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Payment processing between businesses requires a different set of steps than you would expect with a business-to-customer transaction. When one company pays another company money, it is a little more complex because the payments may be extremely large.
Businesses can pay in a variety of ways, which include not only digital payments but also paper checks, wire transfers, ACH payments, cash, and more. When you learn more about business-to-business (B2B) transactions, it will help you understand how it differs from customer transactions.
B2B Payment Processes
When two merchants exchange services or products, they create a B2B transaction. They pay one another in several ways.
What Sets B2B Transactions Apart?
The reason B2B transactions have to be handled differently from customer purchases is because of several factors. There tends to be a longer payment delay, for example. It doesn’t happen immediately in many cases, and B2B payments can last 30 to 90 days. Also, the volume of payments that occur tends to be vastly larger.
B2B payments can be anywhere between thousands, to millions, to billions of dollars. The frequency of a B2B payment may also require recurring transactions. They may have a contract where they pay a monthly amount to receive services.
There are more people involved with the billing framework of a business. A business’s financial team may be made up of procurement, accounts receivable, accounts payable, and billing employees.
This requires a lot more processing than a one-time purchase. Also, some industries may have more specific needs and have additional requirements. For example, hospital industries require specific privacy regulations that can slow the process down.
Different Types of B2B Transactions
There are a variety of avenues that B2B transactions can take.
Check Payments
The traditional paper check between a buyer and seller tends to be the most common form of payment. It is simpler and trusted.
Electronic Bank Transfers
These payments occur between banks and only require the account number and routing number. The Automated Clearing House (ACH) processes these payments. These tend to take a few days but are considered a very reliable way to pay for a service.
Credit Card Payments
Some businesses may opt for a card payment. These can be deferred for additional business cycles depending on the agreement.
Payment Gateways
These payments are your typical digital processors that occur through online platforms. For example, Stripe, Venmo, and Square are payment gateways where you can manually submit information.
Wire Transfers
These are funds that are transferred through banks immediately. This is the quickest approach and can happen within hours. However, these tend to have a lot of fees associated with these payments.
Cash Payments
The simplest and easiest form of payment is cash. There are no fees, and it is deposited quickly. Not all businesses accept cash, which can be inconvenient for companies.
Up and Coming Payment Styles
Newly introduced payments for B2B include peer-to-peer and real-time processing payments. These haven’t exactly caught on but provide ease-of-use and convenience for B2B transactions.
Real-time processing creates a B2B payment infrastructure that allows greater security and quicker payments that happened immediately. Peer-to-Peer payments are digitalized and set up so that companies can speedily pay one another.
Learn More About B2B Payments
Get the best payment strategy for you from an expert team. Find out more from experts on B2B payment processing.