The Essential Guide to B2B Payments Solutions

When it comes to B2B payments, there’s more at stake than you think.

While you may not realize it, there is tremendous economic upside if you take a strategic approach to processing B2B payments.

Every invoice your company receives represents an opportunity: an opportunity to capitalize on the rewards of sound planning and execution, or an opportunity to fall victim to the perils of disorganization.

Time spent digging through your inbox to track down loose invoices and chasing down approvals only begins to scratch the surface of the wasted time and energy that is currently victimizing finance departments everywhere. Below, we explore the B2B payments landscape and how an automated payments solution can help organizations overcome the challenges of traditional payment processing.

What are B2B Payments? 

B2B payments are the transactions processed between one merchant and another. 

An education company may pay an IT solutions provider for computer security services. A healthcare organization will likely outsource for PPE or medical supplies. A food and beverage company owner might pay a supplier for packaging, containers, or bottling services. Or, a non-profit organization may require boxes and shipping materials from a third-party vendor. Put simply, any time one organization invoices another, we find ourselves dealing with B2B payments.

The Current State of B2B Payments

According to a recent report, the global B2B payments market accounted for $732.4 billion USD in 2019 and is estimated to rise to a $1900.6 billion USD valuation by 2029. This market increase is anticipated to register a CAGR of 10.1%.

B2B payments have seen many advancements as of late. The development of online banking solutions, virtual cards, and tokenized payments present a considerable opportunity for market growth due to their ease of execution and high level of security. However, when compared to B2C organizations, B2B companies have been late to adopt payment innovations, like electronic payments. Studies show that approximately two-thirds of B2C global expenditures are processed using e-payments, where just one-third of total B2B global expenditures are processed electronically. 

When faced with this sort of growth potential, it is imperative that organizations prioritize their B2B payments processes and invest in the right solutions in order to stay ahead of the competition and meet customer expectations. 

What Different Types of B2B Payments are There? 

There are many options when it comes to B2B payment reconciliation. However, it’s important to keep in mind that your suppliers may only accept a certain method of payment for invoices. Below, we outline the most common ways to settle your outstanding bills:

1. Cash

The majority of organizations still accept cash payments. However, making payments in cash is more difficult in the B2B worldyour suppliers are unlikely to be conveniently located to make a physical cash exchange. Further, it’s unsafe and not secure to send cash through the mail, and therefore cash payments are becoming a passe option for B2B payments. 

2. Checks

Checks are another traditional form of payment that is generally accepted on a large scale. Paying by check requires a manual process that is time-consuming, costly, and prone to error. Further, paper checks can be difficult to track, easy to misplace, and subject to high fraud risk. 

According to a report by PYMTS.com and MasterCard, 35 percent of businesses expect their check usage to decrease in the future, with more than 40 percent saying check payments are too slow and require too much manual paperwork. However, 64 percent of B2B payments are still made with checks, so there is still an opportunity for businesses to transition to more efficient payment methods.

3. Credit Cards

Though slightly more modern than cash and paper checks, one of the primary methods for B2B payments is via credit card. Credit cards are a convenient and inexpensive way to allow vendors to receive payments quickly, while also allowing the buyer to defer payment for a number of billing cycles. These transactions can also be easily tracked through electronic or paper statements. 

Although credit cards do incur interest rates, when organizations pay off their balances in a timely manner, it allows for access to extra funds and potential rebates. However, just like personal credit cards, business cards are also prone to fraud from time to time. Making a large number of credit card payments can also create additional reconciliation hassle, as your finance team needs to reconcile monthly credit card statements in addition to bank statements, where check, ACH, and even virtual card payments appear. 

4. ACH Payments

Automated clearing house (ACH) payments transfer funds from a business checking account to the account of a third-party. This method requires paperwork to be completed by both the purchasing organization and the vendor. One-off payments are less likely to be made using this method because of the amount of paperwork involved; however, ACH can make recurring or repeated payments much easier. With ACH, payments are sent and received relatively quickly—usually within three business days— and fees are reasonable in comparison to wire transfers. NACHA, the body that resides over ACH payments, currently processes $43 trillion in transactions per year. 

Like other payment methods, ACH has some drawbacks. These payments require organizations to share their personal bank account information, making privacy and fraud a growing concern. ACH transfers can also be difficult to reverse; organizations must report errors within a 60-day period for potential remedy. Additionally, ACH is only supported in the US, so making international payments using this method is not an option. 

5. Wire Transfers

When organizations are looking to make a business transaction in real-time, they often use wire transfers. Once funds land in the receiving account, often within 24 hours of facilitating the transaction, they become available immediately. When compared to ACH, wire transfers have a faster turnaround time. However, some wire transfers still have a daily cut-off time and can be costly to complete. 

There are two different types of wire transfers: cash and digital. Cash-based wire transfers wire funds to a cash office, where a recipient can collect them. Digital wire transfers send funds electronically from one bank account to another. This payment method is also ideal for sending international payments.  

6. Electronic Payment Methods and Virtual Cards

Electronic payments, or e-payments, offer a way for organizations to pay bills online or through an electronic medium, without the use of physical checks or cash. The most popular electronic payment methods include credit cards, debit cards, virtual cards, and ACH (direct deposit, direct debit, and electronic checks).

Virtual cards, in particular, offer a number of benefits: payers incur zero costs, enjoy speedy processing time, and payments remain secure through a process called payment tokenization. Organizations can also receive cash-back rebates on purchases. These benefits have made virtual cards the fastest-growing form of B2B payments, quickly replacing the tedious processes behind checks and wires. 

Electronic payments remove the hard costs and fees associated with traditional B2B payments — including paper, postage, and manual labor expenses. Beyond cost reduction, benefits include strengthened supplier relationships and increased payment security.

The Challenges of Traditional B2B Payments

New automated solutions are changing the way businesses are approaching business payments, and enabling companies to earn returns on every invoice payment that they make. Here are four reasons you should consider adopting the more strategic approach to B2B payments that automated solutions provide:

1. Paper checks are costing you too much

A study by the Credit Research Foundation found that almost 50% of B2B payments are processed with paper checks. MineralTree has found that among smaller businesses in its customer base, this percentage runs even higher.

When you think of all the highly advanced digital payment options in the world today, the idea of paper checks driving business to business payments can seem unfounded. When you think of the fact that digital B2B payments are estimated to cost 90% less to process than paper check transactions, this idea seems even more illogical.

If you’re looking to capitalize on major cost savings like this, switching to digital B2B payments processing should be an easy decision.

2. Time you spend manually entering data could be put to better use

Time is arguably the most valuable resource in the world; so wouldn’t you want your employees to spend it on more valuable tasks while automating accounts payable?

Running multiple processes for checks, ACH payments, and credit card payments is a lot of work and the time to manage each of these effectively starts adding up very quickly.

Establishing an automated invoice processing system has saved companies as much as 64 hours per month, and enabled them to redistribute their employees’ extra time to more strategic and value-added initiatives that ultimately move their business forward.

3. You aren’t capitalizing on early payment discounts

The Association for Information and Image Management reported that achieving significant early payments discounts – which provide as much as 2% back on all spending – is an added benefit to implementing an AP Automation system.

In most cases, the only thing preventing companies from obtaining these discounts is the failure to have an automated payments process in place.

This is low-hanging fruit that drops right to your bottom line.

Benefits of Using a B2B Payments Solution 

B2B payments solutions offer numerous benefits and help organizations overcome the challenges associated with traditional payments. These include: 

Cost Reduction

Estimates from IoFM report it can cost organizations anywhere between $4 and $16 per invoice depending on invoice volume, resources available, and the presence (or lack thereof) of AP automation. With an automated B2B payments solution, costs range anywhere between $3 and $13. It may sound menial, but this cost savings and reduction in cash outflow adds up. Couple this with the cashback rebates you can obtain through virtual cards, and your organization is looking at some serious savings. 

Improved Efficiency

Paying invoices the traditional way (using paper checks) takes time and manpower. With a B2B payments solution, this manual and repetitive work becomes automated – making invoice processing faster and giving your AP team more time to focus on more important business strategies.  

Enhanced Visibility and Reporting

B2B payments solutions provide full visibility into payment workflows and integrate with your ERP solution to offer this view across the organization. This way, team members aren’t spending time tracking down invoices and payments status, and you are able to more easily analyze payment costs, payables age, discount capture, rebates earned, and the overall health of accounts payable. 

Optimized Cash Flow

Automated payments solutions make payments easier and faster to process. When organizations have visibility into the state of their finances and have speed on their side, it becomes easier to optimize cash flow. With more cash on hand, your organization can more easily pursue new business opportunities and remains prepared for a rainy day. 

Strengthened Security

In today’s highly regulated financial systems, security is a must. Most B2B payment solutions offer built-in security features that are able to prevent and protect against payments fraud. This way, your organization does not have to worry about maintaining compliance or protecting against a data breach – the solution does it for you. 

What Do You Look for in a B2B Payment System?

So now that you’ve realized your need for a B2B payments system, where do you start? 

It’s important to know that not all payment and AP automation solutions are created equal. You must do your due diligence to source a platform that works best for your organization and aligns with your current workflows. 

We recommend searching for a B2B payment vendor that offers the following: 

  • Practicality: To whom specifically are you making your payments? If the majority of your vendors are international, you’ll need a solution that is capable of making FX payments. Should you want to reap the benefits of virtual card rebates, your provider must be able to process tokenized payments. 
  • Integration: Modern payment solutions integrate with accounting tools like QuickBooks, Xero, NetSuite, Sage Intacct, and Microsoft Dynamics 365 Business Central. This synchronization ensures that every data point, transaction, approval, and payment syncs with your ERP and bank. Make sure the solution you choose supports your ERP of choice
  • Ease of Use: It’s important that your automation solution is easy to use, set up, and administrate. It’s also imperative that your solutions provider offers quality support and is easy to work with. 
  • Reporting: A modern payments solution should be able to leverage all your activity, from invoice capture to payments, and provide analytics to automate the reporting of accounts payable KPIs.
  • Reputation: Make sure to leverage peer reviews, case studies, and customer feedback to your advantage before selecting a B2B payment vendor. What are users saying about the usability and level of support they offer? 

Final Thoughts

MineralTree supports all payment types including checks, credit cards, wire transfers, ACH, and virtual cards. We also are able to integrate with hundreds of the leading ERPs and accounting systems. Additionally, MineralTree’s Invoice to Pay solution out-ranks the competition across 7 categories including: Meets Requirements, Ease of Use, Ease of Setup, Ease of Admin, Quality of Support, Ease of Doing Business With, and Product Direction according to real user reviews collected by G2.  

Are you ready to start taking a more strategic approach to your accounts payable process? Contact MineralTree for a complimentary assessment of your projected savings with AP Automation.

MineralTree

We're transforming accounting by automating Accounts Payable and B2B Payments for mid-sized companies. Our award-winning solution has helped over one thousand businesses transform accounts payable from a source of inefficiency and fraud risk to a secure and strategic profit center that provides visibility into key cost drivers.