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How Do Large Enterprises Benefit from Trade Credit Automation?

Topics: Finance, Cash Flow & Working Capital, Credit & Payments

Extending trade credit to small and medium-sized businesses (SMBs) can be a smart decision for enterprise organizations that want to increase growth. By helping their SMB customers with cash flow, they enable SMBs to expand, which in turn generates further buying demand, not to mention a loyal customer base. 

However, managing a high volume of frequent payments manually hasn’t been easy – until trade credit automation platforms emerged in the market. Trade credit automation reduces the operational costs, time and resources needed to extend credit to SMBs. In this article, you’ll find out about the many ways enterprise organizations benefit from trade credit automation.

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Benefits of Trade Credit Automation

With about 90% of businesses worldwide classified as SMBs, it’s almost a necessity for large enterprises to consider credit extension. Despite the significant benefits, the administrative and operational costs of a manual credit process add up on both sides of the transaction. Manual processes are slow, error-prone, and highly inefficient for an enterprise that may have hundreds or thousands of SMBs placing small but frequent orders every day. Automation can reduce the fixed costs of extending trade credit by as much as 50%. It also reduces business delays and cash flow issues: 87% of companies that have automated A/R functions such as extending trade credit are processing faster, and 74% say A/R automation has helped them improve the customer experience. In addition, trade credit automation frees staff members to allocate more time to more strategic activities that create higher ROI. 

Trade Credit Statistic Image

Top benefits of trade credit automation include:

Focus on High-Value Transactions 

Manual, paper-based trade credit processes require the same amount of time to process each transaction, even though some transactions are higher-value than others. It’s a known fact that in most businesses, about 20% of B2B customers generate these higher-value transactions. The remaining 80% of customers, often referred to as the long-tail segment, generate just 20% of the revenue through their smaller, more frequent transactions. With trade credit automation platforms, large enterprises automate high-volume long-tail customer transactions, which releases resources to manage higher-value transactions. The combination of automation and concentration on top customers increases the ROI on every customer.  

Apruve Long-Tail Graph

Increased Revenue and Asset Utilization

Using automation for trade credit enables large enterprises to redirect resources toward increasing revenue. Employees freed up from long-tail payment processing can do more meaningful work that aligns with enterprise growth opportunities and value generation. More time is made available for evaluating opportunities and making strategic decisions.

Better Customer Experience & Lower Churn

With trade credit automation, large enterprises can offer SMB customers a digital payment experience that is consistently fast, simple, and error-free. The customer experience begins with online pre-qualification and onboarding that is completed in as little as three minutes, and customers gain access to digital tools for purchase management. The ease and efficiency of purchasing leads to higher long-tail customer retention and lower churn. Large enterprises can promote trade credit automation as a differentiator that attracts potential new customers, too.   

Happier Workforce

Prior to the global pandemic, one in four credit departments did not have enough staff to keep up with workload. The staffing shortage went from tough to tougher with the Great Resignation of 2021. Today, large enterprises need to offer more meaningful work to attract and keep talented credit staff, and many do so by automating trade credit. With automation handling routine and mundane tasks, employees can focus on more strategic work and personal contributions to enterprise goals. This shift is leading to happier, more productive teams in credit departments and across enterprises.  

Risks of B2B Trade Credit, and Trade Credit Insurance

Though there are many benefits of automation, trade credit is a trade finance instrument that can come with risks. The largest risk of extending credit for any enterprise – and it’s often a deal-breaker – is the risk of bad debt. Bad debt occurs when trade credit isn’t repaid or can’t be collected from the customer, and it poses a serious threat to the financial health of an enterprise. Automation in trade finance can help mitigate the risk.

Trade Credit Insurance

Trade credit insurance is an additional safeguard for enterprises that want to limit their risk in extending trade credit. It protects an enterprise from customers that default on payment, for a premium. Get tips for extending trade credit effectively.  

Better Credit Automation and Safe Trade Credit

Automating trade credit processing is a digital strategy with several important benefits that extend beyond administrative efficiencies and cost savings. Trade credit automation can improve cash flow and enable A/R teams to generate more value for the company. By handling routine and repetitive tasks, it can also contribute to higher A/R team engagement and retention. 

Trade credit automation transforms the long-tail customer experience as well, turning purchasing into an edge that helps enterprises create customer loyalty and attract a larger market share. 

Learn how automating your long-tail trade credit process can reduce your enterprise’s fixed costs by up to 50%. Schedule a consult with Apruve today to learn more.

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Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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