Payments in consumer web shops are pretty straightforward.
However, the process becomes more complicated when it comes to B2B payments.
For one, there is a sheer volume of transactions. There are also regulations, depending on where your business is based and where it operates worldwide.
While the B2B payments ecosystem may have once revolved around paper-based, manual processes, in recent years, it has shifted toward cloud-based, automated payment platforms.
With legacy processes ingrained in the industry, it may take some time for electronic payments to make serious headway, but there’s no doubt it’s heading in that direction.
It’s important for businesses to carefully consider the payment methods available and choose the ones that best meet their needs in terms of security, speed, and cost. Some businesses may prefer to use multiple payment methods to provide flexibility and ensure they can complete transactions smoothly and efficiently.
Let’s look at traditional and new B2B payment methods and how to offer them to provide a good customer experience and automate internal payment processes.
In 2023, their use is widespread. They’re secure and make for easy payments.
You will need to integrate your online shop with a payment processor to have a credit card payment page.
Wire transfer is a common payment method for B2B transactions, as it is fast and secure. A wire transfer involves transferring funds electronically from one bank account to another.
Wire transfers are the standard for large B2B payments, particularly international payments. Wires are incredibly flexible, as they can be initiated from a bank or several other non-bank institutions, such as Western Union or MoneyGram.
However, you have to factor in additional costs as wire transfers are seldom free, as the sender almost always has to pay a processing fee to initiate the payment, and the recipient may also have to pay.
In addition to high fees, Wire transfers do not provide a decent exchange rate, and you cannot reverse your transaction once you have done it.
Another common B2B electronic payment form involves the automated clearing house network – ACH.
ACH transfers and wire transfers are quite similar. However, there are some essential differences between the two: ACH transactions tend to be significantly cheaper than wires, often free, but they typically take longer to process than wires.
Unlike wires, ACH transactions can be refunded or canceled by either party, but they are effective in real-time.
Whereas wires can be cross-border, ACH is limited to domestic transactions.
SEPA (Single Euro Payments Area) is an alternative to ACH payments in Europe. SEPA payments are fast and efficient and typically processed within one to two business days. Like ACH payments, SEPA payments are initiated by providing the payee’s bank account information and the payment amount, and they are processed through a network of financial institutions.
While not as common as electronic payment methods, some businesses still use checks for B2B payments. A check is a written order to a financial institution to pay the payee a specific amount.
Although checks may seem old-fashioned, many businesses are reluctant to let go of deep-rooted operations and systems that may be difficult to digitize.
In B2B, it is relatively common for business customers to pay via purchase order. A purchase order is a document issued by a business to another business outlining the goods or services the business is ordering and the payment terms. The supplier will then invoice the business for the goods or services once they have been delivered.
The customers need to be approved by the merchant before paying with a purchase order is allowed. Setting up a credit limit is also a common practice. Merchants sometimes allow prospects to pay by a credit card while reviewing their credit application.
When a buyer places an order, he has a term window to pay the invoice.
B2B payment terms refer to the specific terms and conditions that are agreed upon by two businesses for the payment of goods or services. These terms may include the due date, payment method, discounts or incentives offered, and penalties for late payment.
Here are some common B2B payment terms.
- Net 30 means the buyer has 30 days to pay the invoice after receiving the goods or services.
- Net 60 means the buyer has 60 days to pay the invoice after receiving the goods or services.
- With cash on delivery term, the buyer pays for the goods or services at the delivery time.
- Prepayment: Under this term, the buyer pays for the goods or services before they are delivered.
- Credit terms: Under this term, the buyer is granted a line of credit by the supplier and is allowed to pay the invoice at a later date.