For B2B businesses, receiving timely payment for goods and services is always a concern. To keep your business growing, you need to manage payments in a way that allows you to quickly process and receive funds on time.
Besides, the B2B payment market size is likely to be worth around USD 63,084 billion by 2026.
With the advent of digital innovation and AI in the payment world, the payment process has become more efficient and easier.
However, with so many options available now to improve the B2B payment process, it may be hard to choose the best solution for your business.
Here you will find the six best tips to manage your B2B payments efficiently. But before that, let’s quickly go through B2B payments and how it works.
What is a B2B payment?
B2B payments are the payment transactions between businesses for goods and services. In simple words, a B2B payment scenario is created when a business invoices another business.
For instance, when you generate an invoice to a supplier for office furniture.
B2B payments are more complex than B2C payments. Payment processing in B2B transactions requires a lot more time than in B2C payment transactions.
How B2B payment works?
In B2B business, a payment process starts when a business delivers goods and services to the other business. Once the goods are received, the supplier sends the invoice to the receiver. As per the payment terms between the two, the receiver of goods and services gets a certain amount of time or days to make the payment. The supplier processes the payment once the receiver sends the amount. It takes time for funds to be available depending on the mode of payment.
It takes almost 45 days, on average, to process a B2B payment.
If you have a good relationship with your clients, then you can set the payment terms accordingly. You can also think of providing credits based on their past purchases’ trends from you and creditworthiness.
Tips to Manage B2B Payments Efficiently
Here are the best tips to improve your B2B payment process and management:
1- Understand Costs involved in Payment Process
In B2B business, it is important to make the payment process simple and cost-effective. The cost involved in processing an invoice manually is approximately USD 22.
The first step to minimize your payment cost is to identify and evaluate all the spending on your payment gateway integrations.
Usually, the costs involved are:
- Initial set-up costs
- Processing fees. It is usually around 2% to 4% on each transaction.
These costs also depend on the method of payment, such as wire transfer, paper check, or purchase order.
Other common challenges faced during the payment process are:
- Split transactions
- Payouts to multiple vendors
- Potential chargebacks
- Lengthy onboarding process
Therefore, evaluating all the costs involved will help you understand where you can take the advantage of opportunities to save money and maximize profits.
2- Use Online Invoicing
You need to automate your back office for efficient billing. Online invoicing is a method to create and send invoices through emails without the need to print or mail physical copies. Besides, online invoicing is preferred to send confidential documents. Therefore, you must follow a secure email link to their invoice.
Businesses of all sizes can utilize electronic B2B billing systems. You can raise invoices from your online accounting software. Add relevant VAT rates and email your invoice directly to your clients.
Here the three main benefits of using online invoicing:
- Save time & money
- Get paid faster
- Improve invoice tracking
Also, by implementing AR automation to your online invoicing, you can streamline processes, reduce errors, and improve internal alignment. There are several free online resources that are offering you to download invoice templates, making it easier for you to create invoices.
Furthermore, you can use online invoicing software that can help further improve estimation, invoicing, and B2B payment processing. Some software even allows you to access the detail from your phone.
3- Use Digital Payment Modes
Digital payment methods are seamless, simple, and fast. Implementing digital payment methods in your B2B business helps you to reduce the risk associated with transactions.
Nearly 67% of B2B businesses are deploying new technology and making electronic payments.
Here is how B2B businesses can be benefited from digital payments:
- Digital payments bring transparency to any transaction. It gives quick confirmation on payments made, failed, or bounced.
- Digital payment is a 24/7 solution for B2B businesses. It does not want you to depend on the working hours of a bank. You can process the payment from anywhere at any time.
There are great ways of making digital payments:
- Virtual credit cards
- Mobile wallets.
- Third-party financing
Many institutions offer mobile wallet payments and virtual credit cards to B2B businesses, such as PayPal and Bank of America.
4- Offer Different Payment Options
For any business, it is beneficial to allow its customers or clients to make payments in different forms. It may include digital payment as well as traditional payment methods.
B2B businesses that offer multiple methods to pay invoices are likely to increase revenues by 30%.
Some of the modes of payments include:
- Instant credit
- Trade credit
- Cash on delivery
- Wire transfer
- ACH transfer
- Digital payment
- Purchase order
- Credit card payment
As more and more businesses and merchants are transitioning to digital payments, it is appropriate to offer a mix of payment channels and interfaces that is suitable for your business and clients.
In today’s fast-moving world, B2B businesses need to manage their payments efficiently. There are various effective payment methods and solutions. However, choosing the one that fits your needs will lead to the success of your business.
Payment methods also include hidden costs, manual labor, and additional fees. Therefore, it is recommended that you should go for a payment solution that supports and is compatible with various payment methods. Look for utility, reliability, integration, and ease of use in a B2B payment platform. Going for such payment solutions makes your payment process easier and streamline your payment collections.