A Guide to Digital B2B Payments

What are Business-to-Business Payments?

B2B payments, or business-to-business payments, are described as exchanges of products or services between two firms. Typically, there are two parties involved in a B2B payments transaction: the buyer and the supplier.

The buyer (purchasing organization) is a firm that purchases products and services from vendors/suppliers.

The purchaser is the entity that makes the payment.

Supplier (vendor) – The supplier is the organization that manufactures, sells, and gets money for the products and services. Learn the Best payment methods for businesses to pay vendors and suppliers

B2B (business-to-business) payments are more complicated than B2C (business-to-consumer) or P2P (peer-to-peer) payments since they need significantly more processing stages. They are also impacted by a number of variables that do not affect consumer payments, including the following:

Payment Volume – Business-to-business payments are often substantially larger than consumer-to-consumer payments. Globally, the B2B payments business is expected to be worth $120 trillion each year, compared to the estimated $1.84 billion P2P sector.

Payment Frequency – Businesses may be required to make regular payments, such as paying for a supplier’s monthly supply of products.

Industry-Specific Processing Requirements – Different businesses have unique processing requirements, such as healthcare providers that must adhere to HIPAA and privacy standards.

The Number of Teams Involved – Each B2B transaction is likely to include many teams, including procurement, billing, accounts payable, and accounts receivable, among others.

Processing Time – Unlike P2P payments, which are sometimes instantaneous, B2B payment processes often run 30 to 90 days.

Payment Methods for Business-to-Business Transactions

Payment techniques for business-to-business transactions may be roughly classified into two categories: paper checks and digital B2B payments.

Pay Checks – According to a recent poll conducted by the Association for Financial Professionals, 51% of all B2B payments are still performed by paper check, despite the fact that this technique is inconvenient and insecure.

Digital B2B Payments – Digital B2B payments include the use of an online, electronic payables platform that enables firms to make payments to suppliers efficiently while minimizing risk exposure. ACH, credit cards, wire transfers, electronic funds transfers (EFT), and payment gateways are all examples of digital payments.

With many firms recently transitioning from in-office to remote work, businesses saw the advantages of digital B2B payments, since many paper checks were being delivered to businesses with no one in the office to collect and deposit them.

Benefits of B2B Payments Benefits to Developers Infographic illustrating facts on B2B payments

• Versatility – Integrating digital B2B payments into your software solution increases its versatility by providing a faster and simpler method for your clients to manage procurement, invoicing, and invoice payments.
• Competitiveness – Due to their simplicity and security, digital B2B payments are becoming a popular alternative across sectors. Software developers must include this capability into their solutions in order to stay competitive. It’s a differentiation for your product that may help enhance acceptance of your software solution.
• Income – Including digital B2B payments as part of a solid payment processing software solution may help software developers enhance their close ratio while also introducing another revenue stream. Software providers may continue to earn income from the payments their clients handle on the front end while simultaneously earning revenue from the accounts payable solutions they offer on the backend.

Advantages for Your Customers

• There will be no changes to the current payables process – A significant advantage of enabling digital B2B payments is that the procedure for your customers stays unchanged. Their operating processes remain unchanged.
• Reconciliation – With digital B2B payment systems, 100 percent reconciliation is possible.
• Cost Savings – The cost of issuing and processing a paper company check ranges from $4 to $20. This expense is eliminated with digital B2B payments.
• Automating the Process – Automating the invoicing and payment procedures streamlines the firm by reducing manual operations. It enables the financial staff to concentrate on other critical responsibilities.
• Errors are Reduced – Manual recording, tracking, and reconciliation are prone to mistake. These mistakes are minimised with digital B2B payments.
• Integrity and Accuracy of Data – Errors on a paper check might result in the check being returned, so delaying the payment process.Digitalization enables more precise data collection.
• More Secure – Paper checks are readily stolen from the mail. In recent years, businesses have reported an increase in the theft of vendor payment checks. Excellent digital solutions are complemented by sophisticated payment security measures.
• Improves Cash Flow – When firms employ automated B2B payments, they can monitor their cash flow trends more readily than when they use paper checks. They have more control over when they pay suppliers – which helps them stay afloat. Poor cash flow management is responsible for 82 percent of small company failures.
• Improves Communication – Through the use of digital B2B payments, a closed-loop communication network may be established, hence strengthening the buyer-vendor relationship.

Conclusion

Digital B2B payments provide a number of advantages for both software developers and their clients, including increased payment security, more accuracy, and a simpler, faster procedure. They enable developers to enhance their offerings, and they assist merchants in streamlining their business procedures.