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The Benefits of Digital Payments for B2B Businesses

November 3, 2020 by Eduardo Lopez

benefits of digital payments

Businesses typically view the payment experience as just another customer touchpoint, but now 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. But the same cannot be said for many business' accounting and finance departments, where the majority of transactions and processes are still done via highly manual, paper-based methods.

In recent months, we've seen a lot of challenges confronting the B2B space due to the pandemic. The stark shift to digital tools and remote processes has exposed the costly infrastructure gaps and inefficiencies of a financial system worth hundreds of trillions of dollar, yet still largely dependent on in-person processes, slow moving checks, and costly paper invoices.

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

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 and any errors or delays, you can easily spend a month waiting for payment, which negatively impacts Days Sales Outstanding (DSO) and hurts cash flow.

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

  • Paper checks slow down the payment cycle and regularly cause delays

  • Accepting checks makes businesses 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 bank because remote capture is not offered

  • Difficult to track incoming check or know when the payment will arrive

If that wasn't enough, accepting paper checks has also become increasingly difficult for businesses during the pandemic, especially if your business has been operating remotely and there is no one in the office to collect and reconcile paper checks arriving by mail.

In contrast, paying electronically has been really easy. Additionally, digital payment methods are also safer, easier to collect, and less expensive when you factor in the cost of issuing, mailing, depositing, and manually handling paper checks. 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.

Benefits of digital payments for B2B businesses

Digital payments, especially done via bank networks, transfers funds electronically from your customers account 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 effortless.

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 aways be mired in efficiency.

With digital payments, you can process payments extremely fast — even on the same day — allowing for instant cash application and automatic reconciliation, which has been proven to eliminate data entry errors and ensures your books are accurate.

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.

Digital payments have several advantages over paper checks:

  • Convenience & accessibility: with digital payments, customers can self-service 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 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 a 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 means 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 costs, time and 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 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 businesses?

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.

In the last year alone, several industries have shifted to digital, touchless payments as a way to stabilize revenue and expand their business during COVID-19. This is likely due to the fact that 87% of customers now prefer using contactless payment options.

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 of faster payment services.

Paystand is a digital-first payments platform

Paystand is building future of digital payments. We provide an enterprise-level Payments-as-a-Service technology that is adaptable to your business needs and can streamline the way your company processes payments and recognizes revenue.

Our low-cost, frictionless B2B payment network 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. 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.

  • 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 customer data so it safely vaults sensitive information in a PCI-compliant way. This is useful and desirable for recurring payments and subscriptions.

  • Zero Card: A prepaid virtual card that helps businesses manage expenses by department or purpose. Track every transaction and pay with your Zero Card online, anywhere.

Keep moving forward

Businesses tend to move toward making the lives of consumers easier and more convenient.

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 network that can digitize receivables, automate processing, shorten payment cycles, and lower transaction costs for midmarket and enterprise businesses.

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

Tags:   electronic checks, Paper Checks, Digital Payment, B2B Payments