some of the biggest friction points for manufacturers, and how companies can better optimize the payments function to solve these.
Building Loyalty Across Vast Dealer Networks
Despite having cost advantages over competitors, inflexible billing and invoicing systems make it challenging for manufacturers to provide a consistent purchasing experience. This could mean fleets are paying different prices by location and facing reconciliation nightmares, while dealers struggle with payment pains that hurt cash flow.
But with competitors only a click away, customer retention must be a top B2B business priority. To build loyalty and drive average order value, manufacturers offering a seamless checkout experience gain the advantage. As unveiled in a recent multinational study of business buyers, the strongest seller-buyer relationships are significantly affected by the payments process. More specifically, offering choice of preferred payment methods, convenient onboarding and customization of invoicing will best support the unique needs of OEMs and other business buyers.
Improving Operational Efficiencies
It may come as a surprise, but sending paper invoices is still popular. Only about half are received electronically, meaning the rest must still be manually sorted, entered and filed. This leads to a larger risk of error, causing a delay in payments, creating rework and often requiring refunds to settle overpayments. By eliminating errors and ensuring that negotiated pricing is always reflected in invoices, OEMs can get paid faster, improving their cash flow. Automating multicurrency invoicing and payments improves internal efficiencies significantly and can lead to global cost savings and lower Days Sales Outstanding (DSO) for OEMs when it's done right.
Combatting Business Identity Theft
As more business is conducted online, there is a greater risk of business identity theft, which is when a fraudster poses as a business owner to illegally transact or establish a line of credit. According to Cybersource, identity theft is one of the top three types of fraud attacks with 33% of e-commerce merchants falling victim in 2022. B2B transactions are typically higher than those in B2C, meaning B2B is an even bigger target of fraudsters who may suspect getting caught is not as likely as it is in the B2C online world. Proving and authenticating a business’s digital identity can be challenging for large manufacturers, so improving existing tools or partnering with a powerful third-party solution provider for fraud prevention is necessary. This can be achieved by embedding automated fraud prevention directly into the checkout process, so risky transactions cannot be completed.
As manufacturers continue to embrace digital transformation, D2C sales has the potential to be the best model. By better optimizing the payments' function, manufacturers can improve their selling relationships and reduce many manual, time-consuming processes. OEMs stand to benefit from streamlined, secured payments and invoicing. There is global cost savings, thanks to efficiencies from automating multicurrency invoicing and payments, increased dealer and fleet loyalty with branded invoicing and billing services, and business growth when dealers and distributors have access to a reliable financial relationship. These types of payments programs are pivotable in the aftermarket parts game and will allow manufacturers to enjoy more predictable cash flow from a more loyal customer base as they head into 2025 budget planning.
