12 Popular B2B Payment Options You Should Offer to Your Customers
In recent years, the way that companies have collected B2B payments from their clients has begun to change. Firms have moved away from manual invoicing and payment chasing to using online platforms that manage and automate many of these time-consuming processes.
Read on to find out 12 of the most popular payment methods B2B payment platforms can handle, why it makes sense for firms to start using one, and how to choose the right system for your company.
12 Popular Business-to-Business Payment Types
Twelve of the most popular methods of handling transactions in the current payment landscape include the following.
1. Credit and Debit Cards
Credit cards and debit cards allow business decision-makers to make instant payments on invoices over the phone and online and are the most popular type of electronic funds transfer.
According to PYMNTS, 48% of all companies settle supplier invoices using credit cards with 19% choosing debit cards, making paying by card one of the most common ways of completing transactions in the U.S.
2. Virtual Cards
Virtual cards operate in exactly the same way as credit and debit cards, except they exist only in a digital form. Many fintech providers — like Capital on Tap, Ramp, and Teampay — allow firms to spin off virtual cards from their mobile and web apps.
For example, a company could create a virtual card to use with different vendors or for expense categories. For example, they could create one virtual card to buy from their office supplies provider and another for their online subscription services. Or they can be useful for providing individual employees with a company card.
3. Digital Wallets
Companies can use digital wallets to pay their suppliers using a smartphone or smartwatch. Two of the best-known digital wallets are Apple Pay and Google Pay.
This is how they work. As an example, a bodega owner links their physical and virtual credit and debit cards to their digital wallet. When they’re at the wholesaler, they choose which card they want to use on their digital wallet and tap their mobile device over the card terminal. From there, the process works like a regular credit card payment.
4. Wire Transfers
Wire transfers allow business customers to send money from their bank account directly to another business. The cash arrives almost instantly, but wire transfers can be expensive, costing up to $50 for each wire transfer.
The two systems most frequently used for this real-time payment method are Fedwire and CHIPS. Although this type of bank transfer is widely used and well-established, there is a heightened risk of fraud because you need to share sensitive financial information with your customers to start a transfer.
5. ACH Payments
Automated Clearing House (ACH) transfers offer much lower processing fees than wire transfers, but they can take up to two or three business days for the money to transfer.
However, on the positive side, ACH transfers are much more secure, reducing your chances of falling victim to fraud.
6. SEPA Transfers
If you do business in Europe and want to accept faster payments from customers, the Single Euro Payments Area (SEPA) system manages cross-border transfers of euros between 36 countries.
Settlement is normally one to two business days, depending on the SEPA service you use. But the SEPA Instant Credit Transfers option offers settlement within 10 seconds.
7. Paper Checks
Although online payments are growing fast in popularity for settling business transactions, paper checks retain a surprising hold over many businesses. According to PYMNTS, 81% of companies still use checks to pay their suppliers.
This is despite the fact that settlement times on paper checks are among the slowest. In addition, if you accept a check, there is a risk it will bounce if your customer doesn’t have sufficient funds in their bank account.
8. Electronic Checks
Electronic checks, also known as e-checks or direct debits, are the digital versions of their paper counterparts. While it can take less time for a payment to clear with an electronic check, you still may experience a delay of three to five business days.
E-checks use the ACH system to transfer payments between accounts. To start using and accepting e-checks, you must register with a payment processor to access the service.
9. Peer-to-Peer Platforms
Some companies use firms like Venmo and PayPal to take digital payments from consumers and other businesses. After these peer-to-peer platforms collect a customer’s money, they then transfer the funds to the company’s bank account. These platforms are used for both B2B and B2C payments.
The reasons buyers use peer-to-peer platforms are because they are widely accepted, and they don’t share their banking or payment details with vendors.
10. Financial Services
For many larger purchases, businesses can offer finance packages to clients to make their goods and services more affordable. For example, many vendors offer equipment financing to their customers so that they can pay for the machinery, tools, and vehicles they need over a number of years.
Other popular business finance solutions to make purchasing easier for potential clients include:
Credit accounts: Some companies provide business customers access to a credit line for their goods and services.
Leasing: Vendors partner with financial institutions to provide leasing options on vehicles and other high-ticket items to spread the cost and avoid the need to purchase outright.
Purchase order financing: Some firms, especially those selling overseas, offer short-term financing to customers so they can complete larger purchases.
11. Business Buy Now, Pay Later
Retailers have offered B2C Buy Now, Pay Later (BNPL) options for many years so their customers don’t have to pay for goods and services in one lump sum. Companies like Backd now provide firms with B2B Buy Now, Pay Later, meaning that businesses can offer net payments to their clients on commercial goods and services.
Unlike with more traditional financial packages, there are no credit checks with B2B Buy Now, Pay Later, and the turnaround time is nearly instantaneous.
12. Cash
Cash is the most traditional form of payment, although its usage has dramatically dropped in recent years. Forty-one percent of Americans told Pew Research that they don’t use cash in a typical week to pay for goods and services.
Usage rates are likely to be lower in B2B transactions because of the higher average order values and the widespread acceptance of digital forms of payment. In addition, there are issues with using and accepting cash, like security risks, processing costs, tracking transactions accurately, and the need for safe storage.
Why Are Businesses Switching to B2B Payment Platforms?
Key reasons why businesses are switching to online B2B payment platforms include:
Lower costs: It can cost between $15 and $40 to manually process an invoice. Costs drop considerably if you implement a B2B payments software package for your business, especially one that includes accounts payable automation functionality.
Time savings: Processing times are much longer when invoices and payments are handled manually. You can free up staff to do more by switching to a B2B payment processing platform. You can also see the progress of individual transactions much more easily, meaning you can react faster to payment issues or discrepancies.
Fewer late payments: In accounts receivables, Days Sales Outstanding (DSO) measures how long it takes your customers to pay. You can significantly shorten the time it takes for customers to settle outstanding invoices by offering immediate payment options, like credit cards, B2B BNPL, and e-checks.
Recurring payments: Many businesses now choose to offer their goods and services (like accounting software and cloud storage) on a subscription basis. Modern B2B payment systems allow you to collect regular payments and vary the amount billed if necessary.
Enhanced customer experience: The harder you make it for a customer to pay, the longer it’ll be before you get paid. Online platforms allow your clients to settle up using the method of payment they prefer. This helps build stronger business relationships and may also increase your chances of winning new accounts and giving your existing clients a reason to keep ordering from you.
Better data: Having up-to-date financial and payment data means that companies have the accurate and timely information they need to assess their level of performance and better plan investments and expansion.
More secure: Businesses are less likely to be victims of payment fraud by using a modern B2B payment platform. Many systems include PCI-DSS compliance and data tokenization to protect client data as part of their core service.
Multi-currency options: For e-commerce businesses and companies that trade overseas, multi-currency functionality can reduce costs and reduce the complexity of pricing goods and services individually for the markets you serve. For e-commerce businesses in particular, you can allow your customers to select their native currency at checkout.
6 Factors to Consider When Choosing a B2B Payment Solution for Your Business
When selecting a B2B payment software package for your business, assess the vendors you shortlist on the following six criteria:
Multiple payment options: Choose a platform that supports multiple B2B payment methods to make settling invoices as easy as possible for your clients. If you do business internationally, ensure that the system you choose can handle the currencies customers pay you in.
Competitive fees: Each provider will levy their own fees, which will include subscription charges and transaction costs. Some platforms may charge extra for access to particular features. Ask each vendor for a breakdown of the likely total costs for using their system.
Integration with your existing apps: Many platforms offer third-party native plug-ins to other apps while others rely on API or Zapier/Make-based solutions. Look for a platform that offers connectivity with the apps you already rely on so that your financial data is kept up to date and is easily accessible to senior management.
Customizable workflows: As with many CRM and ERP apps, B2B payment platforms now allow you to create customized workflows. You can use them to automate and streamline time-consuming manual processes like data entry, invoice generation, payment reminders, and bank reconciliation. Look for a system that offers the most flexibility and greatest ease of use.
Adjustable payment terms: You have a unique relationship with each of your customers and you need to make sure the B2B payments platform you choose can mirror your current payment cycles. This means your customer won’t notice any difference and they can benefit from the same arrangements they already have with you.
Reporting and analytics: B2B payment platforms give companies access to all their transaction data so they can track key metrics like DSO. This gives firms real insight into how well their accounts receivable team is performing as well as highlighting which payment methods deliver optimal results.
You may want to consider streamlining your B2B payments by working with an ISO or payments partner. These partners work directly with the various financial institutions and vendors that provide the payments and solutions you need. This can help you get the right mix of services you need and take some of the management aspects off your plate.
For example, these partners can collaborate with Backd to offer you financial services like B2B BNPL.
Improve How Your Business Accepts and Administers B2B Payments
B2B payment platforms offer businesses a host of benefits to bill business customers more efficiently and collect money faster. Their features help firms to improve their cash flow, meaning they have more working capital to run their company with.
These apps also help you to adhere to best practice principles when handling and processing sensitive customer financial information, even when offering a wide variety of payment options. From a senior management point of view, a B2B payment system gives real-time visibility into the health of the company which can lead to better decision-making and forward planning.
Whether you’re an ISO partner that wants to offer a B2B BNPL solution to your customers or you’re a business who wants to add a B2B Buy Now Pay Later option for your purchasers, Backd can help. With BackdPay, you can integrate a BNPL into your website checkout system.
Manage your clients easily in the Backd portal, get paid instantly on your deals, and benefit from a 150%+ uptick in order values.
Become a Backd partner today.
