What is B2B?
Business to business works differently than what you might typically think of for a company. While your retail stores are focusing on selling straight to the consumer (B2C), a B2B company is concerned with selling to other businesses.
B2B v. B2C
There are many differences between a B2B business and a B2C business. First of all, B2C usually has an easier time collecting payments. Typically, customers come into the store, they want to purchase an item, will pay for it on spot and then the product is sold. In B2B, the products being sold are usually purchased in large sums on terms. This means that the business will have to wait a longer time after the product has sold to receive payment.
Further, B2C businesses usually have an easier time managing inventory. They will make or order based on demand. However, some B2B businesses follow a make to engineer system and have a more difficult time planning demand. While other B2B businesses only fulfill orders when it comes in, which makes stocking and manufacturing more difficult.
Since B2B models are so different from B2C models, it is clear the two will need different types of ERP systems to run efficiently. Below are 3 different functions of B2B ERP.
Since B2B companies need to sell to other businesses on terms, rather than at the point of sale, there needs to strong accounting functions. The account receivable should be able to keep track of your days sales outstanding and help to keep track of what is still owed. There should be a general ledger function so you are not keeping track of everything in spreadsheets.
- Supply Chain Management
B2B ERP needs to help companies plan their inventory and the future demand. Using real-time insights from sales orders and historical data, B2B ERP can tell you what exactly needs to be ordered or made so that you are not overproducing or missing out on sales.
- Supporting Documents
Unlike B2C sales, there are usually a lot of supporting documents that needs to be filled out and tracked in B2B sales, such as freight invoices, purchase orders, credit applications and so on. B2B ERP can keep track of these documents and automate the processes needed to fill them out. Further, it can create transparency when important documents are needed during an audit.
B2B business models vary significantly than B2C, which is why they need two different systems to run them correctly. B2B ERP has strong accounting functions to manage the terms that sales are made on, strong supply chain management to plan inventory and the ability to track and automate all the supporting documents needed.