B2B Payments Explained
The B2B payment landscape is evolving rapidly. As more businesses shift to digital selling, it’s important for merchants to understand the B2B payments ecosystem and its challenges and opportunities.
With digital transformation ramping up, it’s also a good time for forward-thinking businesses to take stock of their B2B payment systems and how they manage their accounts payable (AP) and receivable (AR) departments.
Digital payments can offer a path to simplifying and streamlining the AP and AR processes, while also helping your business improve cash flow. For example, the 2019 Electronic Payments Survey by the Association of Finance Professionals showed 72 percent of finance leaders believe application programming interfaces (APIs) will have a major impact on B2B payments, followed by open banking payments (60 percent).1
A Quick Overview of Modern B2B eCommerce Payment Methods
Here are five B2B payment methods companies should understand:
- Bank Transfer (ACH and Wire Transfer): ACH transfers allow instantaneous transfer of funds for business needs, like payroll deductions, tax refunds, and direct deposits. But they tend to be better for repeat sales and purchases, given the upfront paperwork that’s involved for both parties. Wire transfers allow businesses to send funds through intermediaries like SWIFT — although the fees for each transaction can add up quickly if you are too reliant on this method.
- Credit Card Payments: Credit cards can be a useful way for businesses to buy services, without having to worry about cash flow — but for sellers, they can come with risks. As Practical Commerce explains, B2B order costs can exceed what was authorized during checkout, especially when shipping charges are unknown, or when customers edit orders after making them.2 While cards may be useful for building up loyalty rewards, such as frequent flyer points, they do come with significant interest and fees.
- Purchase Orders (PO): A Purchase Order is an authorization a company sends to a supplier to buy specified goods at a certain price. When the supplier accepts a PO, it becomes a legal contract both parties must complete.3
- Paper Checks: The US lags the rest of the world in its approach to checks. There are signs that America’s reluctance to part with this paper payment method is shifting. Check use fell to an all-time low of 42 percent in 2019.4
- B2B Payment Gateways: A payment gateway is an online or in-store way for merchants to accept credit and debit card payments from customers. Of course, getting paid can be full of friction points. Poor online checkout processes can affect receivables and hamper your order-to-cash process.
What Should You Look for in a Digital B2B Payment Platform?
In 2020, digital payment methods are becoming increasingly favored by international businesses. Given the growing complexity of B2B payments, companies can become overwhelmed by options or just plain nervous about dealing with multiple vendors and integrations.
When selecting a B2B payment processing company, consider their ability to deliver fast and locally preferred payment options everywhere you do business. Minimizing or eliminating the need to integrate with multiple vendors gives you the agility to quickly transitioning to a digital commerce model.
The ability to accept real-time payments can also help your business increase cash flow and cut the days your receivables remain outstanding before collection.
Finally B2B businesses need to ability to payout to global suppliers, partners and contractors. A single solution for payments and payouts can dramatically simplify B2B eCommerce payments for your business.
Solve B2B eCommerce Payments and Payouts with one Provider
Explore how Rapyd simplifies collecting and disbursing funds between businesses.