Business-to-Business (B2B) Payments | B2B Finance Glossary

Jun 6, 2023 by Brandon Jones

What are B2B Payments?

B2B is “business-to-business” and refers to businesses designed to create products and services for other businesses. More and more software products have been developed for businesses and fall under the B2B category. Examples include HR and accounting software, CRM, email marketing software, and other software designed to enhance business operations.

B2B payments, more specifically, refer to the exchange of money for goods and services between two businesses. Therefore, a B2B payment would be made from one business to another in exchange for a product or service that particular business is providing.

How are B2B Payments Different from C2B Payments or C2C Payments?

  • C2B is “consumer-to-business” and refers to consumer payments to companies in exchange for goods and services. An example of this kind of payment would be a consumer buying a new suitcase from a luggage company; another would be an individual purchasing a plane ticket from an airline. In this transaction, money flows from a person (the customer) to a business (the seller).
  • C2C stands for “consumer-to-consumer” and refers to payments made from one consumer to another: e.g., one individual might pay another individual back for a pizza they bought together the night before. Venmo and PayPal are examples of payment platforms that facilitate C2C transactions. Here, no businesses send or receive money; the payments are solely transferred from one consumer to another.
  • B2B payments, on the other hand, do not include individual people (consumers) in the payment process. They only refer to payments made from one business to another.

What are the Drawbacks to the Way that B2B Payments Work Today?

Today, unlike C2C payments and C2B payments, many B2B payments are still tied to paper-based processes that are highly work-intensive. That’s because B2B payments are much more complicated than consumer payments and involve much higher transaction volume.

As a result, B2B payments are stuck in the dark ages, with over 40% of them being processed via paper check – a form of payment that falls victim to fraud 74% of the time. On top of that, paper checks greatly extend DSO time due to mail float – the time it takes for a check to travel through the postal system from the payer to the payee. While other options are available, such as wire transfers and credit card payments, they also have their drawbacks.

Wire transfers can be costly – they usually cost between $25 and $50 per transfer, depending on whether or not the payment is being made domestically or internationally. They also run on infrastructure built long before the internet was commercialized. Credit card transactions often come with exorbitant fees (usually 3.5% of every transaction) determined by credit card companies and inevitably punish merchants for accepting payments from their customers.

As a result, B2B payments are extremely costly and time-consuming for AR departments. They have a long way to go compared to how seamlessly and inexpensively C2B and C2C payments operate today.

How Can New B2B Payment Solutions Put Your Revenue on Autopilot?

While it still holds that many B2B payment options are entirely outdated, innovations designed to help AR teams step into the future are being created every day. These new B2B payment solutions are designed to make payments cashless, feeless, intuitive, and free finance organizations from the rote tasks that drain time and energy. Here are a few examples of next-gen B2B payment innovations:

Smart Lockboxes

Paystand built Smart Lockbox as a digital-first alternative to traditional lockbox services. Now, businesses have the keys to unlock a fully paperless cash cycle from payer to merchant – one that incentivizes customers to move to a digitized payment model that eliminates manual tasks and lowers operational costs for finance teams everywhere.

  • Smart Lockbox integrates seamlessly with ERP systems (including NetSuite and Sage Intacct) so that finance teams can entirely bypass the process of manual data entry, remittance matching, and reconciling deposits from paper check payments. More specifically, Smart Lockbox gives merchants the following:
    • A one-click migration experience for existing paper check payers that digitizes all future check payments
    • Remote remittance processes that eliminate DSO and trips to the bank
    • Immediate visibility into the cash flow through payment data displayed as it comes in
    • A centralized collections process and reduced receivables risk with 24/7 payment tracking
    • Check information, reconciliation status, and transaction details that are fully integrated into every user’s ERP system

Zero-fee Direct-bank Networks

The Paystand Bank Network is a zero-fee, digital payment rail that gives businesses access to real-time fund transfers and automated payment settlement. Due to its digital format, this payment rail allows for easier, faster, and more secure transactions than legacy options like debit or credit cards, which helps businesses get paid more quickly and efficiently. On top of that, it makes it possible for businesses to stop accepting credit card payments for good – and avoid the punitive transaction fees associated with them.

Here are some of the benefits that come from using our zero-fee direct-bank network as part of the collections process:

  • No transaction fees, processing costs, or markups
  • Auto-pay and recurring billing features
  • Instant fund verification
  • Proprietary Least Cost Routing (LCR) technology
  • Real-time payment tracking
  • Blockchain-assured payment history
  • Digitally auditable record trails
  • Reduced chargebacks

Additionally, Paystand has created payer incentives that businesses can use to encourage customers to move away from credit card payments altogether – something that can help businesses save 67% on credit card fees on average.

At the end of the day, B2B payment solutions should help turn the cash cycle into a revenue-generating machine – not contribute to draining a business’s bottom line.

Tips for Choosing the Best B2B Payment Provider for Your Business

When it comes to choosing the B2B payment solution that’s right for your company, there are a number of factors to consider:

  • Does the B2B payment solution help facilitate both international and domestic payments?
  • Does the B2B payment solution integrate seamlessly with your current ERP system so that data pertaining to your cash cycle is all in one place?
  • Is the B2B payment solution secure and PCI compliant?
  • Does the B2B payment solution offer payment options that your customers want to use?
  • Does the B2B payment solution have payer incentives that can help encourage your customers to change their payment behaviors to benefit your business?
  • Is the B2B payment solution designed to help your finance team save time and money?