B2B payments are at the core of every business that sells to other businesses–it’s how you get paid, after all. But when it comes to B2B payments, it’s not just about getting paid. Not all payment methods and terms are created equal, and some will be better for your business than others. 

In this article, we’ll explore what B2B payments are, common methods and which are best for your business, B2B payment terms, and trends.

What are B2B payments?

B2B payments stand for ‘business-to-business payments.’ It’s any money that changes hands (or bank accounts!) between two businesses to pay for a good or service. B2B payments are not specific to a certain currency.

The most common B2B payment methods

While digital payments are common in our personal lives, B2B payments have lagged behind. It’s only recently that businesses have started shifting towards favouring digital or online payment methods.

Here are the top B2B payment methods:

  1. Credit cards (digital)
  2. EFT/ACH payments (digital)
  3. Cheques (offline)
  4. Cash (offline)

Cheques and cash are considered ‘offline payment methods’. Many businesses are still accepting cash and cheques as their main form of payment. The downside of offline payment methods is they leave no room for automation. You can’t schedule a pull payment and you can’t automatically update your accounting systems when you receive a payment, creating a lot of manual work. 

Need advice on how to transition your customers from cheque to online payment? Read our guide.

Which B2B payment method is best?

When it comes to B2B payments, there’s no hard and fast rule for which is the best type. Generally, we recommend offering both EFT/ACH and credit card payments. Both are digital but give your customers some flexibility on how they can make payments. However, the payment methods you offer your customers should be based on your business, its needs, and your industry.

Credit Card Payments

Pros:

  • Set up scheduled pull payments
  • Help customers with cash flow
  • Information can be securely stored, reducing non-payment risk

Cons:

  • Credit card fees
  • Payment may not go through
  • Updating expired card information

EFT/ACH Payments

Pros:

  • Set up scheduled pull payments
  • Directly deposited into your bank account once received
  • Information can be securely stored, reducing non-payment risk
  • Lower payment processing fees

Cons:

  • Longer processing time

Cheque

Pros:

  • Payment immediately once deposited
  • More secure than cash

Cons:

  • Manual, labour-intensive collection process
  • Can’t pull payment from customers directly
  • No opportunity for automation
  • Have to deposit at the bank

Cash

Pros:

  • Have liquid funds immediately once handed over

Cons:

  • Manual, labour-intensive collection process
  • Can’t pull payment from customers directly
  • No opportunity for automation
  • Cash is vulnerable to theft

Read more on Credit, Cash & EFTs: Which Payment Method is Best.

A quick guide to B2B payment terms

Payment terms is the designated time frame a customer has to pay a bill. Accounts receivable terms are typically agreed upon in a contract or are provided on the invoice. Common B2B payment terms include: N-30 (due in 30 days from the invoice date) and N-60 (due in 60 days from the invoice date.

Payment terms are important because they can impact your cash flow and working capital. We recommend providing as short of payment terms as possible so you get paid faster.

What’s next for B2B payment trends

B2B payments are trending towards automation and self-service. Customers have become accustomed to paying their personal expenses, like an electricity bill or even property tax, online without having to interact with a person. This expectation is now spilling over into the B2B space. 

Software that allows for automatic pull payments, securely stored payment information, and sends automatic payment reminders is becoming mainstream. Another trending software feature is customer portals that let your B2B customers view their invoice records, update their payment information, and make payments–all without needing support from your team.

In fact, when Ace Beverage Group implemented accounts receivable automation software, it increased the speed at which it manages payments by fivefold and improved accounts receivable collection by 80%.