Did you know that the majority of B2B purchase decisions are now made online?
That’s right — and it means you might need to rethink your strategy for making and receiving B2B payments.
If most of your purchase decisions are made online, it makes sense to have payment options that also work well online. You don’t want to mail a check to pay for something you’re buying on the internet, right?
On the other hand, there are benefits to more traditional payment methods under certain circumstances.
To help decide which B2B payment methods are right for you, check out the analysis below.
1. Credit Cards
Credit cards are a fast, convenient way to make payments on and offline. If you’re running a small business, they’ll help you keep your personal finances separate from your business expenses.
Payments are secure, and you’ll have the benefit of handling any disputes through the credit card company, which is really helpful if anything goes wrong.
For small purchases, credit cards shouldn’t be too expensive, but charges can rack up if you regularly use them for larger spends.
One major downside when using credit cards for B2B eCommerce lies in the fact that costs often work out at more than initially authorized during checkout — for example, because shipping hasn’t been added yet.
For this reason, merchants typically customize their stores to allow for additional authorizations after the initial order has been made.
This is no problem if you’re using credit cards to make purchases, but it means setting yourself up to receive payments will be more expensive and you’ll need help from a web developer.
If you decide to use credit cards, make sure you fully understand any credit card fees, so you aren’t caught out.
In 2016, 97 percent of small businesses still used checks to make and accept payments — although more modern payment methods are fast growing in popularity.
So, why do so many businesses still use checks?
For a start, familiarity. We all know how to use checks, and there’s no need to learn a complex new system or pay any set-up costs.
If you’re dealing with suppliers or clients who are comfortable with checks, it often makes sense to stick with them, rather than try to get everybody on board with a new system that they might find confusing.
However, checks do come with risks.
Unlike digital payments, they don’t come with an instant record, meaning more work for your accounting department. There’s also a risk that they could be lost or stolen in transit, which means massive headaches down the line.
Checks certainly have their place when it comes to B2B business, especially if you’re used to working with them and don’t want to implement a new system.
3. Purchase Orders
Purchase orders are a common method of making and receiving payments as a B2B business. A purchase order is a legally binding document that allows you to ‘pay’ for goods before you’ve actually received them.
They’re a really useful tool for inventory management and should make it easier for your accounting department to track payments.
As they’re legally binding, you shouldn’t have to worry about non-payment from customers, although you should make sure that only approved, vetted customers can pay via purchase order, within acceptable limits.
It’s common sense — you wouldn’t let a company you’d never heard of purchase thousands of dollars worth of product from you without some reassurance that they could afford to pay.
Purchase orders have been around for a long time, so, like checks, they’ll usually appeal to traditional businesses that don’t want to change the way they do things.
The fact that they’re so good for inventory management makes them a great option if this is something you struggle with.
4. ACH Transfers
An ACH or automated clearing house is an online payment that typically takes 2-3 business days to complete.
This kind of payment is relatively fast and convenient, so it’s an excellent way to pay online. However, you should always ensure that you have the full amount in your account before making a payment, or you could be hit with hefty overdraft charges.
Because the ACH network processes funds, this method has a good level of security. However, it takes time to set up and means that each client that pays or receives money will have to fill out a lengthy form.
Payments can be reversed in the event of a dispute, which means this is a risky way to accept large sums from customers.
ACH transfers are convenient and secure, and you’re probably already using them in some capacity — just make sure you’re aware of the risks and downsides.
5. Online Payment Platforms
Online payment platforms are quickly growing in popularity thanks to their ease-of-use and convenience.
Using an online platform means you’ll always have an electronic record of payments made and received which saves lots of time on accounting. There’s also no risk of checks getting lost or stolen.
Online platforms can make it easier to send and receive payments from companies around the world, which is extremely useful if you operate globally. They’ll also allow you to offer a wider range of payment methods, which increases conversions.
The number of payment platforms available means it can be hard to find an option that works for you and all of your customers and suppliers, and you may end up using several platforms at once, which can get confusing.
Online payment platforms may not appeal to customers who are used to doing things the old fashioned way, so there’s a good chance you’ll still need to accept checks and transfers from some clients.
However, online payment platforms are an excellent choice if you do lots of business online and want to make life easier.
How Should You Make B2B Payments?
For most B2B businesses, there’s no simple answer to this question.
You’ll need to look at factors like cost, security, ease-of-use, familiarity, and appeal to customers. In most cases, you’ll find yourself using a combination of all the methods above, depending on the needs of your business.
Want to read more about how to make and receive B2B payments? Check out our blog today.