How to choose a B2B payment processor

Aug 31, 2021 by Mark Fisher

An accounts receivable and accounts payable department should work as a well-oiled machine for setting the cash flow tone in a business. Figuring out how the money could move more efficiently is at the top of every CFO’s list, and that includes finding the right payment processor for his or her team and customers.

As many payment methods have evolved into a digital version of themselves, businesses needed new ways to process them as swiftly as possible. While paper checks have been one of the most popular, costly, and archaic payment methods, a digital approach under the Check 21 Act has progressed to authorize the electronic clearance of checks.

Most payment methods in the B2B landscape have found ways to adapt to digital transactions through the use payment processors who accept card payments, ACH, wire transfers and even checks. We'll dive into these options in a minute, but first, it's important to understand what a payment processor is.

What's a B2B payment processor's purpose?

Simply put, a payment processor authorizes payments by verifying your customers' billing information, authenticates the funds available in their account, and transfers the money to your merchant account or bank account.

Of course, the payment process has to occur in a highly secured environment to protect your customer's sensitive information, as well as yours.

Some processors are focused on a single payment method, while others offer customers a comprehensive display of alternatives to accommodate their payment needs. We've discussed in other blog posts how offering multiple payment methods can increase the chances of getting paid faster, reduce DSO, and lessen the number of processing vendors you have to deal with. While this is still a big talking point for choosing the best processor for your business, there are other factors to consider.

What elements to consider when choosing a B2B payment processor

Quickly screen the payment processor's background

At this point, you've probably run a Google search for "B2B payment processors" and found a dozen options depending on the size of your company and your business's specific needs. So, can you make a decision just by looking at their names and brands? Not likely. However, we recommend doing a quick check on the processor's company based on these questions:

  • How many years has the processor been in business?
  • How many clients does it currently have?
  • Does the company who created the processor have any other payment software or platforms available?
  • Check the processor's social media channels to see if it has updated info on its payment processor (how-to videos, client testimonies, etc.)
  • Check third-party review pages to read actual unfiltered client's experiences using the processor and any other products the company might have. Read these reviews with an open mind, but when a recurring issue is mentioned by customers, make a note of it and be sure to talk it through with the processor's sales rep.

This criteria will help you narrow down your options. Let's look closer at the various features available through B2B payment processors.

Evaluating features

We recommend focusing on four feature categories: convenience, security, speed, and service.

Convenience = one vendor processing many payment methods

The more payment methods your processor can handle, the easier it will be for your clients and your accounting team to manage payments. We suggest looking for suppliers who can process eChecks just as efficiently as other digital payments. Here are some of the most common methods you need:

  • Electronic Bank Transfer: Also known as ACH, this is one of the most reliable payment methods for B2B transactions. All your customers need to do is enter their bank account information to pay their invoices. With some payment processors, you can even schedule recurring payments, reducing the time your team invests in sending out invoices.
  • Wire Transfer: A business can transfer money from its bank account to another using a financial network. This usually takes up to a few hours to complete.
  • Credit Cards: Processing a credit card can be done in different ways, and you'll find more than one payment gateway dedicated exclusively to credit card processing. Just remember that this is one of the most expensive payment methods due to interchange fees and gateways that charge a commission per transaction.

Paper checks are still widely used, but now there are also processors able to digitize the whole operation. The point of getting a payment processor is not to eliminate legacy payments; it's to accept more digital methods to fit your customer's needs. If you're unsure about those needs, create a report on the most used (or requested) payment methods so you know exactly which ones to consider.

Security

Protecting your customer's data should be one of the main concerns in your business. Lose their trust, and you'll lose thousands (or millions) of dollars in revenue.

B2B payment processors should have multiple security protocols to protect transactions and information, from flagging a potentially fraudulent transaction to high data encryption standards.

In addition, a payment processor should act as an extension of your ERP to connect and share information across platforms so your finance team can have one place with unified AR records. The added benefit here is that in case of an audit, the data stored in your processor will be the same as the one in your ERP, keeping your transaction log in sync.

Before making any decisions, have your development team look into the security specs of the processor you're considering. This will save headaches in the future.

Speed

Every transaction method has its own processing time. Paper checks can take days or even weeks to process, while ACH or wire transfers take only a few hours. Most of these rely on third-party banking networks to complete the transaction, but some processors have their networks, meaning they can manage their own transaction times, fees, and conditions.

Time is vital for cash flow and operation needs.

Service and set up

This part can be vital to making a processor decision, and you usually find out how responsive a processor's team is until you interact with their sales reps and schedule a demo.

Most payment tools work on a plug-and-play format; however, there is set-up time to be considered, where the vendor's developers work with your developers to make sure their system is fully integrated into your needs. Depending on the complexity of these features, it can take weeks or even months for the processor to be able to fully operational, so make sure that the system you end up choosing has a responsive team who is willing to provide regular updates.

It also wouldn't hurt to get to know the customer support team, along with their policies and SLAs (Service Level Agreement), so you know exactly what to expect in case something doesn't go as expected.

Other things to consider

A payment process is an investment that needs to be planned carefully. Because so many stakeholders are involved, you need to make sure the timing won't affect the businesses' operations.

Choosing the lowest-priced option may not always be the best choice. Most processors go with a fee-per-transaction pricing model, and this means that you will have an unpredictable cost since it will depend on the number of your company's payments. Other B2B payment processors like Paystand offer a Payments-as-a-Service model that charges a monthly flat fee, based on a projected transaction volume, making your costs more predictable. In the long run, you'll see significant saving in transaction fees. You can schedule a demo with one of our payments experts here.