Are you looking for a solution to enhance your wholesale customers’ experience in your online store? You want to increase customer loyalty by offering them on-credit purchases but afraid of losing money? Look no further as here we give you a complete view of Magento 2 credit limit and how to utilize it for maximum profitability.
B2B Trade Credit
Trade Credit, also often referred to as Net Term, is an agreement between businesses to extend payment due date. The payment terms shall regulate late clearance within 30, 60, 90, or even 180 days from the invoice date.
Typically, B2B Trade Credit means that the Seller offers a 0%-interest loan for the Buyer, giving them a big incentive to regulate financing (financial leverage).
The Seller might also offer a specific discount if the Buyer manages to settle the payment within a short period, e.g. 2% discount for early payment within ten days since the credit date.
B2B Trade Credit is a daily operation, bearing loads of benefits:
1. For the Seller
- Increase Sales Volume: By combining trade credit and bulk discounts for large orders, you offer customers greater purchasing power and bargains.
- Gain Customer Loyalty: With the special credit terms discussed, you increase your interactions with customers and keep them coming back.
- Competitive Edge: Giving customers an interest-free loan helps you attract new customers and retain existing ones.
- Payment Incentives: By giving special discounts for early payment, you encourage customers to settle their invoices as soon as possible.
2. For the Buyer
- Improve Cash Flow: The extended payment period allows customers to finance other costs, avoid loans, and especially get substantial discounts for paying early.
- Fuel Business Growth: With goods and services ready in hand, businesses can ensure their daily activities and growth without worrying about the interest burden.
- Better Relation with Suppliers: By increasing interaction with suppliers and proving an ability to make early payments, the business can be a preferred buyer.
- Competitive Advantage over Rivals: With goods supplies always available, a company can stay ahead of rivals even with unstable finances.
KEEP B2B customers coming back with this guide on boosting Repurchase Rate!
Purchase Order in E-commerce – A Type of B2B Trade Credit
Along with technological advances, B2B sales are getting more popular in e-commerce. Let’s take a simple look at how B2B Trade Credit relates to Purchase Order in the context of technology.
What is the Purchase Order?
Purchase Order (PO) means a commercial document, drawn out by the Buyer, stating the chosen products/ services & agreed prices, and sent to the Seller. It is legally binding and serves to confirm the order’s requirements and Buyer’s payment duty.
PO is different from the invoice as it is sent by Buyer before he/ she places the order. Each PO also has a number, helping Buyer and Seller track delivery and payment details.
Why is Purchase Order a Type of B2B Online Trade Credit?
Purchase Order is of utmost importance for B2B Trade Credit in e-commerce! Businesses use the Purchase Order number to determine whether an order is eligible for trade credit.
At checkout, instead of paying money upfront or tick on “Check/ Money Order”, B2B customers can choose the payment method: “Purchase Order”. He will then enter the PO number, finish checkout, get the goods, and pay the money within a specific duration as discussed with the store admin.
Purchase Order in Magento 2
Magento 2 is a comprehensive e-commerce platform that also allows for ample customization. Thus, B2B Trade Credit features have already been incorporated into Magento 2, including Open Source and Commerce editions with the following functions:
- Use Purchase Order as a payment method for credit purchase
- Restrict eligible customers per country
- Regulate maximum and minimum order total
However, we can all see the big problems here:
- Even restricting eligible customers to those from rich countries does not rule out late payment and non-payment risks.
- Not limiting the purchase order values can lead to tons of orders not getting paid, and you shall end up lacking running cash.
The two reasons lead us to seek a way out – Magento 2 B2B Company Credit.
B2B Company Credit in Magento 2 Commerce
Simply put, company credit means “credit of each company”. You can assign some dollars (credit limit) to each of your business customers. They will spend part of your limit, which is then divided into used credit and available credit.
Once a customer has used up his available credit, you can choose to either assign him another amount of credit straight away or require him to settle the invoices first.
After paying the owed credit, your customer can continue to shop with a new Magento 2 credit limit you give him/ her. The process goes on:
Magento 2 credit limit acts as a customer attribute, and you can configure per customer:
- Enable/ Disable PO payment method
- Allow multiple PO invoices
- Set a tailored credit limit
B2B Company Credit in Magento 2 Commerce can work magic when solving two limitations of the default Magento 2 Purchase Order. But how to get it integrated into Magento 2 Open Source? Look no further as we have a ready-made Credit Limit Solution here.
Magento 2 Credit Limit Solution
Now that we have explored that company credit is the key to success in Magento 2 B2B Trade Credit, here comes the Open Source solution.
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Why Magento 2 B2B Company Credit Extension?
The extension adds more delightful features for managing the default Magento 2 purchase orders:
- Each customer has a credit limit and can buy on credit within that limit
- Allow store admin/ sales rep to enable credit excess per customer
- Add PO number and used credit to order confirmation/ invoice/ credit memo
- Three email templates to remind of updates in credit limit/ available credit
The Charms of Magento 2 Credit Limit
How does the credit limit work for customers and store owners in Magento 2? Let’s take a look at this short comparison:
1. For the Seller
- Boost sales substantially from customers willing to buy but unable to pay upfront
- Attract new customers and retain existing ones through the tempting credit sales
- Get to know more about B2B customers’ budgets and behavior patterns
- Manage stocks better and reduce warehouse costs due to predicted sales
2. For the Buyer
- Make large purchases many times, pay one time
- Track detailed credit updates through a handy credit dashboard
- Save time and efforts settling every single invoice within a while
- Above all, improve cash flow with financial leverage from credit purchases
Highlighted Credit Features
1. Make Use of the Magento 2 Purchase Order Payment Method
By default, Magento 2 already offers Purchase Order as a payment option; however, it is hardly ever enabled. Such a shame!
As we have discussed above, there are difficulties in limiting the scope of purchase orders per customer and within a credit line. The extension allows customers to check out with credit:
- Create multiple purchases on credit
- Make payment within an agreed period
- Choose to exceed their credit limit if enabled by store admin/ sales rep
2. Easy Track of Credit Details for Both Customers and Store Owners
Both customers and store owners can watch every detail in their credit updates. Meanwhile, only store owners can make credit changes.
Generally, each customer’s credit details are presented similarly in the frontend and backend. There are two sections: credit balance and transaction log.
- Credit Balance: shows the amount of credit limit, used, and available credit, plus the ticked/unticked box of enabling credit excess.
- Log Transaction: record the information of each change in available credit like date, type (place order/ update), note, PO number & order ID (if the type is place order), etc.
Meanwhile, store owners can edit credit details per customer:
- Set credit limit, update changes in available credit
- Enable/ disable credit excess
- Mass update or assign credit limit
3. Multiple Email Templates to Notify of Credit Updates
The Magento 2 credit limit extension offers three email templates to send notifications about credit updates, for both customers and store owners:
- To Customer: Store Admin assigns or updates credit limit.
- To Store Owner: Send alert when a customer exceeds his or her credit limit.
- To Customer: Show changes in available credit: either because the customer places an order or admin refunds.
4. Special Functions Not to Miss
Besides the principal features for managing customer’s credit, the Customer Credit Limit extension also allows for:
- Adding the Purchase Order details like PO number and used credit to order confirmation/ invoice/ credit memo emails
- Work well even with multi-currency websites
Working with B2B customers always requires more time and effort, but the order values are worth it! Give your business customers the chance to purchase on credit! With improved financial leverage through the Magento 2 credit limit extension, they might stick to your store like glue!
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