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What billing model should you use for your B2B marketplace?

26 October 2023

Business Insight

Whether they are in the process of launching or already established, B2B marketplaces are constantly striving to offer an optimised buying experience that anticipates buyers’ expectations and ensure secure transactions. To achieve this, they need to choose an invoicing model that meets the needs of professionals while ensuring that financial flows are properly managed. And this is often where the headache begins! How do you reconcile the user experience, supplier diversity and regulatory compliance? Discover our tips for an efficient invoicing process.

 

 

The challenges of invoicing on B2B marketplaces

Invoicing is a significant issue for B2B buyers. They are obliged to justify any payment made to a supplier using an invoice. This must be sent to the accounts department and integrated into their internal tools. The problem when B2B buyers purchase from a marketplace is that they have to manage a supplier database. This is time-consuming for the accounts department and makes cash flow monitoring more complex, especially when the company has several thousand suppliers!

For B2B buyers, reconciling data is costly even with the most efficient ERP, especially as we tend to underestimate the number of service providers used by a large industrial group. Non-strategic, non-recurring indirect purchases account for an average of 60% of order volume, 75% of the number of suppliers and 85% of total items. Often hidden because they are associated with purchases with little or no structure, the processing costs incurred by unregulated purchasing represent a considerable source of savings for companies and a real headache for purchasing departments.

Read also: B2B marketplaces: which challenges for key accounts?

B2B Marketplace: what billing model should you adopt?

Faced with accounting challenges, marketplaces must adopt a more or less effective invoicing model. There are 3 main trends:

  • The first possibility is that there is no solution, meaning that the marketplace can’t issue invoices. This situation is extremely rare among B2B marketplaces., is set to disappear with the entry into force of the 2021 law on electronic invoicing for businesses. Depending on their size, marketplaces have until 2024 or 2026 to offer electronic invoicing.
  • The second option is to set up invoicing via an invoicing mandate: this is known as white label invoicing. In this case, the B2B marketplace selects an invoicing agent to issue invoices on behalf of the sellers: it invoices the customer in the name and on behalf of the resellers whose names appear on the invoices. Then, it invoices the resellers for its commission. This simplifies the experience for merchants looking for a turnkey service. The seller’s prerogatives remain unchanged regarding VAT, and responsibility lies with the seller in case of a tax audit. While this system is advantageous for the marketplace and the supplier, it is less so for the buyer since it generates additional costs for supplier management (the average cost is estimated at €1,000 per supplier for listing and updating the database), as well as being time-consuming to the detriment of value-added tasks.
  • The third possibility, new to the market, is adopting the One Creditor model, which enables purchases to be centralised on a single invoice. The marketplace acts like a traditional retailer, buying and selling goods or services and invoicing buyers. It becomes the central creditor for all transactions carried out on its platform. What is the advantage of this solution? The platform retains control of its customer relations, proposes a simplified supplier management and an improved purchasing experience with a credit line for future purchases that meets the specific needs of B2B buyers. However, to issue an invoice under the One Creditor model, the marketplace must “finance” or “buy” the product from third-party sellers.

 

B2B Marketplace and invoicing: the importance of working with the right partners

Today, the One Creditor model is increasingly appealing to B2B marketplaces, particularly those supplying large accounts. By financing sellers to become their sole creditors, B2B marketplaces no longer have to manage the collection of funds on behalf of third parties. However, given the demands of the B2B sector, it is advisable to be well supported!

Avoiding fraud and non-payment with a PSP

Because they provide a payment service on an ongoing basis, B2B marketplaces have legal obligations to protect funds and combat tax fraud and money laundering. Using a PSP (Payment Services Provider) is a good idea: it ensures that you comply with the law. The PSP is also beneficial, even with a One Creditor model, for easily creating payment accounts and carrying out the KYC (Know Your Customer) procedure for sellers to identify all the people – legal or natural – with whom the marketplace does business. In the event of fraud, relying on a PSP also means you can be reimbursed!

Choosing Lemonway for improved billing management

Invoicing is a major technical issue for B2B marketplaces and needs to be handled by experts. While many Content Management Systems (CMS) and PSPs develop their own invoicing solution as an additional service, calling on a third-party partner specialising in creating an invoicing solution seems more appropriate. Why would you do this? In addition to managing the flow of transfers, direct debits and card payments and carrying out KYC, creating an invoicing solution is a real job, requiring, in particular, the complex calculation of taxes and currencies!

By choosing Lemonway, you’ll be sure to have an optimised financial flow management AND an innovative invoicing solution via the Fonoa platform, a trusted partner specialising in the automation of invoices and taxes.

What are the advantages of Lemonway and Fonoa? Complete verification of the tax status of the buyer and seller, rapid calculation of the tax to be invoiced and almost instantaneous creation of an invoice in compliance with current local tax legislation, all with perfectly controlled and secure financial flows. To learn more about our complete offering, contact one of our Lemonway experts!