A man standing behind the counter at a restaurant looking at a POS screen.

What makes b2b payment processing unique

Sunday, December 28, 2014

The ins and outs for small businesses

An important part of doing business is the interaction between your company and other companies. To run a successful small business, you will likely work with other businesses. One of the primary ways you may work with other businesses is to supply goods and services to one another. Whether you’re the provider or the recipient, these business relationships rely on business-to-business payments (B2B). So in this article, we’ll take a look at B2B payments to better understand what they are, how they work, and how they are different from processing other types of payments at your business. To start, let’s examine B2B payments. 

What are B2B payments and why are they unique? 

As you may imagine, business to business payments are payments made from one company for goods or services to another. For example, restaurants pay other providers for the vegetables, meats and other ingredients they need to run their business. Likewise, a business may pay an office supply company for office furniture or supplies. Business-to-business payments generally happen when one company invoices another company. Because these payments are often larger sums of cash, there are additional considerations on top of those required for a business-to-consumer (B2C) payment. 

Along with having a higher dollar amount, these B2B payments also take longer to process and approve than B2C payments. That’s because B2B payments aren’t made in advance but instead paid during the invoicing process, which can extend the timeline of the transaction. Another component of B2B payments that’s rapidly growing is ecommerce. Electronic payments and facilitation of these payments can help streamline the B2B payment process, even offering online checkout solutions.

Now that you know more about the B2B payments landscape, let’s look at the common B2B business payment options. The common ways that retailers process payments to one another include credit cards, ACH payments, wire transfers, cash, digital payments and paper checks. Let’s examine each in greater detail:

Credit cards

As one of the primary B2B payment methods, credit card payments are convenient. They allow businesses to float the cash until the payment is due. B2B credit card payments are also easily trackable and a business can see its statement of transactions at the end of every month, which can help with bookkeeping. While credit cards provide convenience in the form of a fast and easy payment method and the security of one-time-use credit card numbers, they often come with a high APR if you carry a balance. And some of the vendors you may work with could ignore credit cards altogether to avoid the 3% or more credit card processing fees. The two networks leading the way in business credit cards are Mastercard and Visa. 

ACH payments

The next popular method for B2B transactions is ACH payments. ACH stands for Automated Clearing House and utilizes the ACH network of bank accounts and routing numbers to make bank transfers. In this method, your business is making a funds transfer from your business checking account to another bank account. While both companies involved in the transaction must fill out paperwork initially, it can be a great option for recurring payments due to its ease of use. ACH payments can integrate into many payment software systems or enterprise resource planning (ERP) systems. Because ACH payments are run by the National Automated Clearing House Association (NACHA), payments run in multiple batches throughout the week. Therefore, it could take a few business days to complete a transaction. Larger transactions may also come with nominal transaction fees depending on your bank. While these transaction fees are a nuisance, they are much lower than other fees you may incur in B2B payments. 

Wire transfers

Wire transfers are similar, although different, to ACH transfers. While they don’t happen very often in the B2B payments ecosystem, they are often high-dollar transactions. Because they don’t utilize the batch system, wire transfers happen much faster than ACH transactions, with real-time payment options. Wire transfers can occur via cash or digitally. In cash wire transfers, the recipient has to go to a cash office to retrieve the funds;  digital wire transfers use electronic means to send funds.


While cash is a historically popular payment method in consumer transactions, it’s less practical for B2B payments. This is partly because many B2B relationships rely on large sums of money. Also, many businesses that work together are not located in the same geographic region, making it impractical to use cash to make B2B payments.

Digital payments

Transactions between businesses can also happen via digital payment apps. With apps like Dwolla, Google Pay, Venmo and other peer-to-peer payment apps, digital and mobile payments can be used. However, there are limitations because many of these payment solutions service providers and mobile wallets are not tailored to businesses and often come with high transaction costs for business use. Another way of making a B2B payment is with cryptocurrency. While it’s important to mention here, that is a subject of its own and outside the scope of this article.

Paper checks

Another form of payment that is less popular than in the past is a paper check. While some businesses still rely on paper checks, this has largely been taken over by electronic checks and ACH transactions.

Now that you know about the different types of B2B payments let’s look at what considerations you may need to consider when it comes to B2B payments.

Can I streamline my B2B payments system?

When it comes to making payments as a business, you have a handful of options. As always, it’s important to evaluate your business’s payment needs when finding a solution.

But, as you’ve seen, electronic payments have become the standard in B2B payments. If you work with other companies a lot, a B2B payments solution could help streamline your processes and let you focus on other aspects of your business.

By adopting a streamlined B2B payment system, your business can benefit in several ways, including:

Improving cash flow: B2B process automation helps you identify more consistent cash flow patterns. This allows you to make smarter decisions about your business’s savings and spending. A payment software platform also enables you to generate reports to give you an overview of your accounts payable (AP) and accounts receivable (AR) processes. This insight can prove valuable when examining who your strongest business partners are. B2B software can also make it easier for your vendors to pay you. With integrated electronic invoices and faster invoice creation, you’ll streamline your invoicing process. Some invoicing technology even allows merchants to pay you within the invoice, helping your business get the money sooner and increasing your cash flow.

Simplifying accounting: With an integrated B2B payment gateway, all your accounting information is in the same place. The B2B payment platform allows you to see your invoices and payments all at once, with the functionality to track and record these online payments. This can help streamline all of your invoicing and accounting processes in one place. Some payment systems can even connect with your accounting software for an integrated payments system.

Increasing security: When it comes to your B2B payments, you’re not sending small amounts of money to vendors. Because these payments are larger sums of money, you want to ensure they are protected. While electronic payments aren’t foolproof, they do offer some protections like encryption and verification that you can’t get with physical payment methods. As you learn more about B2B payment providers, ensure that you choose one that is Payment Card Industry (PCI) compliant. This helps protect your business by lowering your risk of fraud with an additional layer of security when it comes to sending and receiving B2B payments.

Saving time and money: An automated payment system for business-to-business payments can save your company time and money. This streamlined process eliminates the need for you to track down multiple invoices and payment receipts. Plus, your company no longer needs to spend time depositing paper checks into your bank account. Instead, everything happens electronically, with payments integrated and tied to your invoices. You’ll also save money by not having to pay employees to take care of many of these data entry tasks. Therefore, your workforce can pivot to focus on other business processes.

As you can see, B2B payments are an important part of the business ecosystem. If you’re working with vendors consistently, having a payment processing system for your B2B payments can help streamline your business and save you time and money.

Ready to work with a payment processor who can help you with B2B payment processing?

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.