The Benefits of Digital Payments for B2B

Nov 3, 2020 by Eduardo Lopez

Businesses typically view the payment experience as just another customer touchpoint, but shifts in technology have proved that digital payments are bringing a ton of opportunities for businesses to grow faster and more efficiently.

Consumer payments have seen a digital revolution so drastic that people hardly set foot in a bank anymore, and most money transfers can be done via apps and online platforms. Contactless payment is the present, not the future of digital payments.

But business accounting and finance departments are lagging behind when it comes to adopting this payment method. The majority of transactions and processes are still done via highly manual, paper-based methods.

We've seen a lot of challenges confronting the digital B2B payment space due to the pandemic. The sudden shift to digital solutions and remote processes has exposed the costly infrastructure gaps and inefficiencies of a financial system worth hundreds of trillions of dollars. Yet, businesses are still largely dependent on in-person processes, slow-moving checks, and costly paper invoices.

If like many CFOs and AR managers, you're looking into digital payments and electronic remittance solutions, read on as we walk through the benefits of shifting to digital payment solutions.

Paper checks vs. Digital Payments

Paper-based payments are a hassle for both businesses and the customers they serve. Among a number of disadvantages, collecting and processing paper checks is an extremely costly activity for most businesses, costing between $4 and $20 to process a single check.

Not only are paper-based payments expensive, but it also takes about 15 days for a check to clear. Accounting for mail float, errors, and potential delays, you can easily spend a month waiting for payment, which negatively impacts Days Sales Outstanding (DSO) and hurts cash flow.

The fact is, this payment system is highly inefficient.

Businesses that stop accepting paper check payments have a number of complaints:

  • Paper checks slow down the payment cycle and regularly cause delays
  • Checks make businesses and their customers more susceptible to fraud
  • Reconciliation is too time-intensive and error-prone
  • No guarantee that a check is tied to an account with sufficient funds
  • Customers can put stop-payments or close the account
  • Spending time driving to the bank because remote capture is not offered
  • Difficult to track incoming checks or know when the payment will arrive

If that wasn't enough, accepting paper checks has also become increasingly difficult for businesses during lockdowns and unexpected crises. Businesses operating remotely have no one in the office to collect and reconcile paper checks arriving by mail. This becomes even more complex with cross-border payments.

However, most AR systems know this.

That's why 88% of businesses use an ERP.

But the problem is, ERPs are not automated. And many businesses still rely on a manual payment system. In other words, businesses are accepting a paper check, processing it, and manually inputting the data into their ERP. And they do this for each and every check. For an enterprise organization, this is madness.

When you consider that the average B2B payment cycle takes about 35 days to complete and 47% of invoices are paid late, it's clear that unless businesses move beyond paper-based payments, they will always be mired inefficiency.

Electronic payments provide the exact opposite experience. The time and expense required to process cashless payments drop dramatically - sometimes by 60% or more. Digital B2B payment methods are also safer, easier to collect, and effortless automated. Best of all, when you collect payments digitally, that money goes straight into your business' account with little to no delay at a fraction of the cost. From your customer across the street to the vendor on the other side of the globe - payment speed is about the same.

But that isn't the whole story. Accounting departments can also leverage enhanced payment data to optimize their process, filter potential risks, and make departmental budgets.

What are B2B digital payments?

Digital payments, especially when completed via bank networks, transfer funds electronically from your customers’ accounts directly to your business bank account. When you accept digital payments, you free up time, money, and energy to grow your business. Your customers can quickly and easily make payments while ensuring your cash flow remains consistent and easy to forecast.

And if you set up recurring billing and automate payment collection, as most of Paystand's customers have, this process becomes streamlined, completely contactless.

With a B2B digital payment method, you can process payments extremely fast - even on the same day - allowing for instant cash application and automatic reconciliation. This process has been proven to eliminate data entry errors in a payment transaction and ensures your books are accurate. At the same time, digital payment solutions typically integrate with ERPs, making it easy to automatically scan for duplicates or incorrect payments to combat fraud risks.

Digital payments have several more advantages over a flimsy paper check:

  • Convenient customer experience: with digital payments, customers can use a self-service platform and pay invoices from anywhere at any time. They can even pay directly from the emails and invoices they receive with a 1-click "Pay Now" button.
  • Lower risk: Digital B2B transactions are much more secure than traditional ones because they are processed by secure gateways which are hard to tamper with. Most platforms are heavily regulated and protected to keep your money safe.
  • Easily traceable: Details of payments are stored in merchant-specific databases. Both merchants and customers have easy access to payment information. This avoids ambiguity and confusion while tracking payments because you know where the money is at all times.
  • More options mean faster payments: There are several studies that prove that offering customers multiple payment options can lead to getting paid faster, improving cash flow, and allowing companies to expand at a quicker rate.
  • Save money on processing fees: Many payment methods are loaded with fees and soft costs, especially paper checks. One of the benefits of going paperless is that most solutions have fixed fees that allow for better planning, and businesses can choose the model that better suits their needs. Some B2B digital payment platforms even forgo transaction fees altogether and instead use a payments-as-a-service model, like Paystand.

What does this mean for B2B organizations?

There are many industries that still rely mainly on paper checks for payments such as law firms, insurance, and construction. By eliminating the option to pay via paper checks, these businesses can manage their accounts receivable process more effectively, which leads to faster payment cycles and more efficient collections.

Payment preferences are leaning towards digital transactions, fueled by the need to make operations faster, remote, and safe for everyone. While some companies are choosing to keep traditional payments in their catalog, in the long run, these might lead to more expensive and inflexible transactions.

Since 2020, several industries have shifted to digital, contactless payments as a way to stabilize revenue and expand their business. This is likely due to the fact that 87% of customers now prefer using a digital payment method. It's faster, more convenient, and safer.

By now, we've seen some of the benefits digital payments have provided businesses. With payment alternatives for every need, it's easy to see why more companies are choosing to integrate multiple forms of digital payments into their systems. As time goes on, new technologies are being developed to cope with the rising need for faster a payment system.

Finding a digital-first payments platform

So, which digital payment method platform should you choose? Rather than go through all the compliance hoops, most organizations choose to save and invest in a digital payments system.

We can't speak for every system out there. But we believe every business should have access to enterprise-level Payments-as-a-Service technology. The ideal B2B cashless payments platform should be adaptable to your business needs and can streamline the way your company processes payments and captures revenue.

At Paystand, our low-cost, frictionless B2B payment system automates manual processes, lowers transaction costs, and speeds up time-to-cash.

We're moving quickly to become a one-stop platform for every business transaction, from Zero-Touch virtual expense cards for a controlled and easy way to keep track of resources, to a system that integrates ERPs for carrying out invoicing, payment processing, and reconciliation without the usual fees charged by credit cards or banks.

Here are some of the functionalities that Paystand provides:

  • AR Management: Digitize the complete accounts receivable flow with an enhanced employee and customer experience. Improve ROI, maximize efficiency by speeding up time to cash, lowering costs, and automating receivables.
  • Virtual Terminal: A virtual terminal facilitates card-not-present transactions. It allows the merchant to make payments on behalf of the customer. This speeds up transactions and makes contactless card payments possible.
  • Payment Portal: Let customers self-service and pay using multiple payment methods (ACH, Credit/Debit cards, Smart ACH). Our portal eliminates juggling multiple payment gateways and manual processes. Traditional lockbox services are now replaced with a much more convenient digital solution.
  • Fund on File: Securely store payment information so customers can be re-engaged for future charges. We tokenize and encrypt personal data before storing it in a PCI-compliant way. This both safeguards customer data while making recurring payments and subscriptions safe and streamlined.

Taking AR to the next level

Paystand is building the most advanced commercial payment network available to improve bottom-line savings for businesses. Our Payments-as-a-Service model creates a smart billing and payment system that can digitize receivables, automate processing, shorten payment cycles, and lower transaction costs for mid-market and enterprise businesses.

This is a one-stop solution for smarter finances. If you want to know if Paystand and your company are a perfect match, schedule a free demo today.