Business Dangers

B2B Debt Collection: 4 Dangers Owners and AR Managers Need to Recognize

B2B  |  2 min read

Cash flow is oxygen to business. Interrupt the supply, and the consequences are immediate and severe.

This is true for all business models, and for those whose customers are other businesses, a multitude of unique challenges exist. Specifically, there are four great dangers that make B2B debt collection very different from collecting retail or consumer debt:

1. Limited Customers

For many B2B vendors, especially those serving niche markets or small industries, business prospects are finite and close-knit. Oftentimes there are only a handful of potential customers, and they all know each other. Nothing travels faster than bad news, and mishandling debt collection or any other sensitive matter can quickly impact your brand and irretrievably shrink your company’s market share. 


2. Industry-Specific Impacts

Whether your B2B company sells its product to clients upstream or downstream, it is probably vulnerable to economic, regulatory and supply-and-demand related variables that can suddenly impact cash flow. One day everything is booming, and the next, your business is fighting for its life. At such times, when an entire supply chain can be suffering from overdue receivables, it is essential your B2B business has a strategy for reinforcing high payment priority in order to avoid being caught inside a recurring toppling-dominoes effect. Proactive monitoring and a great collection agency can make the difference between survival and failure.


3. Higher Stakes

In the B2B world, purchase volumes tend to be orders of magnitude larger than in consumer-oriented selling. Whereas a million dollars in retail sales can be spread across numerous buyers, it can amount to a mere handful of orders, or often less than a single contract for an industrial manufacturer or distributor. A single deal gone sideways can have crippling repercussions for a B2B vendor.


4. Tougher Negotiations

In business-to-business debt collection, Accounts Receivable managers can expect to encounter a higher level of sophistication than in the consumer and retail world. Negotiations are often conducted with trained Accounts Payable specialists acting under specific directives—or with the business owners themselves. Approaches that may work very well in B2C situations can have disastrous consequences when dealing with a veteran entrepreneur hardened by multiple economic downturns, or one who has weathered prior business failures and is currently facing new adversity.

Not only are negotiations generally tougher in B2B collections, but losses due to a debtor business’s collapse are more difficult to recover because you are up against banks, secured creditors and the CRA. (Check out this popular blog post to better understand the effect of time on the likelihood of recovering aging debt.)

Don’t accept bad debt as a necessary risk or a cost of doing business in the B2B world. It simply doesn’t have to be that way. Use the link below to download my free guide, or reach out to me or my elite team of B2B collection agency professionals anytime. 

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Brian Summerflet Author: Brian Summerfelt

President and CEO of MetCredit, Canada's top-performing consumer and commercial collection agency

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