Businesses often require invoices and solidified payment terms when trading with other companies. Suppliers and buyers often go through a lengthy process of creating a contract and producing a detailed paper trail. Security can be a lot more critical for these payment systems, as the price of these transactions for vendors and buyers is usually quite large or on a reoccurring schedule.
As you consider B2B payments options, it's important to think about your company's needs and structure. Here are some B2B payment methods to consider.
What are B2B payments?
Business-to-Business Payments (also known as B2B Payments) are monetary transactions between two companies. These payments often are contractual, repeating transactions but also can be single-time purchases. The B2B payment process can happen in the eCommerce sector, through seller partnerships, or via cross-border payments with international partners. There is no one method in which these payments are made, and they range from traditional paper checks to electronic payment methods.
How are B2B payments made
The payment options you use for B2B transactions can have severe effects on the process. Transaction fees can add up over time for a company, and payment delays can have serious repercussions for your cash flow. On top of that, you have to consider the security of your transaction. For these reasons and more, it is crucial to research your options to find what is best for your company and its needs.
Most people carry a credit card these days, whether for personal use or business use. These payment methods are most common in business-to-customer transactions. There are different credit card providers, such as Mastercard and Visa, and different transaction fees depending on the card and your processing method. Credit card payments aren't ideal for B2B payments due to their high processing fees of sometimes 4%.
ACH payments (Automated Clearing House)
ACH payments are electronic payments that go through an Automated Clearing House Network, managed by a non-profit called the National Automated Clearing House Association (NACHA). These are often referred to as "direct-deposit" payments, "e-checks," or "direct pay." This online payment platform is becoming more and more popular due to its high level of security. These payment methods are fast and simple, arriving in usually about 1-3 business days. These payments often cost less than $1, which is significant cost savings compared to credit cards.
Wire transfers are not super common unless transferring a significant sum of money to someone you know well. With these payments, money goes straight from the buyer's bank to the seller's bank before ending up in their business account. While this seems secure, there are ways that someone could steal a person's information and interfere in the transaction. On top of this, fees can be up to $50 per transaction, depending on your bank's policy.
PayPal and other digital payment platforms
Digital payment methods are a huge trend right now, facilitating timely payments and easy checkout processes. Paypal, Venmo, and Zelle are all often used for these payments. These are much more common in P2P transactions due to their easy-to-use interfaces, but businesses can use them for payment processing. These different platforms have their own rules and fees, so it is essential to do your research on the individual company before deciding to use them.
Paper checks are still frequently used in B2B transactions and remain one of the most common B2B payment methods. Checks are familiar and commonly accepted, making them a flexible and reliable payment option for many business owners. However, there are a couple drawbacks to consider: Checks can take several days to arrive to the recipient, and there's a risk they can get lost in the mail.
Cash transactions are not popular in the ever-expanding world of international trade. It is very risky to send large sums of cash through the mail and isn't preferred by most businesses. The paper trail associated with most other payment methods also offers convenient tracking to look back on in the future, which has to be manually done anytime you pay with cash.
The challenges of B2B payments
B2B payments come with many often complicated hurdles. There are ways you can overcome them through things like B2B payment solutions or careful planning. Because of this, it is vital to be aware of these issues before they potentially start cropping up for your company.
Many payment mediums
While you may have a set payment method that you are interested in using, that doesn't mean the businesses you are doing transactions with will want to use the same platforms. For example, while you may want to use ACH transactions, your trade partner may be adamant about digital payment platforms. To facilitate this, you have to learn how to make your accounting department flexible to your clients' needs to at least some extent. Luckily, there are B2B payment solutions that help make this process a lot easier.
Risk of fraud
As with any transaction, there is a risk of fraud with B2B payments. While this is always considered as we make purchases in any context, the larger transactions within B2B trading make it especially concerning. Finding a way to keep a detailed paper trail on your trades and accepting only secure payment workflows and methods will help you keep your company safe against fraud.
Lack of visibility
When trading with other companies, something vital is to try to be as transparent as possible about the transactions. Unfortunately, it isn't uncommon to get vague documentation, charges without a detailed breakdown, and other poor communication examples. Some B2B payment solutions help you keep your business partner transparent through their interface and help you stay transparent without extra effort on behalf of your team. This process helps keep your vendor relationships healthy and also protects you from fraud.
Fluctuations in processing time
Many factors can cause delays in the processing of B2B payments. Paperwork often has to go through both accounting departments, which can cause delay, especially if there are any discrepancies. The type of payment you use also can cause hang-ups. For instance, mailing a check can take significantly longer than many electronic payment methods. This variability means that even reoccurring orders aren't always processed at the same time each month, making these transactions sometimes unpredictable.
Benefits of using a B2B payment solution
With so many potential missteps in the B2B transaction process, many companies implement B2B payment solutions that help avoid these common issues. Many newer solutions include robust tools like automation that can keep your company more secure while also cutting down on your accounting department's tedious manual work. When deciding whether or not to invest in a B2B payment solution, consider not only the issues you may avoid but the benefits of implementation.
Improve cash flow
Delayed and inconsistent transactions with other businesses can dramatically impact your cash flow. Paying bills on time and getting your invoices paid by their due date is crucial, but piles of paperwork and other complexities can slow these processes. By implementing a B2B payment solution, you can process these payments through the platform itself, accepting online payments and paying bills through an easy interface. Doing this not only gives you an automated paper trail and notifies you upon receiving payment but helps streamline the workflow for both you and the other company.
Simplify bookkeeping and taxes
B2B payment solutions often connect directly to your accounting software, helping you to set up things like automated invoicing and data entry. These programs also sometimes allow you to email, upload, or scan bills into the system for more manageable payment and tracking. This process will enable you to not only bulk process these items but also easily track them through the automated workflow. With everything being accurately processed in the same way, bookkeeping and taxes become infinitely more straightforward as you aren't searching for missing invoices in your emails or on another person's computer.
Using an encrypted, secure payment platform like a B2B solution can take a lot of the risk out of transactions. While these types of security help a lot, they won't necessarily save you from fraud. Luckily, because of the detailed paper trail kept within many of these technologies, you'll be able to refute the transaction if needed.
Save time and resources
A shocking amount of time is spent in accounting doing manual, tedious work. Some B2B solutions integrate automation, which handles or streamlines a lot of this work. This shift allows your team to spend more time on much more vital tasks requiring human touch and analysis rather than wasting significant periods on data entry.
What should I look for in a B2B payment platform?
After looking at the benefits of B2B payments, you may be ready to start considering which platform to pursue. When doing so, make sure to reflect on which potential issues you are looking to solve and ensure that the product you go with supports you in those places. There are a few other things to consider when looking at potential options, such as automation integration and the platform's future flexibility.
The addition of automation within your B2B platform is a massive boost to your team's productivity. By handling data entry tasks and automating your AP and AR workflows, your team will have time to focus on more complex tasks. Letting automation handle these tasks also helps reduce human error, detects fraud, and gives automatic updates as the process goes through its workflow.
Integrations with accounting tools
Some B2B payment platforms integrate seamlessly with your current accounting tools. This integration makes the transition to the new technology much more accessible and helps your team continue working with familiar tools. Some B2B platforms even help you keep these accounting programs updated to ensure flawless integration throughout all of your products.
Ease of use
When implementing completely new technology to your team like a B2B payment platform, ease of use is huge. The point of automation and the other features that these tools provide is to make your team's job easier, not harder. As you decide which product you want to use, make sure that the platform's implementation and workflow are simple, quick, and empowering for your team.
Scales with your business
As your business grows, it can be challenging to start integrating new technology to help keep up with the workload. B2B platforms often use their automation and features in a way that can scale with your business no matter how many payments you are processing. This future-proofing is a crucial factor to consider as you look for new tools. You don't want to have to buy something new as your company grows to meet new demand.
Start using Routable for easy B2B payments
As you start researching the right B2B payment platform for you, consider Routable. Routable simplifies your B2B transactions by accepting online payments, helping you pay your invoices, and sending real-time notifications every step along the way. With integrated automation tools and direct connections with your current accounting software, Routable can help your team spend less time invoicing and help you collect payments safer and faster.
Automated accounts payable and receivable
Routable simplifies your accounts payable and receivable process. For AP teams, Routable gives you the option to scan, email, or upload any bill or batch file, allowing your team to process one or thousands of payments. You can automatically set up approval rules to get payments approved without slowing down your processes. You can also automate your receivables to get paid faster.
Deep integrations with your accounting software
Integration with your current software is a must. Routable has a seamless two-way sync with QuickBooks Online, NetSuite, and Xero.
API access to build more automation
Routable sophisticated API helps you create a powerful payments infrastructure for your business. Whether you're sending with 500 payments a month or 500,000, Routable will be able to handle it.
By implementing a B2B payment solution, your can help simplify a complex workflow, protect yourself from fraud, and save your team's time and resources. Whether a small company or a large one, automation and other technological tools can give your team the ability to excel.
To learn more about Routable, sign up for a demo so we can show you how we can simplify your business payments.