Is Your Customer’s Net Working Capital Hurting Your Sales | Behalf

By March 20, 2017Blog
Customer's lack of net working capital hurting sales

What’s hurting your company’s sales performance?

Large corporations spend a fortune mining user experience data trying to glean insights into what is hurting their sales. However, years of studying phenomena like shopping cart abandonment can only expose certain aspects of the customer mindset. The fact is there are many factors influencing a business customer’s decision to buy or not to buy on any given day. As you review your own customer dynamics, the biggest challenge preventing you from hitting your sales targets may be fairly simple. Your business customers could be experiencing a net working capital deficit. Net working capital is the funds a business uses to cover its operational expenses and short term business needs. When a business experiences a net working capital deficit, they lack purchasing power which hurts their business. When that business is your customer, it ultimately hurts your business, too. If your customer base is largely comprised of small businesses, a segment that is notoriously undercapitalized, it is safe to assume you are feeling this pinch. This article explains the role net working capital plays in your business customer’s decisions and how you can prevent their shortfalls from hurting your sales.

Net Working Capital for Small Businesses

Your business customer’s net working capital is more than just a number. It impacts their daily business decisions and inevitably your sales. In this case, your company might be facing two obstacles: your business customer’s actual net working capital and their perception of it. Many business owners do not know their net working capital off hand but they have a vague idea of it. Your customer’s actual net working capital is a simple calculation of current assets minus current liabilities. However, the way they perceive their net working capital might be very different from their actual net working capital. In some cases, skeptical business customers could be experiencing a phantom net working capital deficit.

What is a Phantom Net Working Capital Deficit?

Phantom net working capital deficits occur when a business owner believes they lack the net working capital they actually do have. Your customer underestimates how much net working capital they have at their disposal because they don’t fully understand their business cash flow cycle. Phantom net working capital deficits are just as debilitating to those business customers as an actual deficit and they can have just as negative an impact on your sales. If your business customer feels they do not have the funds to make a purchase when they actually do, your company loses out on sales. The good news is you can help your business customers overcome their apprehensions.

Be the Solution

In order to remedy a customer’s phantom net working capital deficit, you can offer them educational services and financial tools to help them better understand their true buying power. For example, add a net working capital calculator to your site so your business customers can get an actual figure to work with as they shop. In the event that your customer does, in fact, have a net working capital deficit, you can offer business credit to help them manage through any short-term gaps. Payment solutions like Behalf can be added to your site in minutes to allow your customers to pre-qualify themselves for credit.

Whether your customer has a gap in net working capital or not, most customers find value in a credit line with flexible payment terms. Adding Behalf to your payment ecosystem is a great way to reward your business customers with improved payment terms. They can pre-qualify for up to $50,000 in revolving purchasing power, with up to six months of extra time to pay for each purchase. This control and flexibility makes it easier for your customers to buy more, more often. A current Behalf accepting merchant says that “Customers that pay with Behalf have an average order size around 35% higher and repeat around 80% more than customers who pay cash.”

Learn more about the way Behalf transforms the way businesses buy and sell here.