Business-to-business (B2B) payments represent an even greater opportunity. But payment solutions are still lagging. The Association for Financial Professionals found that 51% of B2B payments are still done by paper checks. Paper checks aren’t the most convenient or secure way to pay. A majority of companies plan to move to digital payment methods for these reasons.
Payments can be made, received, and processed more easily with digital B2B products. You can also improve your cash flow, something every small business owner wants. Learn more about B2B Payments and the best B2B products for small businesses.
Overview of B2B payments
B2B payments are payments between two businesses for the exchange of goods or services. Paper checks remain the most popular way that businesses pay each other. Digital B2B payment solutions allow businesses to receive, process, and issue payments faster, which improves ‘s Cash Flow.
B2B payments are behind consumer payments in terms of innovation. This is because B2B (payments between businesses) are impacted by factors that do not affect consumer payments.
- Volume: Payments made between merchants are usually higher than those between consumers. The B2B payment industry has a total value of $18.5 trillion. This dwarfs the P2P payment industry, which is only $709 billion.
- Frequency: Many merchants have contracts which allow them to conduct regular transactions. A retailer, for example, might receive a monthly shipment from their supplier.
- Industry: Some industries have specific payment requirements. Healthcare providers, for example, often use B2B custom payment products due to HIPAA regulations and privacy laws.
- The people involved: Each B2B transaction involves multiple parties, including the accounts payable, invoice, billing and procurement teams.
- Payment delays: When paying a family member or friend for something you do, it is often done on the spot (e.g. If you split a restaurant bill, it’s usually done at the time of the event. B2B payments cycles can last up to 90 days.
More and more companies are choosing digital payment methods to track B2B payments. 51 percent of organizations pay with checks, down from 81% in 2004, and 44% of companies still receive payments by check.
B2B payment processing: 5 ways to send and receive money
Five main methods exist for sending and receiving B2B payments.
- Checks: This category includes paper checks as well as electronic checks that are issued by the buyer to the seller. The seller’s account will be credited by the buyer’s account when the check is deposited.
- Wire Transfers: These are money transfers between banks, which are sent through a financial system like SWIFT. Money is usually delivered within hours with wire transfers.
- Electronic banking transfers: These are payments made between banks via the Automated Clearing House. It is one of the most reliable and safe payment systems. However, bank transfers can take up to a week longer than wire transfers.
- Credit Cards (including virtual cards for one-time use): The buyer can delay the payment by one or more billing cycles.
- Payment gateway: A Payment Gateway is a payment platform that allows the buyer to make online payments for goods and services during the checkout process.
The cost and security of each option are different. Most businesses are moving away from paper check payments and towards electronic and digital payments. We’ll show you some B2B payment products that cover a range of payment processing options.
Benefits of Using B2B Payments
There are many reasons why your business may be reluctant to abandon check payments. Payment apps and billing and invoicing software make B2B payments faster and easier. They can also improve your cash flow.
Improve Cash Flow
Starting a small company is a risky endeavor, as failure rates are around 50% within the first five years of business. Cash flow issues are the leading cause of business failure. You can better track your cash flow by automating your B2B transactions instead of using paper checks.
Reports in payment software and apps give you a quick overview of your receivables and payables. If you have a few merchants who pay you late regularly, you could either enforce stricter payment deadlines or stop working together. B2B solutions make it easy for your customers and you to receive payments. Invoicing apps, for example, allow your customers to pay you in one click instead of writing a check to mail to you. It will help you to improve your cash flow by getting the money into your account faster.
Simple Bookkeeping and Taxes
B2B solutions can also be used to streamline your accounts payable and receivable. It can be difficult to manage a large number of checks that are coming from different parties or going in various directions. You can easily lose checks or make mistakes when you enter the check amount into your accounting software.
B2B Payment Solutions automatically record and store payments. Some integrate with accounting software or bookkeeping programs to make tax filing and bookkeeping easier.
Save Time and Resources
You, your team, and your clients will save time by adopting a B2B payment solution. Your customer does not need to mail you a check. You don’t have to reconcile and deposit the check.
While this may not seem like much, over time, the cost can amount to hundreds or even thousands of dollars. You could spend more time with your team on the core products and services.
Mail theft is increasing in cities all over the country. Another reason to switch to B2B solutions is to avoid mail theft. Digital solutions are not immune from hackers or security breaches. However, the majority of payment providers employ a team consisting of data experts and engineers to protect your information (and that of your customers). Pay digitally also leaves a more transparent payment trail.
Also read: 15 Mobile Payment Apps for Business
The Best B2B Payments Solutions
The B2B payment space is a crowded one. B2B payments are offered by several banks, fintech companies, and industry experts. New companies enter the market frequently.
Here are the top B2B payments solutions we found:
1. Fundbox Pay
Best for Businesses that buy or sell net terms.
Fundbox is an invoice finance and business line of credit specialist for small businesses.
Fundbox Pay is the newest product from Fundbox. It provides a B2B marketplace.
Fundbox Pay gives sellers the option to receive payment immediately on an invoice while giving buyers up to 60 calendar days to pay. Fundbox Pay allows sellers to invite their customers and, if they are approved, send them payment requests. Fundbox will send the payment immediately to the seller once the buyer accepts. The 2.9% fee is similar to that charged by PayPal and Square for credit card payments. Fundbox can be paid in full within 60 days, without interest. The buyer has 60 days to pay Fundbox, interest-free.
Fundbox Pay also offers a checkout feature. Fundbox Pay is a great option for B2B or wholesale websites. Credit decisions are made in minutes. If the buyer is approved, they will be able to complete the checkout, and both the seller and buyer will get paid immediately. All of this happens when credit is needed, just like online shopping experiences that allow you to pay by credit card. It’s not necessary to waste time with emails and faxes in order to set up payment terms.
Fundbox Pay B2B solutions shift the risk that the buyer will not pay the seller. It is very similar to how credit cards are used in the consumer market. The merchant is paid immediately when a person uses a credit card to pay for a movie or a meal at a restaurant. However, the consumer will defer payment until the next billing cycle. Fundbox Pay extends the concept to B2B transactions.
Best for B2B companies that bill customers and pay vendors using invoices.
PayPal is one of the biggest players in B2B payments. PayPal allows you to send an invoice by email. They can use their PayPal balance or linked bank account or credit or debit cards to pay by clicking the “pay” option. You can easily manage your invoices through your PayPal account and schedule invoices ahead of time. You can also accept installment payments.
The seller charges a fee of 2.9% plus $0.30 for each transaction when a buyer uses a debit or credit card. When the buyer uses a PayPal account or linked bank account, there is no fee. You can send and receive mobile payments, which is useful for truck drivers who want to charge businesses upon delivery.
A $30 monthly fee is added to transaction fees if you’d like more advanced B2B payment features. PayPal Payments Pro is an upgraded plan that allows you to accept payments via phone, fax, or mail. You can design and host a wholesale online checkout experience.
Best for B2B businesses that want to offer online payment pages for their customers.
Square is a popular B2B payment company. Square Cash is a popular app that you may have heard about if you’ve ever received or sent money from a family member or friend. Square Cash can also be used for B2B transactions. Cash. app allows merchants to create a unique Square Cash username, also known as a cash tag, for their business. You will be prompted to set up a payment webpage that allows visitors to pay by debit or credit card. Square Cash costs 2.75% for each transaction.
Square has a similar invoice service to PayPal. Square Invoices lets you send customized invoices via email to your customers. Customers can pay by credit card or debit card. Square customers cannot pay using a bank account linked to their PayPal account. You can track invoices easily, see which ones have been paid and viewed, and whom you might need to remind. You can send automated reminders to customers if they haven’t paid an invoice by a certain date. Digital invoicing costs the same as using PayPal — 2.9% plus $0.30 for each payment. The fees are slightly higher if you pay by phone or if you use a credit card that is stored. Square Invoices Plus is an option for extra features, but it will cost you $20 per month in addition to processing fees.
Also read: Top 10 Cryptocurrency Payment Gateways
Best for Businesses that use QuickBooks to manage their accounting.
QuickBooks is a well-known name in the small business world, and its accounting software is its biggest selling point. QuickBooks offers a B2B solution for payments that is similar to Square or PayPal. You can send invoices via email to your customers. Instant notifications are sent when they view and pay the invoice. Progress invoicing allows your customers to pay in installments for a service or product.
QuickBooks customers can automatically sync their accounting statements with incoming and outgoing payments. It makes tax and bookkeeping much easier.
There is no fee when customers pay by bank transfer. The fee for credit card payments is 2.9% plus 25c per transaction. This is slightly less than PayPal or Square. Businesses that pay a $20 per month fee or accept more than $7,500 in B2B payments each month can receive discounts.
Best for B2B purchasers who want to centralize their payments using a credit card.
Plastiq is a unique player in the B2B payments space. The fact that vendors have different preferences for payment methods is one of the reasons that B2B payments are difficult to manage. Another vendor may request a wire transfer while the first requests an ACH transfer. Plastiq allows you to centralize payments made by credit cards for your vendors.
Plastiq pays your sellers immediately, according to their preferences: check wire transfer or ACH transfer. They will then charge your credit card the total amount plus a 2.5% fee. This charge will appear on your credit statement just like any other. You can also earn cashback and credit card rewards. Plastiq can be used to pay for almost any type of merchant. This includes your accountant, lawyer, and supplier.