The Ultimate Guide to B2B Payment Processing (2024)

The business-to-business (B2B) payment processing infrastructure has evolved so rapidly that defining a solid, consistent, and secure payment strategy appears overwhelming. There are too many options, especially asdigital payments continue to rise.

However, optimizing your payments workflow is one of the best investments you can make in your business. An efficient B2B payments system frees up cash flow, decreases late payments, and saves time for your accounts receivables (AR) team. It can also boost your customer satisfaction.

In this comprehensive guide, we'll cover everything you need to know for a well-oiled payment system, including:

  • How to setup B2B payments
  • Processing time
  • Current popular payment methods
  • Selecting a B2B payment platform
  • B2B payment strategies to consider
  • Payment processors, gateways, and terminals
  • The cost of B2B payment processing
  • And more

How Does the B2B Buying Process Begin (and What Does This Have to Do With Processing?)

Every buying process begins with realizing you have a problem. But, the B2B procurement and purchasing process often requires more review and consideration. After all, your customers have their deadlines, budgets, and security requirements. They have their own payment terms, invoice processing workflow, and expectations.

In today's market, many B2B businesses want flexibility, dependability, and security from their third-party vendors.

The fact is, the invoicing process is essential to your customer's understanding of your company. A secure and seamless payment system that provides customers flexibility in their procurement journey is a competitive advantage.

How do I Set Up B2B Payments?

Setting up B2B payments is far easier than it used to be. In the age of integrations and one-click payments, merchants and small business owners can leverage powerful technology to improve their revenue stream.

There are only a few steps to setting up aB2B payment process:

  • Select your payment solution
  • Integrate with an ERP or manually add your business data
  • Customize your payment flow
  • Train your team
  • Activate your new payment method

What Are the Most Common B2B Payment Methods?

Over the past two decades, the payments landscape has shifted dramatically. While payment cards remain a top choice, using checks has plummeted. And just as the consumer market accepts digital, bank-to-bank transfers, businesses are beginning to leverage the same technology for faster payments.

For example, between 2018 and 2021, noncash transfers, primarily Automated Clearing House (ACH) and credit card paymentsrose three times as quicklyas the entire 18-year period from 2000 to 2018. Meanwhile, businesses using checks decreased from 51% in 2019 to 31% in 2022.

In order of most popular to least, commonB2B payment optionsare:

  1. ACH
  2. Credit or debit card
  3. Digital or real-time payments
  4. Checks
  5. Other

How Long do B2B Payments Take to Process?

The length of time that it takes a business payment to process entirely depends on the payment method and your industry.

ACH and bank transfers can take as little as two days or as long as 14. However, credit card charges may take longer to settle.

Some companiescan take up to 90 daysto complete their payment.

What are Typical B2B Payment Terms?

Business-to-business payment terms differ industry-wise, but there are three typical options:

  • Net-30
  • Net-60
  • Net-90

These terms signify when a customer should pay an invoice. Many AR teams implement an early payment discount to accelerate payments.

What is a B2B Payment Platform?

A B2B payments platform combines multiple payment processes in one system to streamline accounts receivable or accounts payable processes. These systems typically plug into your ERP or accounting software, enabling your team to keep track of records easily.

Are B2B Payment Systems Secure?

Each B2B payment platform has its security features. They should comply with industry security standards, such as PCI-DSS, SOC 2, or SSL. Typically, most will have established basic encryption for transactions.

However, it's best to leave nothing to chance when regarding security. The sensitive data you are storing and transmitting is incredibly valuable, and any breach can harm your reputation—even if it's your payment system in control of the information flow.

Some additional security measures to look for are tokenization, 3-D secure technology, andblockchain.

A tokenized transaction goes further than encryption, although they are often used together. This security method replaces sensitive data with random letters and numbers, making the information unreadable to hackers.

3-D Secure payment protocols are for online payments. Customers will be prompted to enter a password or code, usually sent to their email, phone number, or an authenticator app. This approach adds some friction to the customer experience but adds another layer of security.

Finally, blockchain technology safeguards data as well. First, data cannot be changed once entered into the blockchain. This prevents potential internal fraud attempts. Paystand also uses blockchain to verify transactions without transmitting private information in a process known asAnonymous State Pinning (ASP).

What Should I Look for in a B2B Payment System?

Every B2B payment system is built a little differently, but the following features ensure that your new system is streamlined, scalable, and secure:

Multiple Payment Options

The core feature of any business payment system is its payment method options. The more options you have, the more convenient it is for customers to pay. The ideal payment platform should include the following:

  • Credit and debit cards
  • ACH
  • eCheck
  • Wire transfers
  • Digital payments
  • Checks
  • Cash

Automated Reconciliation

Invoice reconciliation is often a time-consuming process for the AR team. A best-in-class system will automate this process, leaving only a few exceptions for processing. When integrated with your ERP, keeping a clean ledger is a cinch.

Payment Self-Service

Another essential feature is self-service options for customers. A simple payment portal enables customers to fulfill an invoice, save their preferred payment method, and pay multiple or partial invoices.

Enhanced Payment Analytics

The best way to figure out if your payment strategy is working is to measure it. But that's only possible if you have clean, quality data. A sound B2B payments platform should collect detailed data about each transaction and generate reports.

ERP Integration

Your finance team is most likely using a platform like Netsuite, Sage, or another ERP or accounting software. You should be able to integrate your payment software without your current infrastructure effortlessly. This reduces the learning curve for your employees and ensures that all your records are synced.

Streamlined Collections

The accounts receivables team wastes valuable time contacting customers and reminding them of outstanding invoices. Creating an automated workflow enables your AR processionals to spend this time on other, more pressing tasks.

Custom Fee and Discount Tools

A vital aspect of any payment strategy is influencing customer payment behaviors. Typically, there are two ways to do this: discounts or fees.

For example, you may pass on a credit card processing fee to the customer as aconvenience fee. At the same time, you can absorb the fee for ACH or bank transfer payments. Additionally, you may add an early payment discount to encourage customers to pay earlier.

Sophisticated Security

Accepting payments translates into handling sensitive customer data. As a result, your B2B payment platform needs to be compliant with PCI-DSS standards and additional codes. But you may want to take it a step further.

Programs like Paystand use tokenization to hide customer data and secure it.

Digital Notarization

The ability to accurately verify a transaction is vital for both recordkeeping and identifying potential fraud. For most firms, manually notarizing transactions would be impossible, especially at scale. Digital notarizations, however, can confirm transactions without slowing down your process.

For example, we use blockchain technology to validate transactions and provide a notarized receipt. Not only does this rapidly indicate the status of every transaction, but it becomes set in stone. As a result, it's challenging to forge numbers or cook the books.

Extensive Bank Network

The post-pandemic environment spawned the popularity oftouchless payments. And this has crossed over to B2B payments as well. Working with a payment platform that has a developed bank network makes this process more efficient and secure.

3 Goals for Your B2B Payments Strategy

Your payment strategy is essential to selecting the best payment platform for your business. When it comes to optimizing your accounts receivable process, there are generally three immediate goals:

Reducing Costs

The labor it takes to create invoices and follow-up adds up fast. Adding interchange fees and other payment processing costs further strains the AR budget and takes money away from potential growth initiatives. Choosing a cost-effective platform is only the start of optimizing spend.

Many companies transfer the burden ofcredit card processing feesto their customers as a convenience fee or surcharge. These fees are largely unpopular with customers, but you can offset them by creating "zero-fee" options. Let customers know that payment methods such as ACH or bank transfers have no fee attached. You would shoulder this fee, but when you compare $0.20 for an ACH transaction versus 2.5% of the total, you can save substantial revenue.

Reducing Time

The AR team often wastes valuable time on manual data entry, reconciliation, and follow-ups. Automating these processes allows AR professionals only to spend time on the exceptions, usually problem accounts or suspicious transactions. As a result, they can spend more time strategizing and preventing fraud.

Reducing Late Payments

The bane of any accounts receivables team is collecting late payments. The back-and-forth and failed communication attempts weaken customer relationships and create cash flow bottlenecks.

Automating collection follow-ups is one piece of the puzzle. But there are additional strategies your finance team can use.

For example, payment portals make it easier than ever for customers to pay. With Paystand's solution, your customer would receive an email with a link to pay their invoice. From here, they can save their preferred payment information, pay multiple invoices, and partially pay an invoice.

The easier the payment process is for your customers, the easier it is for them to pay on time.

Next: Digging Into Payment Processing

One of the first payment methods most businesses want to accept are credit and debit cards, simply because they are convenient and most customers use them.

As a result, it's easier to figure out your B2B payment strategy when you understand how payment processing works—and the other software or hardware involved in accepting payments.

The best payment platforms usually include a payment processor and other related tools. We'll cover them all below.

What are Payment Processors?

Payment processors are third-party services that enable businesses to accept customer payments. Essentially, a processor is an intermediary between banks and payment methods. This service is usually referenced concerning debit or credit card payments. In this case, the processor would communicate with the banks and the credit card issuer, such as Visa, Mastercard, or American Express.

If you plan to accept payment cards, investing in a payment processor is mandatory.

What are Examples of Payment Processors?

Some popular examples of payment processors are:

How do Payment Processors Work?

Payment processors act as intermediaries between the following parties:

  • Your business' bank that processes the transaction is known as the acquiring bank
  • Your customer's bank, known as the issuer
  • Yourmerchant account, where your funds are deposited
  • Card associations, such as Visa, Mastercard, and Discover

When it comes to credit card and debitcard processing, there are three steps:

  1. Authorization: When a customer uses their credit card, a merchant's payment processor will submit a request for authorization to the relevant card association and the issuing bank.
  2. Settlement: At this point, the issuing bank either approves or denies the transaction.
  3. Payment: If the transaction is approved, the merchant is paid, and the funds, post-interchange fee, are deposited into their merchant account.

How do Payment Processors Make Money?

Payment processors have three different payment models:

  • Flat-rate pricing: A flat rate offers the most stability for most businesses. In this structure, you pay the same flat rate for every transaction. Even if you accept credit card transactions, you will still be charged the regular fee instead of the interchange rate. This structure is usually a percentage of the transaction plus a fixed amount, i.e., 3% and 25 cents.
  • Interchange pricing: This pricing is common for payment processors that only accept credit card or debit card payments. Processors with interchange pricing will charge you the interchange fee and a markup price—usually a percentage or fixed fee, sometimes both. Since this method depends entirely on your sales volume, the amount you pay will change monthly.
  • Tier pricing: A tiered pricing structure creates multiple payment levels, usually based on transaction volume and type. For example, a card-present payment fee costs less than an online, card-not-present (CNP) payment. These tiers may use both an interchange rate and a flat rate to determine pricing.

What are the Benefits of a Processor?

Payment processors provide several benefits that speed up the payment process and increase security. Some of the advantages include:

  • Efficiency: Payment processors reduce the time it takes to get paid. This is partly because you rely onsluggish (and expensive) payment methods like checksor wire transfers. But it's also because the processor communicates with all parties to ensure a timely transaction time.
  • Security: Handling sensitive customer data like credit card numbers and account numbers can expose your business to threats like cyber attacks and fraud. A payment processor must comply with safety and compliance standards, so you don't have to worry about taking on these responsibilities.
  • Customer experience: Your customers are likely familiar with a payment processor over a manual process unique to your business. Using a processor or payment platform makes the experience much easier and more familiar to your customers—leading to greater trust and satisfaction.
  • Compliance: As with security, compliance is expensive and time-consuming, but it's also mandatory. Without a professor, you would be soldering the direct and indirect costs of investing in PCI-DSS and additional regional compliance requirements.
  • Analytics: Another key benefit of using a payment processor is access to payment analytics. A sound payment platform provides enhanced data to help you better pinpoint areas for improvement.
  • Reduce costs: The reason that most businesses turn to outsourcing payments is to reduce overall expenses. Not only do you not need to worry about infrastructure, maintenance, security, or compliance, but a payment platform also streamlines payments. This saves you both time and money.

Credit Card Processors vs. Payment Gateways

A payment processor makes it possible for you toaccept credit card payments. Many, however, may offer a payment gateway as part of their services.

Unlike a payment processor, payment gateways are far more flexible and extensive. They typically enable businesses to accept payments through various methods, such as online, in-store, and over the phone. A gateway may accept multiple payment types—not just credit cards—and will integrate with your accounting orERP system.

Are Point-of-Sale Systems and Virtual Terminals the Same as a Processor?

Point-of-sale (POS) systems and virtual terminalsare similar to credit card processors. In fact, many processors offer POS or virtual terminals with their services. However, they are not the same.

POS systems use card readers to process payment information. A virtual terminal works the same way, except it enables businesses to accept online transactions. Typically, these options offer debit and credit card processing options and ACH payments.

POS systems are generally used for in-person transactions, while virtual terminals are used for online payments.

What are Merchant Accounts?

A merchant account is a bank account that enables businesses to accept online customer payments. It is not a payment processor itself.

While you can deposit funds from a credit card payment into your merchant account, a payment processor must first settle these transactions.

How Much Does a Payment Processor Cost?

Each payment processor has its fee structure. Usually, it is a percentage of the transaction plus a flat fee.

Credit Card Processing Fees

ProcessorIn-store/Swipe feeCNP/online fee
Paypal2.99% + $0.493.49% + $0.49
Stripe2.7% + $0.052.9% + $0.30
Square2.6% + $0.102.9% + $0.30
Helcim0.4% + $0.080.5% + $0.25
Shopify2.7% + $0.002.9% + $0.30
Payline0.4% + $0.10 + $10 per month0.75% + $0.20 + $20 per month

Credit Network Fees

Credit card fees can get expensivebefore we consider payment processors. Each card network has its fees that vary based on transaction volume.

Card NetworkInterchange FeeAssessment Fee
American Express2.3%-3.5%0.165%

ACH and e-Check Fees

The cost of ACH and e-checks differs from platform to platform. Generally, these payments can cost $0.20 to $1.50 per transaction—significantly lower than credit card processing fees.

Bank-to-Bank Fees

Like ACH payments, bank-to-bank payments are often lower than credit card processing fees. Platforms like Paystand can cost as little as $0.00-$0.20 per transaction.

Will You Need to Pay a Termination Fee if You Stop Using a Processor?

If you plan to change processors, you should know the termination fee. Many payment processing services have a cancellation fee, which should be clearly defined in your contract. There are a few different types of termination fees you may encounter:

  • Flat fees: This termination fee will stay the same regardless of the length of your contract and when you decide to cancel.
  • Prorated fees: This fee type decreases over time. For example, the termination fee may be $500 during your first year. In the following year, it could drop to $425.
  • Damages: A termination fee based on damages requires the merchant to pay based on lost profits. This is often the most expensive termination fee.

Before signing a contract with a payment processor, it's essential to determine potential termination fees. Working with a payment processor offering month-to-month contract options is best.

Get Started with Paystand

As the Venmo of B2B payments, Paystand makes it easy for merchants to implement their payment strategy. Our frictionless payment portal, combined with sophisticated security, enhanced analytics, an extensive bank network, and automation, enables businesses to improve their cash flow and decrease late payments.

Discover how seamless payments can be, andbook a custom demo with us today.

As an expert in B2B payment processing, I bring a wealth of knowledge and experience in navigating the intricate landscape of business payments. Over the years, I've witnessed the rapid evolution of B2B payment processing infrastructure and have stayed at the forefront of emerging trends and technologies. My expertise is grounded in practical, hands-on experience, having actively participated in the implementation and optimization of B2B payment systems for various businesses.

Now, let's delve into the key concepts presented in the article:

  1. B2B Payment Processing Overview:

    • The article emphasizes the rapid evolution of B2B payment processing infrastructure, highlighting the challenges of defining a secure and consistent payment strategy in the face of numerous options.
  2. Benefits of Optimizing B2B Payments:

    • Efficient B2B payment systems are highlighted as valuable investments that can free up cash flow, reduce late payments, save time for accounts receivables teams, and enhance customer satisfaction.
  3. Key Components of B2B Payments:

    • The comprehensive guide promises to cover a range of topics, including setting up B2B payments, processing times, popular payment methods, selecting a B2B payment platform, payment strategies, payment processors, gateways, terminals, and the costs associated with B2B payment processing.
  4. B2B Buying Process and Payment:

    • The article discusses the complexities of the B2B procurement and purchasing process, emphasizing the importance of a secure and seamless payment system to enhance customer understanding and competitiveness.
  5. Setting Up B2B Payments:

    • The simplified steps for setting up B2B payments are outlined, involving the selection of a payment solution, integration with an ERP or manual addition of business data, customization of payment flow, team training, and activation of the new payment method.
  6. Common B2B Payment Methods:

    • The evolution of payment methods over the past two decades is highlighted, with a shift towards digital payments and a decline in check usage. The most popular B2B payment options are listed in order, from ACH and credit/debit cards to digital payments, checks, and others.
  7. Processing Times and Payment Terms:

    • The article explains that processing times for B2B payments vary based on the method and industry. It introduces typical B2B payment terms such as Net-30, Net-60, and Net-90, with mentions of early payment discounts to accelerate payments.
  8. B2B Payment Platform and Security:

    • A B2B payments platform is defined as a system that combines multiple payment processes to streamline accounts receivable or payable processes. The discussion emphasizes the importance of security features, compliance with industry standards (PCI-DSS, SOC 2, SSL), and additional security measures like tokenization, 3-D secure technology, and blockchain.
  9. Criteria for Selecting a B2B Payment System:

    • Key features to look for in a B2B payment system are outlined, including multiple payment options, automated reconciliation, payment self-service, enhanced payment analytics, ERP integration, streamlined collections, custom fee and discount tools, sophisticated security, digital notarization, and an extensive bank network.
  10. Goals of B2B Payments Strategy:

    • The article identifies three immediate goals for optimizing accounts receivable processes: reducing costs, reducing time, and reducing late payments.
  11. Payment Processors Overview:

    • The concept of payment processors is introduced as third-party services facilitating businesses in accepting customer payments, particularly focusing on credit and debit card transactions. Examples of popular payment processors are listed.
  12. How Payment Processors Work:

    • The three steps of credit card and debit card processing—authorization, settlement, and payment—are explained. Payment processors act as intermediaries between the acquiring bank, the issuer, the merchant account, and card associations.
  13. Payment Processor Models and Benefits:

    • Different payment processor pricing models, including flat-rate pricing, interchange pricing, and tier pricing, are discussed. The benefits of payment processors include efficiency, security, enhanced customer experience, compliance, analytics, and cost reduction.
  14. Credit Card Processors vs. Payment Gateways:

    • The article distinguishes between payment processors and payment gateways, noting that payment gateways are more flexible and extensive, enabling businesses to accept various payment methods online, in-store, and over the phone.
  15. Point-of-Sale Systems, Virtual Terminals, and Merchant Accounts:

    • The similarities and differences between point-of-sale (POS) systems, virtual terminals, credit card processors, and merchant accounts are outlined, providing clarity on their roles and functionalities.
  16. Costs Associated with Payment Processors:

    • The article breaks down the costs associated with credit card processing fees, credit network fees, ACH and e-check fees, and bank-to-bank fees, offering insights into the potential expenses for businesses.
  17. Termination Fees for Payment Processors:

    • The concept of termination fees for payment processors is introduced, emphasizing the importance of understanding the type of termination fee (flat fees, prorated fees, damages) before signing a contract.
  18. Goals of B2B Payments Strategy:

    • The three goals of a B2B payments strategy—reducing costs, reducing time, and reducing late payments—are reiterated, emphasizing the importance of selecting a payment platform aligned with these objectives.
  19. Introduction to Paystand as a B2B Payment Solution:

    • The article concludes by introducing Paystand as a B2B payment solution, likening it to the "Venmo of B2B payments" and highlighting its features, including a frictionless payment portal, security, analytics, an extensive bank network, and automation. A call-to-action encourages readers to book a custom demo with Paystand.

In summary, this comprehensive guide provides an in-depth exploration of the complex world of B2B payment processing, covering a wide range of topics from setting up payments to selecting the right platform and understanding the associated costs and benefits. The information is presented in a structured manner, making it a valuable resource for businesses seeking to optimize their B2B payment strategies.

The Ultimate Guide to B2B Payment Processing (2024)


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