Today’s B2B (Business to Business) customers have so many choices. They know that if one company doesn’t offer what they want, they can easily shop around. Not only do customers have preferences about products and services, they also have preferences when it comes to payment methods. They want the payment process to be streamlined, convenient, and secure.
It’s important to offer more than one option. Flexibility and choice will give your organization a competitive edge. And offering updated payment methods will give your customers a more streamlined and convenient payment experience.
Let’s talk about the various types of digital payment methods available to B2B sellers and their advantages over traditional methods.
What payment methods are available to B2B sellers?
Unlike with many B2C (Business to Consumer) purchases, in B2B buying, it’s usual for the seller to issue an invoice outlining the details of the sale and stating the payment terms (e.g., total and date due.) Now the seller can collect payment in one of three ways: traditional payments, digital payments, and smart payments.
Traditional payments include checks, money orders, cash, and, less frequently, barter. Nearly half of all invoices are still paid by these methods. Money orders differ from personal checks in that they are guaranteed not to bounce. But money orders are often limited to smaller amounts. Paying invoices with cash is increasingly less popular, and in fact, many businesses no longer accept cash payments.
Digital payment methods
Digital payment methods include debit cards, credit cards, prepaid cards, charge cards, virtual cards, electronic funds transfers (EFT), automated clearing house (ACH), direct deposit, and digital wallets.
Debit card payments are withdrawn from the customer’s checking account and processed for deposit into the seller’s account. Credit card payments look the same as debits to the seller, but the buyer has some time before the money leaves their account.
Prepaid cards such as gift cards are an alternative to cash or credit cards, and they guarantee instant payment. A charge card is like a credit card, but it carries no interest and requires full payment when the statement is received. Charge cards are typically only issued for borrowers with excellent credit scores.
Virtual cards are virtual versions of credit cards – without the card. Sellers tend not to favor this payment method, given that they must manually plug the card details into their point-of-sale (POS) system or virtual terminal. But some solutions provide
EFT can transfer funds from one bank account to another without intervention from bank staff. ACH is an EFT system run by the National Automated Clearing House Association in the US. An ACH payment moves funds electronically—from one bank to another—through the ACH network.
Direct deposits are also a form of EFT usually used for depositing paychecks and tax refunds. The transfer is made electronically between banks. Because it happens online, the recipient’s account is credited automatically and often instantaneously, meaning there is no waiting period for money to clear.
Digital wallets are software programs that securely store payment information for a variety of payment methods. Customers can use digital wallets to store funds, easily make purchases, and track payment history all on their mobile devices.
Smart payments are an improvement on digital payments. In addition to moving funds from the buyer to the seller, smart payments carry critical business data along with the payment. This is particularly helpful for AR (Accounts Receivable) teams as it supplies the information needed to easily reconcile incoming payments with their corresponding invoice.
With payments made through an online portal powered by a SaaS solution or via an integrated payments solution connected to your ERP, supporting data can be captured at the same time as the payment, which can vastly simplify B2B transactions.
Although some B2B buyers still make payments by check, most customers no longer find them convenient. That they are used at all may be because many businesses haven’t yet provided their AR departments with the means to accept more modern payment methods that many customers prefer. Financial experts believe that by 2022, a majority of payments to suppliers will be made via electronic payment methods.
The future for B2B payments
Business is increasingly moving online, and customers are learning to take advantage of the digital shift. As they move away from paper-based payment methods, B2B sellers must make it easy for their customers to pay in the way that best suits their needs. Digital payments give them the flexibility and control they are coming to expect.
The last few years have shown us that B2B purchasing is on track to take place entirely online
Are you looking for an easy way for your customers to pay online? Would you like to know more about electronic payments and how you can equip your business for the future?
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