Until now, consumers and businesses were offered very different payment methods and options. Consumers take for granted how easy it is on the B2C side when it comes to paying for a purchase. B2C payments like eCommerce and payment gateways have more sophisticated, simple, and versatile payment systems. Consumers have the advantage of easy digital payment options for checkout such as credit card payments, Stripe, PayPal, Venmo, or newer B2C BNPL solutions.
True B2B payment solutions involve more than simply accepting ACH payments
Conversely, businesses have had fewer options. Business owners have generally offered a combination of payment services that were limited to ACH (automated clearing house), wire transfers, bank transfers, and even paper checks. Options like accepting online payments, international payments, or mobile payments have been difficult. And in general, transactions are much more complicated when they are business-to-business. That’s because the B2B payment processing cycle is impacted by a multitude of factors, including:
- Volume of transactions
- Frequency of transactions
- Size of transactions
- Expectations on extending credit
- Payment terms
Business-to-business transactions are always more complicated than business-to-consumer transactions. One of the main reasons for this is that companies have traditionally financed purchases up and down the supply chain. For this reason and more, B2B transactions have always lagged behind consumer payments when it comes to ease, optionality, and digitization. But the B2B payments sector is now heating up and changing all this.
How B2B BNPL and B2B payment methods are different
BNPL stands for “buy now, pay later.” BNPL allows customers to pay for their orders over an extended period of time, acting as a type of short-term financing. Using a third party that facilitates BNPL, a company’s customers can pay for what they need on a deferred basis. This gives the customer the opportunity to purchase what is needed, with the option to pay later.
Since BNPL in the B2B space is a rapidly evolving sector with many different players, there can be confusion about the exact definition of this new category. Different solutions can be incorrectly consolidated into this concept, despite their differences. The best solution should enhance your complete end-to-end accounts receivables workflow and add long-term value in addition to providing a working capital boost. Businesses that offer net terms invoicing need solutions that have been designed for this specific work flow and use case.
For instance, a few companies, like Resolve, are often categorized as BNPL despite offering an enhanced solution that actually adds value across the entire B2B payment workflow by streamlining the whole accounts receivable process. Resolve’s easy-to-use solution can be thought of as an "Accounts Receiveable Operations” platform for inventory based businesses. This encompasses much more than a BNPL option.
The benefits of streamlining B2B payment methods
Even if you have strong working capital and an in-house accounts receivables team, there are compelling reasons to consider a B2B payments solution. Here are a few of them:
Sharpen your focus
If you’re not a bank, you shouldn’t act like a bank by extending deferred customer payments. At the same time, manually managing receivables collections is time-consuming and costly. Valuable resources must be diverted to track, chase, and follow up on payments. The more human intervention that is needed, the greater the risk for errors that cost time and money.
Transforming the repetitive accounts receivable process into an automated workflow is an exponential benefit. Outsourcing back-end tasks (like credit checks, net terms, and AR collections) can cut your cost of labor and give you and your team more time to focus on your core business.
Remove your receivables risk
Every B2B sales transaction contains an element of risk. A business takes on credit risk, payment risk, and economic risk when they enter into sales agreements. For instance, companies take on risk with new business customers and must ensure that they are reliable and can pay within their established terms. The right type of credit check would scrutinize a company’s financial health, previous payment history, and risk level–but there is still always a risk that some customers will not pay on time, or worse, at all.
Risk is unavoidable, especially in today’s economic environment. Even though businesses cannot avoid risk, they can be smarter about it by outsourcing risk to improve their overall business health. Some B2B payment solutions alleviate these risks (to a degree, depending on the vendor) by taking the risk on themselves with minimal to no impact to the business.
Boost your financial velocity
Although you can improve working capital and liquidity through a bank loan or line of credit, rates are high and unpredictable. The process is burdensome and eats up administrative resources. Some B2B payment solutions offer companies the option to receive instant cash advances on invoices that would otherwise be paid out by customers over an extended timeline through net terms. This option to receive an infusion of cash can be advantageous as every dollar received upfront is another dollar that can be reinvested into the business, without waiting for your customers to pay.
Stimulate business growth
Offering net terms speeds up your company’s growth by allowing buyers to make the purchases they need without overextending their own finances. Net terms (30,60,90 days) is the process by which a business establishes payment windows to their customers. If your business is not already offering net terms, this practice can be a deciding factor when a customer chooses your business over a competitor's.
Many businesses experience revenue growth (some even triple their revenue growth) when they work with a B2B payments provider to extend net terms, as this builds customer loyalty, repeat purchases, and increased sales volumes. Net terms also open up the opportunity to work with larger buyers who may demand larger line sizes and longer payment terms. It’s also a requirement for most government contracts—a lucrative area to expand your business.
The truth: what to look for in a B2B payment solution
When assessing any software vendor, there are a multitude of factors to keep in mind that go beyond payment methods. There are eight key points to consider when shopping for an effective B2B payments solution:
Simplicity: Any platform functionality should always focus on ease of use and streamline your processes. Accenture’s 16th annual research report with more than 25,000 data points across 22 countries emphasized that simplicity in purchasing decisions is now table stakes. The best software products have intuitive navigation since simplicity is a key ingredient to efficiency and long-term business value. The solution should offer integration with all the major accounting software including QuickBooks Online.
Customer Experience: New solutions should elevate the experience that your customers have. The quality of your payments experience determines the quality of your customer experience—which drives the growth of your business. Maintaining strong customer relationships is the key to steady business growth—and positive customer experiences set you apart from competitors.
Solution Support: Take the time to examine a vendor's support and training structures. The right B2B payments solution shouldn’t just be a SaaS vendor, but rather a true fintech partner. And the right technology partner will be invested in your business's growth. The best indication of this is the type of support they provide post-sales. Check the reviews of the software, and you’ll quickly see which ones have offered great customer support and met the business’ needs, and which ones leave the customer right after purchase.
Credit Checks: A strong solution should be your ‘credit team on tap’ bringing an efficient yet credible process to assess every single one of your customer’s credit applications. Reliable underwriting is the first differentiating factor in B2B solutions (due to the volume and size of business transactions compared to consumer payments). Poor quality and unreliable underwriting may result in low-risk buyers that are mistakenly declined (say hello to lost sales opportunities) or high-risk buyers that are accidentally approved (which leads to taking on avoidable risk).
Net Terms Enrollment: In this economy, providing net terms is no longer an option, it’s a requirement. Your customers need to be able to acquire goods on credit and make payments at their convenience due to supply chain issues, pricing, and a host of other reasons. Companies that handle net terms internally are at risk of creating friction as decisions may be based on ambiguous approval criteria. Even worse, companies that do not offer any net terms lead to customer frustration, negative perceptions, and lost sales. Outsourcing net terms removes all risk from your balance sheet and frees up working capital. A solution that automates recurring payments will save time and reduce errors. Providing options for 30, 60, or 90 days before requiring payment of an invoice will help sustain the health of your customer’s business, and subsequently, your own.
Financial Velocity through Embedded Credit: Cash is the lifeblood of businesses. To maximize your business’s cash flow, you must improve the rigor of your accounts receivables collection processes. With unpredictable economic conditions, most businesses prefer to have cash on hand and defer payments—rather than pay for purchases upfront. While you may be thinking about deferring payments to your own suppliers, your customers are likely thinking about doing the same thing, if they don’t already have a net terms arrangement with you. That’s why the most beneficial B2B payment solutions should offer options for advance cash payments while managing and processing all AR collections from your customers.
Payment Collection Versatility and Flexibility: Payment flexibility is also essential as your customers want and demand different options to pay. The right platform will accommodate a variety of payment types (debit card, ACH, wire transfers, credit card payments, etc) and automation will be a key component. Transaction fees will be reasonable and the options will meet your customer’s payment needs by accepting everything from MasterCard and Visa to a variety of electronic payments.
Reconciliation: If it wasn’t recorded, it didn’t happen. Automation of reconciliations between the accounts receivable balance on your general ledger and cash received per your bank account statement are crucial—and not just for audits. To fulfill end-to-end reconciliation for each of your payment cycles, reconciling bank account payments through to accounts receivables sub ledgers and your accounting software system is crucial. The right B2B payment solution integrates with your core accounting and eCommerce platforms in real-time.
Learn more about these eight elements in Resolve’s new B2B Payment Solutions Guide. This guide shares a framework to help companies find the right solution by looking at six vendors in the B2B payment platforms space.
Popular companies in the B2B payment landscape
Our guide provides an overview of six top solutions for B2B businesses:
The bottom line: selecting the right B2B payments solution
Resolve’s new guide on B2B payment solutions eliminates the confusion of selecting the right vendor. Our guide covers six solutions, and we encourage everybody to evaluate these B2B payment systems solutions based on the following criteria.
- Remember to select a vendor and product that is reliable, credible, and meets your specific needs. Research your shortlist through third-party reviews websites such as Capterra, G2 Crowd, TrustPilot, and TrustRadius.
- For small businesses and startups that may not have an eCommerce storefront, a solution, with a smooth and efficient onboarding experience is the most important criterion. Look at the pos integration and how it impacts your customer experience.
- Growing businesses or large enterprises will likely need a solution that is more robust and adaptable with extended types of payment options beyond ACH.
No matter what solution you choose, it’s time to maximize and improve your business-to-business payment process. Take the opportunity to outsource credit checks, net terms, and embedded B2B payments. You’ll save time, effort, and money while gaining certainty over your cash flow and facilitating healthy business growth.
Interested in learning why Resolve is the industry leader when it comes to B2B payments? Learn more and book a demo.
As a seasoned professional in the realm of B2B payments and financial technology, my expertise is grounded in years of hands-on experience and a deep understanding of the evolving landscape. I have actively engaged with various players in the industry, from startups to established enterprises, and have closely monitored the shifts and advancements in B2B payment methods, particularly in the context of Buy Now, Pay Later (BNPL) solutions.
Over the course of my career, I have witnessed the transformation of B2B payments from traditional methods like ACH, wire transfers, and paper checks to the dynamic and sophisticated systems we see today. The evolution has been driven by the increasing demand for simplicity, efficiency, and flexibility in business transactions. I have not only observed these changes but have actively contributed to the adoption of innovative solutions, understanding the intricate dynamics of B2B payments, including factors like transaction volume, frequency, size, credit terms, and the complexities inherent in business-to-business interactions.
In the provided article, several key concepts related to B2B payments are explored. Let's break down and elaborate on the major themes covered:
Differences Between B2C and B2B Payments:
- Consumers enjoy streamlined and versatile payment options (e.g., credit cards, Stripe, PayPal, Venmo, BNPL).
- Traditional B2B payments involve ACH, wire transfers, bank transfers, and paper checks.
- B2B transactions are inherently more complex due to factors like transaction volume, frequency, size, credit terms, and the financing of purchases along the supply chain.
Evolution of B2B Payments with BNPL:
- BNPL in B2B allows deferred payments, acting as short-term financing.
- The B2B BNPL sector is rapidly evolving, offering solutions that go beyond traditional BNPL, such as Resolve's comprehensive "Accounts Receivable Operations" platform.
Benefits of Streamlining B2B Payment Methods:
- Streamlining processes through B2B payment solutions enhances efficiency and reduces costs.
- Outsourcing tasks like credit checks, net terms, and AR collections frees up resources for core business activities.
Mitigating Receivables Risk:
- B2B sales transactions involve credit, payment, and economic risks.
- Some B2B payment solutions assume or mitigate these risks, providing a safety net for businesses.
Financial Velocity and Business Growth:
- B2B payment solutions offer options for instant cash advances, improving working capital and liquidity.
- Offering net terms stimulates business growth by attracting buyers and facilitating larger transactions.
Key Considerations in Selecting a B2B Payment Solution:
- Simplicity, customer experience, solution support, credit checks, net terms enrollment, financial velocity, payment collection versatility, and reconciliation are crucial factors.
- The article suggests evaluating popular B2B payment solutions, including Apuve, Balance, Behalf, BlueVine, CreditKey, and Resolve.
Selecting the Right B2B Payments Solution:
- The final section emphasizes the importance of reliability, credibility, and alignment with specific business needs.
- Recommendations include researching vendors through third-party reviews and considering onboarding experiences and payment options.
In conclusion, the B2B payments landscape is undergoing significant changes, with a focus on simplification, risk mitigation, and fostering business growth. The article provides valuable insights into the evolving dynamics of B2B payments and offers guidance on selecting the right solution for various business needs.