B2B system - what is it and how to finance it?

Service Business

Computerization of business processes, despite considerable initial costs related to the development of appropriate software and its implementation, is one of the elements that allow for the creation of huge opportunities for cooperation and significantly reduce the costs of the entrepreneur's activity. This is related to the introduction of an effective B2B system to the company.

This requires looking at all the processes on which the enterprise operates. It is a time-consuming and costly task, however, its implementation gives great opportunities and profits from the business.

B2B system - what is it?

The concept of Business-to-Business has been present on the market for some time. For the definition to be correct, it can be defined as the name of a relationship between companies, sometimes referred to as classic e-business. The largest part of this issue in the world is business information, such as industry reports, consumer research and information related to social networks.

In practice, the activities of enterprises within the B2B system may look like this. Cooperation between business partners, which may include manufacturers, wholesalers and distributors, who constitute individual links in the entire cooperation process, is based on joint management by the system. To facilitate the operation of individual links, electronic means are very often used to facilitate transactions between individual elements of the system. Cooperation within B2B means the automation of information flow as well as the organization and integration of data on deliveries and their dates. This system can be extended even further when information such as forecasts, planning, production, storage, contract fulfillment and servicing are also interfered with as part of the collaboration.

It is assumed that the following electronic markets are used as part of cooperation in the B2B system:

  • Pages with catalogs that facilitate the ordering of goods by entrepreneurs,

  • Purchasing alliances - merging companies into one in order to negotiate larger discounts on purchased goods and negotiate lower prices,

  • Barter markets - here the subject of exchange are goods and services that can be exchanged,

  • Vertical markets - mainly industrial products are mentioned: plastics, chemicals, steel,

  • Auction sites - trade in production goods.

In turn, the cooperation between the cells is based on such activities as: preparation of offers and orders, order confirmation, payment and execution of transactions, searching for new offers, issuing documents related to the execution of transactions, and marketing activities.

Advantages and disadvantages of the B2B system

The main advantage of introducing the B2B system is, above all, the reduction of costs related to the current service of transactions between distribution links. It allows you to reduce financial outlays both on the part of buyers and sellers. In addition, it reduces the time expenditure necessary to complete the transaction or waiting for delivery. Additionally, it allows for the development of closer business relationships between buyers and sellers.

However, this system has its drawbacks. First of all, there is a decrease in loyalty between buyers and sellers, which may pose threats to the company's security. However, taking into account the pros and cons of operating in the B2B system, from the point of view of entrepreneurs, it is a cooperation that allows for a significant increase in the scope of activity.

B2B as an IT system

A system based on electronic transmission seems to be of great importance in cutting costs related to the operation of individual cells. As a result, it allows for the elimination of geographical barriers and reduces the financial outlays necessary to establish business contacts, and also improves the organization of trade exchange. With its help, it is also possible to eliminate traditional ways of contacting business partners, such as advertisements in the press, telephone calls or face-to-face meetings. Customarily used platforms to support the B2B system consist of the EDI standard, which unifies the information sent and ensures communication security. Documents supported under the standard are: invoice, order, delivery note, delivery, production schedule and many others.

Financial resources for the B2B system

Designing and creating software for operating a B2B system is a challenge, because these types of products are characterized not only by the enormity of work that must be done, but also by the costs that must be incurred to be able to work on its basis. Until 2012, it was possible to finance this project with EU subsidies for investments and modernization, but for over two years there has been no such possibility of financing.

One of the ways is to take a commercial loan for the investment. A company that plans to introduce a new technology to develop new services and improve those currently offered may apply for it. To choose the best conditions for granting funding, it is best to compare the current offers of banks and financial institutions.

Another idea is leasing. This form of financing is mainly associated with assistance in the purchase of material goods, for example cars or computers, but it can also be used in the case of entrepreneurs who plan to purchase software. Unfortunately, this method is not very popular. As estimated by the European Association of Leasing Companies, the percentage of IT services lease is only 14, while in Poland it is around 10%.

The usefulness of leasing is evidenced by the fact that by using it, entrepreneurs have the opportunity to reduce the initial costs and use the so-called tax shield, and thus reduce the tax burden. However, its most important benefits are, above all, the reduction of overall maintenance costs and savings in working capital. Another significant advantage is the fact that funds for the implementation of such projects are allocated quite quickly.

Another financing model, widely used in IT, is the success fee formula. Cooperation based on it takes various forms. It is characterized by the fact that the basis of the software developer is a sales commission. Therefore, the company selling the product focuses on developing an offer, leaving the IT service and sales level to the cooperating company.

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