payments

How to manage and accept B2B payments: A guide for small businesses

Managing B2B payments is a challenge for most midsize businesses. While just receiving payment on time can seem like a big achievement, there are other B2B payment challenges to consider too.

Unsurprisingly, how you manage B2B payments impacts how quickly they’re processed and how long it takes to receive funds. Challenges like matching invoices with payments and executing payments effectively can be time-consuming and costly.

Businesses often still opt for traditional payment methods like checks which can slow down payment processing and delay funds.

But following some payment processing best practices and using the right payment technology can help you streamline your processes and implement a robust payment workflow. So, how can you leverage these modern payment solutions to benefit your growing business?

Use this guide to get a better understanding of current B2B payment options and learn the best practices for accepting and managing various options throughout the payments market. For information on a specific aspect of B2B payments, use the links below to navigate to the section you need.

How do B2B payments work?

Across the payments landscape, B2B payments are generally made once the goods are delivered via your preferred supply chain or services are provided. 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—which is 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, based 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 details of the transaction.

B2B vs. B2C payments: what’s the difference?

The most notable difference between B2B and B2C payments is the payee. B2B payments are payments made by one business to another. These businesses could include startups, retailers, e-commerce companies, corporations, and any other type of entity.

B2C payments are consumer payments made by a customer to a business. Consumers are individuals who are purchasing goods or services from a company for personal use.

Some other key differences include:

  • B2B payments are more often used for recurring purchases, while B2C payments are typically for one-off purchases.
  • B2B payments are processed based on billing cycles and often involve invoices, while B2C payments are usually processed immediately.
  • B2B payments typically involve multiple departments within both businesses, while B2C payments are completed in one step.


What are the challenges associated with B2B payments?

B2B payments are complex, particularly for midsize businesses, who don’t always have access to the right payment solution. B2B payment processing is often slow and inefficient –– leading to delays and cash flow 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 of the 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: Payment delays can be caused by delays in payment from either buyers or suppliers or slow processing methods.
  • Manual processing: Businesses lack sufficient automation capabilities for AP processing due to limited integrations with electronic payments or invoices. They may have a lack of IT resources to set up an electronic system or find it difficult to convince customers or suppliers to use electronic payments.
  • Risk of fraud: The risk of fraud is high as there are minimal authorization controls for every transaction. B2B payments are often subject to security threats and fraud attempts. According to the Association of Financial Professionals, over 80% of businesses were affected by attempted or actual payments fraud in 2019. Some existing payment methods don’t provide enough security for online payments. Cyberattacks have also become more sophisticated. Choosing a secure payment processor can help mitigate the risk of fraud.
  • Matching data: Reconciling multiple invoices and processing data can be slow and inconvenient. There’s often missing data and it’s time-consuming for back-office teams to piece together data.
  • Longer billing cycles Most B2B payments are processed on a consistent cycle. Payment cycles can be as short as 30 days or even as long as 90 days.
  • Tracking: 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, delays, extra costs, and chargebacks.
  • Mismatched payment preferences: Suppliers and buyers often prefer different payment methods. Buyer payment methods depend on the payment methods their suppliers use.


Common B2B payment methods

Offering as many B2B payment methods as possible is best when trying to grow your business because it makes things easier for buyers. Here are some of the most popular B2B payment methods:

Checks

While checks may be becoming a less common form of payment for B2C transactions, they’re still fairly common for B2B transactions. Research suggests that checks still make up 42% of all B2B payments.

But, paper checks are far from being the most convenient method of payment. When you combine them with mail delays and postage increases, it’s easy to see why they slow down payment processing.

The key benefit is that checks are often thought to be a workaround to avoid credit card processing fees, but there’s a cost for accepting checks as well. If most businesses you work with pay with a check, these costs can add up quickly.

Another downside of accepting checks as payment is that they are less secure. Checks are a major source of fraud because they lack the security measures of cards and digital payments and can be easily faked or replicated.

ACH transfers

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 can typically be completed at no additional fee to the buyer or seller. E-checks are a common type of ACH 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 monthly transactions 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.

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

Wire transfers

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

Keep in mind that international bank transfers can take longer and incur higher payment processing fees depending on the service provider.

Over the last few years, digital solutions have grown significantly, thanks to innovations in payment processing and fintech, as well as the rise of eCommerce.

Steps in the B2B payments cycle

Unlike B2C payments, B2B payments aren’t completed immediately. Instead of one step— swiping your card or submitting payment for the goods or services—B2B payments are more involved.

Here are the basic steps necessary in the B2B payments cycle:

  1. You set payment terms for the buyer.
  2. The buyer sends you their order request.
  3. You fulfill their order, delivering the goods or services they’ve requested. 4. You send them an invoice for those goods or services.
  4. The buyer submits their payment.
  5. Your business processes its payment internally.

Once the payment has been processed, the funds will become available to you. For recurring orders—say those that occur every month—the process will continuously repeat itself.

B2B payments best practices

Now you know the top challenges associated with B2B payments, it’s time to look at what best practices your business can follow to implement a more structured payment workflow.

  • Acknowledge customer preferences

The first step is to think about your customer preferences so you can more easily shift buyer behavior without abrasive changes. Do they have their own payment system they want you to use? Are they comfortable with electronic payments already?

It’s important to analyze your customer base and determine who your most frequent buyers and biggest spenders are. That way you can make it a priority to switch them to your new preferred payment systems first.

  • Follow regular billing cycles

Maintaining a consistent and predictable billing cycle will help your customers know when they should make payment and help you organize a streamlined internal processing system.

Whether you bill clients weekly, monthly, quarterly, or immediately after purchase, it’s important to stick to your workflow.

  • Automate payment processing

Manual processes slow your team down and leave you open to human error. Automating your payment processing will speed up how quickly you collect payments and help keep your data organized.

  • Use one central payment system 

Taking the time to set up one central payment system will allow you to keep your payments in one accessible place. You’ll skip the manual processes and can automate more of your workflow. As an added advantage, you’ll be able to store all your financial data safely in the cloud so you don’t need to worry about security risks.

How to set up a B2B payment system and process B2B payments

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 well worthwhile—especially given that 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 payment 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—QuickBooks Payments has been designed with midsize businesses like yours in mind.
  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. 11. Add links for making payments through this new payment system to your site and invoices.
  5. Begin processing payments through your new payment system.

How to process B2B payments with QuickBooks

There are numerous payment providers, from Stripe to PayPal to Venmo, but not all providers are created equal. QuickBooks Payments is designed to make processing payments as easy and efficient as possible for your small business. (QuickBooks Payments is fully integrated with QuickBooks Online Advanced so midsize businesses can accept payments and manage their books all through one platform.)

QuickBooks uses automation to streamline workflows, optimizing the process for accepting B2B payments. When you use QuickBooks Payments, processing B2B payments becomes much easier.

Here’s what you’ll need to do:

  1. Connect QuickBooks Payments to your other QuickBooks products. For midsize businesses (defined here as 10 or more employees), QuickBooks Payments integrates with QuickBooks Online Advanced. For small businesses, you can integrate QuickBooks Payments with QuickBooks Online. Simply activate it in your account to get any job paid, online or on-site.
  2. Send the invoice for the order. You can also set up automated invoicing for recurring orders.
  3. Your client pays the invoice online. When you receive an online payment, it will be automatically processed and recorded.
  4. Once the payment is processed, QuickBooks puts the money in your bank account.

With an online payment processing solution like QuickBooks, the repetitive and time-consuming tasks associated with accepting B2B payments are handled for you so your clients can enjoy a better customer experience. By leveraging this B2B payment platform, you can better use your resources and focus on growing your business.

Additional resources and help

To learn more about how to expedite customer payments and effectively follow up on past due invoices, download our checklist: 21 ways to get paid faster and effectively collect past due invoices.

You can also read our article Impact of late payments on midsize businesses revealed in new QuickBooks research to learn how late payments are affecting other businesses.

Finally, QuickBooks Online Advanced offers more automation and customization with Advanced-only features that make it easier to manage a growing and complex business and get more done each day.


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