If your retail operation purchases merchandise or services from other companies, you are conducting what is known as business-to-business, or B2B, transactions. While these have traditionally been slow and costly because of their nature and antiquated credit card processing systems, this no longer needs to be the case.
Once you learn how B2B payments work, you can turn those sluggish transactions into nimble, efficient ones.
The problem with old-school B2B transactions
Why havenโt B2B payments kept pace with their consumer counterparts, by embracing innovations such as digital wallets and real-time transfers?
On the surface, the answer might seem to be nothing more than an unwillingness on the part of providers to be nimble and adopt new technology.
Many businesses continue to make B2B payments using outdated technology. Additionally, the nature of B2Bs, combined with their complex workflows and the need for strict compliance, make improving their efficiency difficult.
However, the truth goes beyond blaming payment solutions for enterprise businesses. The B2B payments landscape is riddled with regulatory compliance issues, complicated workflows, and serious security concerns.
Finding a way to enhance B2B payment efficiency, while never losing sight of transparency and security, has proven to be a daunting challenge.
The nature of B2B payments
As with all payments, money is exchanged for goods, services, or partnerships. However, B2Bs are more complex, involve larger financial outlays, have multiple layers of approval, and come with longer payment cycles. Old-school methods of paying with checks and bank transfers are only gradually giving way to modern techniques.
B2B fund transfers tend to be much more time-consuming and complex than exchanges between merchants and their consumer customers.
Additionally, the payment amounts tend to be more significant, and approval generally involves multiple permissions. In order to complete the B2B exchange, most businesses have used tried-and-true, but notoriously slow and inefficient methods such as checks and bank transfers backed by manual reconciliation.
The good news is that modern technology is removing many of the sticking points and bottlenecks from B2B payments. Automation sweeps away many of the errors that have traditionally plagued these transactions, and real-time processing with built-in security features is doing wonders to enhance their speed and safety.
How B2B payments work
B2B payments generally involve four steps. These include issuing an invoice, approval, payment execution, and reconciliation and reporting.
As stated above, the B2B cycle can be quite complex, and it often differs according to the sizes and industries of the companies involved. Nevertheless, there are certain steps common to nearly all B2B payments.
First, the seller issues an invoice to the potential buyer that specifies the products or services to be purchased. The buyer then sends this statement to all of the in-house players involved in the process, with payment approval often requiring passage through a number of levels and departments.
After approval has been obtained, the seller processes the payment. This can occur in a number of ways, including checks, digital wallets, ACH transfers, or wire payments. Upon completion, records and financial reporting must be updated and checked for accuracy.
Top solutions to streamline your B2B payments
Modern technologies facilitate more efficient B2B fund transfers. Two of the most effective automation-aided strategies are the institution of recurring billing and self-service payments.
With the help of your merchant services provider, your business can elevate your antiquated B2B payment methods to include cutting-edge automation-based systems.
Set up recurring billing
One of the easiest and most intuitive ways involves configuring your software to allow for recurring billing. These routine, repetitive transactions are based on a clear agreement between both parties that specifies all terms of the funds' transfer.
This contract also stipulates your policies concerning late or canceled payments and account closure, providing maximum transparency and open lines of communication at every juncture. Augmenting these automated processes with software that tracks invoices, ensures regulatory compliance, and prevents or addresses failed payments is also a must.
Once you have implemented this recurring payment model, you can look forward to several positives for your company. They include added predictability, uninterrupted services, and less need for manual processes that can be slow and prone to errors.
Create a payment portal
Another effective solution involves allowing your customers to take payments into their own hands. Once you install a self-service B2B payments portal, they can use it to settle their invoices, update account details, and review their payment history at any time from anywhere.
When you give your business customers agency over their own payments, you can increase compliance and look forward to a more efficient and productive relationship.
Self-service portals remove much of the administrative burden from your staff by enabling your buyers to be in control. The result is heightened accuracy, an improved payment process, and an enhanced relationship between you and your buyers.
Now that you have seen the advantages to be gained by incorporating modern B2B payment systems into your company, you need to find the right merchant services provider.
By focusing on important criteria such as integration capabilities, security and regulatory compliance, scalability, and affordability, you will be able to select the provider who will be best qualified to grow right alongside your business as you continue to offer a gold-standard, updated payment experience to your business customers.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
