Why do customers tend to choose suppliers with flexible payment terms?

Flexible payment terms can influence the choice of supplier when several companies offer similar products at comparable prices. One seller requires 100% prepayment, while another allows the amount to be spread out or offers financing options for buyers. In both cases, the purchase cost may be the same, but its impact on the customer’s liquidity differs significantly.

In B2B transactions, payment terms are included in the commercial offer along with the price, product availability, delivery time, warranty, and service. If it is difficult for the buyer to free up the entire amount, an additional payment method can remove the financial barrier and help finalize the agreed-upon purchase.

What does a B2B customer evaluate when choosing a supplier?

A corporate buyer analyzes the overall economics of the deal. A low price loses some of its appeal if the product takes a long time to arrive, the minimum order quantity exceeds the buyer’s needs, the warranty terms include restrictions, or the payment places an excessive strain on cash flow.

When comparing offers, the client may evaluate:

• flexible payment terms and affordable payment options;
• the final purchase price, including shipping and additional services;
• actual availability of the required quantity of goods;
• delivery time and consistency of shipments;
• minimum order quantity;
• warranty and after-sales service;
• return or replacement policy;
• the amount of the prepayment;
• payment plans;
• speed of contract and invoice processing.

The importance of each criterion depends on the product and the transaction amount. When ordering supplies worth 20,000 UAH, the buyer may focus on availability and delivery speed. When purchasing equipment worth 500,000 UAH, the department head, procurement specialist, accounting department, and CFO are often involved in the approval process.

If the specifications, price, and delivery time are similar among two sellers, the payment terms may determine the final choice. The buyer evaluates which option will allow them to obtain the desired goods while also setting aside funds for salaries, taxes, raw materials, and day-to-day operations.

Why might a 100% prepayment deter a B2B buyer?

Agreeing on a price does not necessarily confirm a company’s willingness to transfer the full amount today. The buyer may have sufficient revenue and profitable operations, but a significant portion of their funds has already been allocated to mandatory payments. Funds may also be tied up in inventory or accounts receivable.

Let’s consider a purchase of 600,000 UAH. Over the next two weeks, the company must pay 300,000 UAH in salaries and taxes, 120,000 UAH for rent and logistics, and maintain a reserve of 200,000 UAH. Full prepayment will reduce the available balance and may create a shortfall for operating activities.

In this situation, the client can:

• reduce the order quantity;
• postpone the purchase until next month;
• choose a less expensive configuration;
• ask for a discount;
• contact the supplier with a different payment schedule.

The first four scenarios reduce the seller’s potential revenue or delay the transaction. The fifth allows the seller to maintain the planned volume if the buyer can meet the future payment schedule.

The need for a large shipment may also precede the receipt of revenue. For example, a distributor purchases goods in September, sells them throughout October and November, and some B2B customers pay 30 days after delivery. Purchasing financing helps spread the burden across several periods and preserve working capital for day-to-day operations.

What flexible payment terms can be offered to a customer?

Payment methods in B2B should be selected based on the type of product, order fulfillment time, the buyer’s financial cycle, and the seller’s capabilities. A one-size-fits-all payment schedule for all customers can lead to excessive accounts receivable or prove inconvenient for a specific purchase.

The main payment models include:

• partial prepayment – the buyer pays a portion of the amount at the time of order placement and the balance after shipment;
• cash on delivery – payment is made upon receipt of the goods or signing of the documents;
• Deferred payment – the seller agrees to accept payment after a specified number of days;
• staged payment—the amount is divided according to the stages of production, delivery, or project completion;
• customized payment schedule – payment dates and amounts are tailored to the customer’s financial cycle;
• payment in installments – the purchase price is divided into several regular payments;
• B2B BNPL – the business receives the goods or services now and pays later according to an agreed-upon schedule;
• Financing for a Specific Purchase – an external partner participates in a single transaction.

A partial prepayment is suitable for orders where the supplier needs to finance the production or reservation of goods. It is convenient to link installment payments to individual deliveries. Deferred payment may be offered to regular customers with a proven track record of timely payments.

The source of the financial resources is particularly important. If the seller expects to receive payment within 60 days, the shipped products remain on the accounts receivable side. In a model involving an external financial partner, the procedure for the supplier to receive payment and for the buyer to make subsequent payments is determined by the terms of the service.

Installment payments for businesses can be used to purchase goods or services by spreading the payment over time. The buyer is offered an additional payment plan, and its availability and specific terms depend on the approval of the application.

How do payment terms affect a supplier’s competitiveness?

Accessible payment terms for customers expand the seller’s commercial offering. They can be particularly relevant for equipment, professional machinery, construction materials, large shipments of goods, and other high-value purchases.

Let’s consider two suppliers who sell the same equipment for 500,000 UAH. Supplier A requires payment of the full amount prior to shipment. Supplier B offers the buyer the option to use a financial instrument and spread out the payment according to an agreed-upon schedule.

In the first scenario, 500,000 UAH is immediately deducted from the client’s turnover. In the second, the company can retain a portion of its own funds for raw materials, salaries, and equipment startup. If the total cost, terms, and requirements of the second option align with the buyer’s financial plan, their offer may prove to be more favorable.

For the seller, this option could potentially affect:

• conversion rate of commercial offers;
• average order value;
• number of abandoned transactions;
• repeat purchases;
• corporate customer retention;
• sales of high-value products;
• ability to compete while maintaining the base price.

Metrics should be verified against actual transactions. The introduction of an additional payment method does not guarantee an increase in sales. A customer’s decision also depends on product quality, the supplier’s reputation, total cost, delivery time, warranty, and service.

To evaluate the results, it’s important to compare like-for-like categories and time periods. The article on B2B financial services explains in more detail how to analyze conversion rates, average order value, profit margins, and the percentage of deferred purchases following the introduction of a new financial scenario.

Why might a different payment schedule be more advantageous than a discount?

When a customer says, “It’s too expensive for us,” this can describe three different situations. In the first, the buyer believes the product costs more than its market value. In the second, the company simply lacks the resources for such a purchase. In the third, the total amount is acceptable, but it’s inconvenient to withdraw the entire sum from the current month’s cash flow.

In the first case, the manager needs to justify the price based on specifications, performance, warranty, service, service life, and total cost of ownership. In the second case, a different configuration or a smaller quantity may be needed. For the third situation, it makes sense to discuss a payment schedule.

Let’s say the equipment costs 400,000 UAH. A 10% discount reduces the seller’s revenue by 40,000 UAH and, accordingly, lowers the margin. If the buyer is satisfied with the base price but is hesitant because of the one-time payment, lowering the price may not address the main reason for the refusal.

The manager needs to clarify what budget is currently available, when the next payments are expected, and whether splitting the amount will help finalize the purchase. A specific breakdown of future payments provides the client with more information for internal approval than a general promise of “convenient payment.”

Additional ways to make your case are discussed in the article on how to sell high-priced items without discounts. The solution must take into account the financial interests of both parties: the buyer assesses the impact on liquidity, while the seller manages the margin and the timing of payment.

How can you offer payment in installments while protecting the seller’s cash flow?

Granting extended payment terms to each customer on one’s own increases the supplier’s accounts receivable. The goods have already been shipped, but payment may not be received for several months. During this period, the seller needs to restock the warehouse, pay salaries, taxes, and bills to their own business partners.

Therefore, before launching a new payment model, it is necessary to define credit limits, customer screening criteria, the maximum waiting period, the procedure for handling late payments, and the acceptable amount of accounts receivable. It is also necessary to calculate how the payment deferral will affect the company’s working capital requirements.

Another scenario involves the participation of a financial service. eDilo’s mechanism is based on B2B settlements: the buyer is able to spread out the payment, and the service, acting as a factor, settles with the seller according to the terms of the agreement. The customer then makes payments according to their schedule.

For the supplier, the practical benefit lies in being able to complete the transaction without the buyer having to provide independent financing from its own working capital. The current limits, terms, fees, requirements for the parties, and payment procedures must be verified for each specific application.

On the eDilo page for merchants, you can submit a request to enable the appropriate payment method. Once the integration is complete, managers should understand how the service works, the terms of agreement, and the wording that can be used in a commercial proposal.

How can you tell if customers need an additional payment option?

Decisions should be based on CRM data, customer interviews, and financial metrics. A manager’s comment that “buyers often ask for installment plans” does not reveal the potential transaction volume, average order value, or the impact of the new scenario on margins.

A practical step-by-step guide consists of ten steps:

1. Analyze the reasons for rejections of commercial offers.
2. Determine the percentage of customers who request a change in the payment schedule.
3. Check how often managers offer a discount after a customer objects to the price.
4. Calculate the average transaction value for lost and deferred deals.
5. Identify the products for which a one-time payment has the greatest impact on the buyer’s liquidity.
6. Survey key customers about their preferred payment methods.
7. Calculate the costs and margins for each payment model for the seller.
8. Select several categories for a pilot launch.
9. Add this information to product cards, commercial proposals, and manager playbooks.
10. Compare conversion rates, average order value, and profit margins before and after the launch.

The results should be analyzed separately by category and price range. If a financial option is used primarily for expensive equipment, a direct comparison with the average transaction value for the entire product range will provide a distorted picture. It is more useful to compare similar products, customer types, and time periods.

B2B sales also require monitoring the duration of the transaction. A new calculation method can be useful if the number of deferred purchases and the time between a commercial offer and payment are reduced. At the same time, the seller must monitor the total cost of the financial service and the gross profit from completed orders.

Payment terms are part of a B2B offer, along with price, delivery, documentation, and service. If a large one-time payment is holding a customer back, an alternative payment option can remove that specific financial barrier. Before launching, the seller needs to assess demand, the business model’s viability, the impact on their own liquidity, and the process for onboarding a financial partner.