B2B is an acronym for business-to-business, which refers to a direct transaction between businesses. After the transaction, payment needs to be made, creating a need for a payment system to pay for the services or products provided by one business to another. This is where the term B2B payments come in.
The B2B payments processes can get quite complicated. So much is involved; invoices and quotes have to be prepared, numerous hours go into planning, and different departments are required to give their budgets.
It is important that the payments are managed appropriately in order to maintain a long-lasting relationship between the businesses. Here are the ways in which B2B payments are made:
- Paper Checks
- Credit Cards
- Online Payments
- ACH (Automated Clearing House) Transfers
- Electronic Transfers
These days, payment systems have become more digital. They have moved from checks and the use of cash to using credit cards to make online payments. This evolution has brought with it many benefits which include:
- Convenience and easy access to credit
- Detailed records are availed after each and every transaction made
- If need be, there is a support system in place to settle any disputes
However, there are some drawbacks as well. They include:
- Using digital payment is quite complicated and cumbersome
- Security is not guaranteed as the processes can be hacked easily
- The processes are rather expensive as additional expenses are involved in the transaction charges
- When invoices are involved, the process takes so much longer
B2B Payment Management
A well-organized payment system goes a long way in ensuring that you stay in business with your partners for a long time. A management system will help you cut costs by embracing digital systems. You can also save time by using an automated invoice processing system in place of the manual system.
A system that is not organized properly will cause chaos that could potentially ruin your business through improper payments. That being said, there are disadvantages to using B2B payments systems. Here are the drawbacks of B2B payments and how to deal with them:
There are costs involved with each transaction. It’s advisable to look into the different modes of payment available before deciding on what’s the best option for your business. Find what works best for you with in regards to the kind of transactions you will be carrying out.
You can also save on the transaction costs by not carrying as many transactions. Instead, wait for the charges to accumulate then make the transaction in one payment. This way you will only be charged for one transaction.
When a payment is done electronically, it becomes prone to hackers. There are major data breaches that occur across many payment networks. It’s important that your partners are assured of safe transactions before they can trust you with their money and information.
You can use blockchain to encrypt the transaction network and thus provide extreme protection against hackers. Blockchain refers to a transaction network that is extremely secure through which information is passed from one party to another.
Delays in Processing Invoices
It can get quite hectic when you always have to make follow-ups with your partner before you receive payment for your products or services. In the case of late payments, a fine should be put in place. To avoid paying fines, your business partners will try to expedite the payment process.
E-invoicing is an automated process of sending invoices that will ensure your partners are kept in the know about the whole process from transaction to payment.
The world is digitizing and payment systems have not been left behind. The way in which payments are made has moved from physical channels to digital channels. This shift has taken quite some time but has been rather seamless.
However, for a majority of businesses conducting B2B transactions, the process has been a slow one. When businesses make payments to each other, it can get cumbersome; invoices are involved and processing takes anywhere between 1 to 3 months. In addition, a lot of phone calls have to be made and following up with the banks.
Until now, most merchants with small businesses still find digital payment options complex. These challenges can be managed to make the systems safe, easy to use and inexpensive. A good B2B payment management system is guaranteed to make payments and has become so much simple and cheaper.
More and more businesses are embracing digital payment processes because of the numerous gains that come with it. All they need to know is what payment option works best for them in regard to convenience, cost, efficiency, and safety.