B2B payments: what are your options?

It may sound obvious, but businesses need ways to pay each other. They provide each other goods and services in exchange for money, and that’s how the world works. But payment between companies is a little different than it is between a customer and a business. Because companies are often exchanging large sums of money, cash doesn’t cut it. Most opt for digital payments, although there are some die-hards out there who still prefer a physical cheque (or check for our friends in the US).

This article will cover why business-to-business (B2B) payments are essential and the types of payments available to businesses.

Why are B2B payments important?

B2B payments are how companies pay each other for the exchange of goods or services, and do not involve any customers. Companies should have a formal process in place to handle B2B payments. Implementing a defined spending process reduces the risk of fraud and human error.

Payment between businesses takes a bit longer than business-to-consumer (B2C) transactions. B2B payments will need some advanced steps in the form of ordering, invoicing, processing, and settling. They also might need to be approved by a certain chain of command in the company hierarchy, such as a sign-off by the CFO or CEO or various department managers.

Some examples of possible business-to-business transactions might include:

• Subscriptions

• Inventory

• Rent

B2B payments could be one-off or recurring. We’ll take a look at the different ways you can pay in the next section.

What B2B payment options are available?

There’s no one-size-fits-all payment solution available. Each option has its pros and cons, and not every option will suit every company. It depends on your finance team, preferences, size of the payment, what you’re actually paying for, and your existing spend management processes.

Wire transfers

Wire transfers are enormously popular for B2B payments. Not only are they quick and relatively painless, but they’re often the preferred method for companies sending money across international borders. The money is transferred from one bank to another, and there are usually feeds incurred. It’s an entirely electronic transaction that’s subject to inspection by regulatory authorities to reduce the risk of money laundering.

Digital payment platforms

Digital payment platforms like Wise, PayPal, Venmo, and Google Pay are quickly replacing traditional wire transfer methods. Unlike wire transfers, these platforms take the middleman – the bank – out of the equation, making B2B payments direct and simple. But just like wire transfers, however, there can be significant fees incurred with payments via these platforms. There are other benefits to digital payment platforms, such as mobility (Venmo and Google Pay are available through mobile apps) and enhanced security.

Cheques

This old-fashioned method of payment is still used by quite a few companies. A major plus to using paper cheques is the (literal) paper trail which makes the auditing process much easier. While not as instantaneous as wire transfers or digital payment platforms, cheques are easily traceable and still a very reliable and secure payment method. In addition, some companies simply don’t have the digital infrastructure in place to support digital payments, so cheques are a great option for them.

Cards

Debit, credit, and purchasing cards are all viable options for payment by card. Some teams have just one company credit card passed around, and others opt for a spend management solution like Spendesk which allows employees to have their own cards (with built-in budgets, of course).

Cards can also be broken down further: physical cards and virtual cards. Let’s explore both below.

Physical cards

With Spendesk, employees can have their own physical cards to spend and make B2B payments as needed. Purchases are approved by a manager, and built-in controls make it impossible to overspend. These are a great alternative to the corporate credit card, which is a fraud risk and a pain to manage.

Virtual cards

Virtual cards are especially convenient for B2B payments. With Spendesk, employees can generate unique virtual cards for safer spending online. These are especially useful for any subscriptions for SaaS software. Transactions are displayed in real time, so the finance team can keep track of budgets and company finances.

Manage B2B payments with a spend management solution

No matter how you choose to transfer money between your organisation and your partners, you’ll definitely need a robust spend management solution to keep an eye on incomings and outgoings. 

B2B payments, along with all other types of payments, expenses, invoices, and procurement tasks, can all be handled in one simple, scalable solution. Book a demo today to learn more about Spendesk.