What are B2B Payments?

In simple terms, B2B payments refer to financial transactions that occur between two businesses. These payments can involve the exchange of goods, services, or both, and they typically include agreed-upon payment terms.

But there’s a lot more to B2B payment options than meets the eye and building effective payment strategies frequently represents a competitive advantage. 

Driven by rapidly evolving technology, the B2B payment space is full of growth & efficiency opportunities for forward thinking enterprises. B2B payments often involve large amounts of money and more complex payment processes, which has resulted in clear opportunities for innovation. With this wave of innovation, B2B payment strategy has moved on from simply offering the traditional options to actively driving business efficiencies & positive buyer experiences. 

Exploring Traditional Payment Methods & Processes in B2B Transactions

Payment Processes

Trade Credit

‍Trade credit is a financial arrangement in B2B commerce where buyers purchase goods or services on credit and pay at a later date. Payment terms are agreed between the buyer and merchant and then payment is typically made in instalments, throughout the agreed period of time. Offering trade credit represents a level of risk for the merchant as they are effectively providing goods and services before being paid - this risk is typically managed with trade credit insurance.

‍Invoicing

Invoicing is a tried-and-tested way of requesting payments, maintaining accurate financial records, and providing legal paperwork for transactions. Its main advantages are better cash flow management and compliance with regulatory standards. However, invoicing also faces obstacles such as late payments, administrative hassles, potential errors, and fraud threats, needing careful management to assure efficacy and minimise complications.

PayLater

In simple terms buy now, pay later (also referred to as “BNPL”) is a form of short-term loan. It is offered as a payment method that enables the buyer to receive their goods and services immediately, while spreading the cost over an agreed period of time. The Seller however, receives the monies at the point of sale. You’ve likely heard of Klarna, who are the top supplier in the B2C market and the brand has come to be synonymous with the term, however B2B buy now pay later is becoming increasingly used due to the benefits to both parties in transactions.

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Payment Methods

Bank Transfer

Bank transfers (or wire transfers) are a digital form of payment that moves money from one account to another without the need for a payment processor. Bank transfers are commonly used by businesses for real-time payments to pay invoices. Once the money arrives in the receiving account, it becomes immediately available making it a popular choice of payment methods when businesses are looking for the quickest way to make a payment. There are also International wire transfer solutions for businesses that make global payments (note: these typically incur additional costs).

Credit Cards

Credit cards offer a simple and fairly inexpensive way to enable transactions. Paying by credit card is a popular method across both B2B & B2C payments that most buyers will trust and be used to, making it a relatively low friction payment method for B2B payments. You will need to utilise a payment processor to comply with cardholder data laws. This payment processing comes at an additional cost, especially when dealing with high-volume wholesale transactions. If your consumers choose to pay with cards, you must consider this fee.

Cheques

Although cheques are a declining form of payment, some businesses may still expect to be able to pay via this method. While paper cheques provide a physical record of payment, they can be time-consuming, prone to errors, and require manual processing.

Direct Debit

Direct debit allows one company to authorise another to take funds from its bank account to pay invoices. Direct Debit benefits include streamlined transactions, on-time payments, and increased cash flow by automating withdrawals for routine needs such as subscriptions. It reduces administrative costs and increases financial stability, making it ideal for businesses with regular, fixed payment obligations.
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Defining Your B2B Payment Strategy

When choosing the best B2B payment options for your company, there are a number of considerations; 

Payment experience

Forward thinking enterprises invest significantly in improving the buyer experience, and offering a choice of payment methods, flexible terms and a modern seamless payment experience is a golden opportunity to improve the overall buyer experience. Today’s B2B buyers expect a similar experience to their B2C purchases, therefore when forming your strategy take into account your target market’s preferences.

A user-friendly payment solution can increase; customer satisfaction, conversion rates, average order value & repeat business. 

Look for features like automated payment collection, recurring billing options, and a straightforward checkout process to improve the entire user experience. A streamlined approach decreases the possibility of payment delays or errors, which improves your cash flow and overall financial management. 

The costs associated with the payment method

Processing fees for some payment methods can be significant, impacting your bottomline. Costs can increase quickly when you’re operating at scale. In addition to these visible costs, it’s critical to consider any hidden fees or prospective price rises over time. Conduct a detailed cost study to determine the long-term financial impact of each payment option.

Integration with your existing systems 

Syncing payment data across your business systems is critical to efficient and accurate management of accounts and delivery.

As part of your payment strategy evaluation, you’ll need to be clear about your requirements for any new platforms or payment processes and how they’ll enable accurate, timely synchronisation with your existing systems - including accounting software or customer relationship management (CRM) systems.

Seamless integration can drive huge time & resource savings, and reduce error rates throughout the reconciliation process. Look for payment providers who have APIs or plugins for your software to ensure a smooth and effective connection.

Managing risk

As flexible payment method adoption grows, effective risk management becomes increasingly important. B2B executives must evaluate and reduce the risks associated with online transactions, such as fraud, chargebacks, and credit defaults. Leading payment systems include sophisticated buyer identification, credit check, and fraud detection technologies to protect you from losses. Learn more about authentication with Kriya

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The Rise of Digital Payment Platforms for B2B Transactions

As we’ve covered, B2B buyers are increasingly expecting the flexibility and speed that we are accustomed to with consumer purchases. Technology has driven a wave of innovation in digital payment platforms providing B2B payment alternatives that address expectations that are becoming the new standard:

• A frictionless buyer experience that is quick and simple to use
• Flexible payment terms and many payment options
• A multichannel experience that works for buyers through both online and physical sales channels

Introducing Kriya PayLater…

Kriya’s PayLater solution enables enterprises to offer a modern B2B payment method. PayLater enables enterprises to offer their buyers flexible payment terms at purchase, whether at online checkout, or offline channels such as over the phone or even in store. In addition, PayLater offers instant buyer onboarding, fully managed repayments and reconciliation service, and full upfront payment to the merchant. 

Speak to our team today to learn more about how PayLater can transform your B2B payment strategy

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