What Is B2B Payment? Kinds, Challenges, Top Providers & Best Practices

What Is B2B Payment? Kinds, Challenges, Top Providers & Best Practices

Thanks to the ease, convenience, and availability of modern technology, financial business management has been a lot easier than it was a decade ago. Although there are many businesses still conducting their transaction by cash or check, we have seen the rise of companies which have adopted electronic B2B payment methods.

Even more and more B2B payment options are accessible; there still have factors to consider with each option, such as security, processing time, etc. Additionally, one payment method that works for one business may not be the best choice for another.

If you are looking for a payment option that can mitigate payment risk and increase the cash flow of your B2B business, you are right here with us! To help business owners like you navigate a developing B2B payment landscape, we have put together this comprehensive guide that covers everything you need to know about B2B transactions.

We are about to start by analyzing the payment difficulties that B2B business ower may encounter as well as the benefits of using a smart solution. Consequently, a wide range of B2B payment methods, along with reviews, will be well listed, which we hope that can effectively assist you in choosing the best fit for your business module.

Table of content

An overview of B2B payment

Simply, B2B payments are payments made between companies for goods or services. For example, a company might pay a supplier for office equipment, or a restaurant owner might pay for vegetables, fruits, meats from their providers. In general, whenever one business invoices another one, it creates a B2B payment scenario.

B2B payment

Business to business payments represents considerable opportunities. According to Deloitte, the US B2B payment market covered $16.5 trillion in 2014, and it is expected to reach $231 trillion in 2020. Significantly, on a global scale, the numbers are even more impressive, $231 trillion will be generated by B2B sectors in 2020.

Here are the industries that process the highest volume of B2B payments

  • Manufacturing – $3.53 trillion (28.8 percent)
  • Professional and business services – $2.60 trillion (21.2 percent)
  • Finance, insurance, real estate, rental, and leasing – $2.19 trillion (17.8 percent)
  • Mining – $685 billion (5.6 percent)
  • Wholesale trade – $643 billion (5.2 percent)

In spite of such plenty of opportunities for disruption, B2B payment solutions are lagging behind consumer payments, and paper checks are still the most popular way for business transactions. So why does this happen? That is because B2B payment is influenced by several factors that do not exsert any impact on consumer payment.

Volume: Payments between merchants convey higher values than payments between consumers

Frequency: The contracts between businesses often come with regular and recurring transactions.

Industry: Certain industries have their own payment needs (which can be seen from the revenue of industries listed above)

The number of people in the business cycles: There are many people involved in each B2B transaction because of its complexity.

Payment delay: B2B payment cycles often last 30-90 days. That is so much longer than the personal transaction, which is right on-site or just a few minutes.

business man

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The different kinds of B2B payment mediums

Cash

Although businesses have used cash to pay each other over the years, this seems to be gradually obsolete. Today, it seems weird to come and pay a supplier a briefcase full of bills. How can you handle this if the contracts cost billions of dollars?

Checks

In the world of B2B business, paying by checks is relatively easy. Basically, this category includes traditional paper checks and electronic checks issued by a purchaser to a seller. Only after the check is deposited, the payment request from the buyer’s bank will be sent to the seller’s bank.

Interestingly, while we are not using check much in our personal lives, they still dominate the business world.

Wire transfers

Wire transfers were first introduced over 150 years ago by Western Union. The fund transfers between the banks will be electronically routed through a financial network like SWIFT and Fedwire. In spite of being quite expensive, this payment can process the payment between businesses within hours.

Credit cards

Credit cards

Credit card adoption is not accepted by all vendors, especially small businesses or startup because of the processing fee. While it allows the seller to receive the payment quickly, the buyer can postpone their payment for more than one billing cycle.

Payment gateways

The payment gateways such as Paypal , Stripe, Square , and Bill.come allows the buyers to pay for good and services online during the checkout process.

The Obstacles for B2B Payments

Aside from the support of modern payment solutions to break old habits and facilitate millions of requirements for invoicing, B2B companies still face a whole host of obstacles when using finding and choosing the most suitable one.

We will list down some common grips about the current state of B2B payments.

Payment mediums variety

The availability of various payment methods for the B2B sector comes with its drawbacks. Because every business has its own approach to payments, one business may prefer to use the one that is not be accepted by the vendor. For example, a customer wants to pay you by wire transfer, but you do not want to absorb the high fees. Obviously, the interoperability between different platforms makes business owners hesitate to apply modern payment tools to consolidate payments.

Security issue

Security issue

Data security remains an incredibly important concern when it comes to online payments, especially in the world of B2B commerce, where transactions are made frequently, and any breaches can open the door to fraud. A study conducted by Deloitte shows that 22% of the middle market business have been attacked by payment fraud in recent years.

To avoid the loss of funds, more and more B2B businesses are moving to modern payment systems.

Transparency

The ability to know the status of a transaction at any given time is paramount for any business to control cash flow. The lack of visibility of digital transactions between firms will lead to errors, inefficiencies, and higher headcount.

Time

Time

Because of the complex process and the considerable numbers of B2B payment transactions every day, sometimes, it is time-consuming to get all the payment made as expected.

On average, it takes more than 40 days to process a B2B payment. It is particularly difficult when most organizations are managing payment cycles differently. For example, one company may cut checks two times a month while the other payout accounts monthly.

Cost

The fee for transaction and account maintenance is one of the critical factors that business owners consider when finding a way to pay to others. If you use wire transfer or credit cards, you have to be willing to pay significant fees for payment services.

Otherwise, if you choose to pay with bills and collect checks as payment, it will cost you a considerable amount of time for managing cash inflows and outflows. As we have seen that a large business might be able to afford the cost, but most small ones won’t.

Benefits of solving B2B payment challenges

Because of the inefficiency of the existing payment methods, more and more B2B businesses are looking for a risk-free and convenient way of paying out. Hence, we have noticed an increasing number of new B2B payment solutions on the market. Here are the benefits that businesses across all industries will enjoy from the revolution

Improve cash flow

Ineffective cash flow management is the biggest cause of business failure. By automating all of the B2B transactions, you can easily see patterns in their incoming and outcoming cash flow via reports, which helps to minimize any unwanted results from financial management failure.

Because of that, business administrators can give a quick solution for financial problems.

For example, they can either enforce strict deadlines or stop working with the merchants that often routine payment late. At the same time, B2B payment solution also makes it more simple for customers to pay you and help you receive the payment faster.

cash flow

Save time and resources

By adopting a B2B payment solution, much of the repetitive work, such as depositing and reconciling checks that had been done manually, is automatedly handled. This improvement gives you and your employees more time to focus on other vital areas of operation or product development.

Enhance security

While modern payment solutions may still be immune to hackers, most payment providers own top-notch security and a team of experts and engineers working together to detect any instructions and even prevent them from happening in the first phrase. This strong guard, combined with digitally tracked payment systems, can help to deliver improved security.

The best B2B payment platforms and providers

On the market, we can see lots of banks, fintech firms, or industry specialists providing B2B payment platforms, and it seems as more and more new platforms are coming online every day.

Let’s check out our the top options listed here:

Fundbox Pay

Fundbox Pay

Perfect for: B2B firms buying or selling on net terms

Fundbox is a small business lender who focuses on invoice financing and business lines of credit. By using Fundbox, the seller can receive payment on an invoice instantly while the buyer can postpone up to 60 days to pay for the goods or services.

Here is how it works: the seller invites their buyers to Fundbox Pay and sends them a payment request after they are approved.

Once the buyer accepts the request, Fundbox will send the amount to the seller right way, minus a 2.9% processing fee. The approved buyer has 60 days to pay Fundbox the balance. After 60 days, they can extend terms for up to one year for a flat weekly fee.

Furthermore, Fundbox also provides checkout functionality for B2B eCommerce and wholesale business, which is similar to the checkout experience via credit card.

Paypal

Paypal

Perfect for: B2B businesses using invoices to bill their clients or pay their vendors via this network.

Paypal allows the buyers to pay both by credit card and debit card with their Paypal balances or a linked bank account at no cost. At the same time, the seller’s fee is 2.9% plus $0.30 per transaction. There is a Paypal mobile version that helps businesses send and receive money via mobile.

Especially, Paypal also offers more advanced B2B payment features - Paypal Payment Pro with the cost of 30$ on top of transaction fees paid monthly.

Thanks to this upgraded plan, payments by phone, mail, fax can be all accepted. Besides, it is also simple to design and host an online checkout experience for wholesales buyers.

Square

Square

Perfect for: B2B business who focus on providing online payment page for customers

Square is one of the heavyweights in the market. Like Paypal, Square supports a number of B2B payment solutions, including credit card, which costs 2.75% per transaction and invoicing, which costs 2.9% plus $0.03 per transaction. Unlike Paypal, users can not pay with a linked bank account on Square.

Quickbooks

Quickbooks

Perfect for: B2B business who already use that for accounting Quickbook is a popular payment provider for small companies, well-known for their accounting software. Quickbooks offers a B2B payment solution that works as same as Square and Paypal.

However, one of the most outstanding features that make it different from the rest is that ingoing and outgoing payments automatically sync with the user’s accounting statements. That results in a simple process for bookkeeping and taxes.

The fee by credit card is 2.9% plus 0.25 for each transaction, which is a bit slower than Paypal and Square. If businesses accept to pay $20 monthly or have total transactions, over $7,500 in B2B payment can enjoy a discount off these rates.

Due

Due

Perfect for: B2B businesses which want to use one platform for their payments and time tracking solution

Due provides full-scale payment solutions, including electronic invoicing, digital wallet, mobile payments, project management, and time tracking. The company offers a low-cost payment processing fee, starting at 2.8%, which makes Due a good choice for law firms, bookkeepers.

Transpay

Transpay

Perfect for: B2B businesses who do business across the border Transpay service supports international payments to and from 200 countries in 60 currencies. This kind of payment is highly recommended for small businesses because the higher cost they need for wire or bank transfer overseas is significantly limited by Transpay.

By using this payment method, business owners can send money directly from their US bank account to their local bank account in local currency. The transaction fee is so much lower than bank wire fees, ranging from $5 to $20 for each transaction.

What to look for a payment provider

When searching for a B2B payment vendor, there are some important things to consider.

Utility

Depending on your specific use case, you need to choose a suitable payment platform. For example, if you do business internationally, it is essential to use a platform that can transfer payment cross borders.

Reliability

Payments are so important. Make sure that your chosen payment provider is the one that you can rely on every day.

Integration

Out of date payment solutions fall short of business expectations to see their finances clearly. Today’s new payment solutions integrated with common accounting tools, can solve this problem.

When deciding to use any payment platform, you should make sure that it is not only the right one making payment easier but also giving you a better view of your financial picture.

Approval process

A simple, quick, and straightforward process for payment application is one of the critical elements that every business owner is looking for. Make sure that your favorite payment platform can meet up with this requirement.

Simple to use

The purpose of changing the payment platform is to make things easier. Therefore, let’s find the one that is quick and intuitive.

Best practices for B2B payment

Every business is different, and there is no size fits for all. Possibly, the payment solutions that work well for your company can not be used for another business and vice versa. Here are the best practices that will be helpful for both B2B buyers and sellers.

For sellers

  • Invoice customer right after the transaction
  • Send follow up reminders when the payment deadline nears
  • Apply early payment discount and overdue payment penalties
  • Consider credit card allowance

    For buyers

  • Wait to settle your invoice until they are due
  • Use the credit card for the payment transaction if you still need time for reconciling the cost
  • Inform the vendor if you miss a payment deadline
  • Negotiate with your vendor for more favorable terms of payment
  • Try to pay via electronic platforms instead of checks

Final thoughts

The technology has transferred all aspect of your modern life, including business. Today, business transactions are a lot complicated than the past, which requires us to apply smart and convenient payment platforms. Choosing the right payment platform for your B2B business is like choosing the right boat for your journey.

There are a lot of options in front of you, but you should choose the one that almost fits your business case. We hope that this article would be a useful source of information for building your B2B sales strategies. We greatly appreciate your reading time!

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