B2B payments: A small business guide

As someone who runs a small business in the B2B space, you know just how important the B2B payment process is.

From correctly matching invoices with payments to receiving payment on time, the B2B payment process can pose its fair share of challenges. Fortunately, using the right payment technology can help you streamline your processes and implement a robust payment workflow.

So how do B2B payments work, and what are the different payment methods commonly used today?

Follow this small business guide to learn more about B2B payments, from emerging trends to how you can set up and process B2B payments yourself.

How B2B payments work

Across the payments landscape, B2B payments generally follow the delivery of goods via your preferred supply chain or services. This is known as billing in arrears.

In simple terms, when a client requests goods or services from your business, you’ll fulfill the order and send an invoice. Once they receive the invoice, they’ll have a certain amount of time to make their payment based on your payment terms.

Once payment is submitted, you’ll process that payment. You may have to wait several days for funds to be available, depending on the payment method.

Depending on your relationship with the client and your payment needs, you can set payment terms like their billing cycle and how much they receive on credit. Consider factors like whether they’ve purchased from you before, their creditworthiness, and the transaction details. From using autopay to charge your clients to using a invoice generator to bill them, there are several ways to manage your B2B payments.

Types of B2B payments

Like other transactions, businesses can make B2B payments in a variety of ways. To help you better understand B2B payments, look at these common business-to-business payment methods.

Checks 

While checks may be a less common form of payment for B2C transactions, they’re still fairly common for B2B transactions. Despite their frequent use, paper checks are far from being the most convenient method of payment.

Accepting checks as a payment method can result in a less secure transaction. Checks are a major source of fraud because they lack the security measures of cards and electronic payments and can be easily faked or replicated. 

Still, the key benefit to checks is that they are often used as an alternative to avoid credit card processing fees. 

ACH payments

Automated Clearing House (ACH) transfer is an electronic payment option that transfers money directly from the payee’s financial institution to yours. ACH transfers can take up to three days to complete.

However, ACH payments are highly secure and typically completed at no additional fee to the buyer or seller. eChecks are a common type of ACH payment. 

Wire transfers

Wire transfers electronically move funds from a buyer to your bank account. This process is generally faster than an ACH transfer, allowing for real-time payments because businesses can transfer funds via a financial network. Wire transfers are typically completed within a few hours, taking up to one business day at the longest.

Remember that international bank transfers can take longer and incur higher payment processing fees, depending on the service provider.

Over the last few years, B2B payment solutions have grown significantly, thanks to innovations in payment processing and fintech, as well as the rise of e-commerce.

Digital payment platforms

Another popular B2B payment option is the use of digital payment platforms, such as:

• PayPal
• Google Pay
• Apple Pay
• Venmo

These digital payment platforms allow businesses to place a payment in real-time, making it a more convenient option than other small business payment methods, such as paper checks. 

You can make B2B payments using digital payment platforms via a website or mobile app. One downside to digital B2B payment services is that you’ll likely have to pay a transfer fee while sending or withdrawing a payment.

Credit and debit cards

Most companies have a business-only credit card for expenses. Credit cards are an easy way to make payments both in-person and digitally. Credit cards also provide a simple way to track expenses on the billing statement.

Accepting all major credit cards—Visa, Mastercard, American Express, and Discover—will make buying your product easier at checkout and help you close more sales. Another great thing about credit card payments is that businesses tend to spend more when using them. Use our payment processing calculator to calculate rates and compare payment processors.

Clients may also use what’s known as a virtual card, which has a temporary credit card number and allows for safer online payments.

Cash 

Of course, this list wouldn’t be complete without including good old-fashioned cash. Unlike credit cards or other B2B payment options, those who use cash will never have to worry about paying any transaction fees or the risk of spending money they don’t have.

Because of this, cash is a popular option for businesses looking to minimize transaction fees. In some cases, a business may only accept cash. One downside of only using cash for B2B payments is that it can lead to a negative cash flow balance, as using cash immediately lessens your cash flow balance.

Challenges of B2B payments

B2B payments are complex, particularly for midsize businesses, which don’t always have access to the right payment solution. B2B payment processing is often slow and inefficient –– leading to delays and cash flow management issues.

But, understanding the challenges associated with managing payments from your clients can help you choose a payment system that works for your business and overcome these challenges. 

Here are a few common challenges that impact B2B payment processing:

• High-processing costs: High processing costs lower your margins and take funds out of your revenue.
• Payment delays: Slow processing methods can lead to payment delays for both buyers and sellers.
• Time-consuming: Manually reconciling multiple invoices and processing data can be slow and inconvenient. Data is often missing, and it’s time-consuming for back-office teams to piece together data.
• Longer billing cycles: Most B2B payments allow for processing on a consistent cycle. Payment cycles can be as short as 30 days or even as long as 90 days.
• Tracking issues: Businesses will often manage more than one B2B transaction at a time. This creates challenges associated with processing, tracking, and reconciling many payments in different stages of the billing cycle.
• Low transaction visibility: Limited views of the transactions linked to multiple payment methods can disrupt the payment cycle, causing delays, extra costs, and chargebacks.
• Mismatched payment preferences: Limited views of the transactions linked to multiple payment methods can disrupt the payment cycle and cause delays, extra costs, and chargebacks.
• Risk of fraud: The risk of fraud is high due to minimal authorization controls for every transaction. B2B payments are often subject to security threats and fraud attempts. 

Benefits of B2B payment software

Many small businesses turn to B2B payment software to help combat these challenges. Read through the following benefits to learn more about the benefits of using B2B payment systems.

Flexible payment options 

As you know, there are many B2B payment methods. From digital payment platforms like PayPal, Venmo, and Apple Pay, to debit and credit cards, B2B payment software allows you to manage all of your payments in one place.

Automated bookkeeping

Another benefit of using a B2B payment platform is automated bookkeeping. As payments come in, the payment system works with accounting software to automatically record each transaction, saving you time and minimizing the risk of human error.

Streamlined invoicing 

B2B payment software also provides the ability to create customizable invoices that your customers can easily pay online, allowing for a much quicker payment process than traditional paper invoicing.

In addition, you can also track your invoices to ensure no payments fall through the cracks. Not only will you be able to see when businesses pay your invoices, but you’ll also be able to see when they view them.

Quick and easy deposits

With B2B payment software, you can access your payments quickly and easily. You may even be able to access your payments instantly, eliminating the wait time that usually comes with paper checks or ACH transfers.

Recurring payment automation

If any of your B2B transactions are recurring payments, you can use B2B payment software to schedule recurring invoices automatically. B2B payment automation can also help save you and your employees time while reducing the risk of human error or a forgotten payment.

B2B payment trends

As technology advances, so does the B2B payments space. From a decline in paper checks to emerging payment methods such as digital payment platforms, let’s take a closer look at the B2B payment trends changing the landscape.

Fewer paper checks 

With the speed and security benefits of alternative payment options such as credit cards and digital payment platforms, the use of paper checks has declined over the past few decades.

Because of this, it’s important that small businesses stay up to speed with other popular B2B payment options to ensure they are ready to accept other forms of payments as paper checks fall to the wayside.

Payment automation 

Many businesses turn toward software that can help automate the B2B payment process and accept payments in real-time. From automatically sending invoices for recurring payments to keeping payment methods on file, payment automation can help speed up the B2B payment process.

Mobile payments and digital wallets

With mobile payment apps and digital wallets becoming commonplace for B2C transactions, they will likely be increasingly popular for B2B payments. This includes popular payment apps, such as Venmo and PayPal, as well as digital wallets, like Apple Pay and Samsung Pay.

To help your small business stay ahead of this trend, you may want to consider using payment software that accepts these popular forms of B2B payment.

Remote payment approvals

With remote work now being the new norm for some businesses, more and more B2B payments are being approved remotely rather than in a traditional office setting. Because of this, many businesses turn to electronic payments and invoicing to help simplify the payment process regardless of your location.

How to set up and process B2B payments

Now that you know the trends shaping the B2B payments space, let’s walk through how you can set up and process B2B payments using payment software.

Sometimes accounting teams forgo setting up a B2B payment processing system because they perceive it as a daunting task with little reward. However, setting up a B2B payment system is worthwhile, especially since modern software solutions make it easy.

Ideally, you want to find a way to streamline your B2B payment system to process business payments efficiently. Digital payment processing solutions like pay-enabled invoices make it easier for clients to submit payments online and for you to process payments internally. 

Beyond ease of use, having a secure payment gateway is also essential if you want your buyers to feel confident making online payments.

To set up a B2B payment system and process B2B payments more efficiently, you should:

1. Find a payment solution that works for your needs.
2. Sign up for an account and purchase a subscription if necessary.
3. Integrate your business and client data.
4. Train your team on how to use the system to process and track payments.
5. Begin processing payments through your new payment system.

Choose the best payment setup for your business

With an understanding of B2B payments and the payment methods and trends shaping the payment process, you might consider using QuickBooks Money to process your B2B payments. While switching bank accountings may be time-consuming, QuickBooks Money offers payment tracking and a mobile business bank account you can use for B2B payments.

Sources:

• The global B2B payments industry is estimated to reach $313.95 billion by 2031, according to Allied Market Research.
• According to the Association for Financial Professionals (AFP), one-third of all B2B payments in the US and Canada are made by check.
• According to BlueSnap, 13% of B2B organizations pay invoices in cash.
• According to AFP, 65% of organizations were targets of payment fraud-related attacks.
• According to PYMNTS, 30%-50% of all B2B payments will be done digitally and in real time by 2025.
• According to AFP research, the use of checks for B2B payments has fallen nearly 50% from 2004 to 2022.
• According to Flywire, 32% of businesses spend 11 or more hours per month managing incoming B2B payments.
• According to Juniper Research, over 60% of the global population will likely use digital wallets in 2026.
• According to FlexJobs, nearly half of employers include some form of remote work within their workforce.

QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.

Apple Pay: Apple Pay is a registered trademark of Apple Inc. 

Google Pay: Google Pay is a trademark of Google LLC.

QuickBooks and Intuit are a technology company, not a bank. Banking services provided by our partner, Green Dot Bank.

**Product Information:

QuickBooks Money: QuickBooks Money is a standalone Intuit product that includes QuickBooks Payments, and currently does not connect with other QuickBooks products such as QuickBooks Online (and QuickBooks Checking), QuickBooks Self-Employed, or GoPayment. Intuit accounts are subject to eligibility criteria, credit, and application approval. Banking services provided by and QuickBooks Visa Debit Card are issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Visa is a registered trademark of Visa International Service Association. QuickBooks Money Deposit Account Agreement applies. Banking services and debit card opening are subject to identity verification and approval by Green Dot Bank. Money movement services, including Same Day Deposit, are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services.