With the ease, availability, and convenience of today’s technology, conducting business is a lot easier than it was even a decade ago. Gone are the days when business owners actually had to show up at an office to get their jobs done. Entrepreneurs have the ability to work anywhere with the power of a network connection. Additionally, managing business finances is also easier and more convenient than ever before.
Although many businesses still accept traditional forms of B2B payments, such as checks and cash, many businesses are also adopting more electronic B2B payment methods. Some electronic B2B payment methods include Automated Clearing House (ACH), Electronic Funds Transfer (EFT), and commercial cards.
Although businesses have access to more B2B payment options than ever before, there are factors to consider with each option, such as security, setup time and costs, and processing fees. One payment option that works for one business may not be the best fit for another.
Let's take a look at some B2B payment options and we'll break them down to help you determine which option is best for your business.
Checks are still used in business today. In fact, according to the National Automated Clearing House Association (NACHA), approximately 46 percent of checks that are written and deposited involve a small business.
One reason for this is because checks are a cost-effective payment solution for businesses. Although businesses have to pay upfront costs to have checks printed or for postage, they do not cost anything to process (unless a check bounces, of course).
One of the disadvantages to accepting checks is the payment float time. In some cases, businesses may need to wait up to seven business days for a payment to “clear” or for funds to be available. However, as payment systems have become more efficient, the average float time has been reduced to one to three business days.
ACH payments are a popular electronic B2B payment solution used today. Payments are processed electronically via an online portal between a business’ accounts and a vendor. The good news about using ACH is that there is no float time. ACH payments typically take around one or two business days to process. The catch here is that the full amount of the payment must be available in an account to avoid overdraft charges.
ACH payments do come with initial setup costs, and each transaction has a small cost, depending on the ACH provider. ACH transactions are also encrypted at both ends to ensure security and confidentiality. Banks and businesses must abide by a lot of federal regulations regarding the processing of electronic payments and safeguarding customer information in order to mitigate security risks.
Commercial cards, also known as purchasing cards or P-cards work just like a consumer credit card. They can be used to purchase office supplies or to pay suppliers. Many businesses choose to accept P-cards as a form of payment from customers.
There are a number of benefits to using and accepting P-cards as a B2B payment solution. The biggest convenience to using p-cards is that businesses are credited immediately, and charges and fees are consolidated at the end of the monthly cycle. Businesses also have control over who has access to a commercial card within the company, spending limits, and processing costs.
Additionally, many P-cards today come with fraud and security protection. Depending on the contract terms issued by the institution, businesses may even have the opportunity to take advantage of rebates or other rewards programs.
Which B2B Payment Solution is Best for Your Business?
One can clearly see that there are a number of B2B payment solutions available for businesses. Depending on the size and budget of your business, you may want to handle B2B payments differently. Which payment methods are most convenient for your customers? What are the processing costs of each method? What is the average payment float time? These are all factors to consider before selecting the best B2B payment solutions for your business.
The best B2B payment solution for your business should be the payment option that is most convenient for your customers, keeps costs as low as possible for your business, and ensures that you are adopting the safest and most secure B2B payment option. The goal should be to drive sales, not risks.