How to choose B2B payment methods for a small business
The business-to-business (B2B) sector used to rely on payment methods like cheques and wire transfers, but now it’s taking a cue from the business-to-consumer (B2C) sector and giving clients more options – including instant transfers, credit cards and mobile payments.
This guide covers different payment options for B2Bs to help you choose a method that works for your small business.
What are B2B payments?
B2B payments are transactions between two businesses. If your business sells to other companies, you'll receive B2B payments when you supply goods or services to them. Examples of B2B businesses include wholesalers and importers, manufacturers, suppliers, and service providers – like accountants, consultants and marketing agencies.
Types and methods of B2B payments
Here are some of the ways businesses can make B2B payments:
Credit cards
Credit cards are a common method for B2B payments. Like consumer credit cards, a business card offers a set limit and charges interest rates at the end of each month. For the buyer, it's an easy way to make payments online or offline, as well as a useful source of funds during cash flow troughs. If you're a seller, a credit card is an easy way to take and track payments, with a handy summary of transactions at the end of every month.
Wire transfers
Wire transfers are a form of digital payment from one bank account to another bank account, often used for large transactions. Wire transfer payments are managed by banks and sent through an interbank network – that's why they're seen as a safe, secure way to send larger sums.
These days, most wire transfers are digital, with one bank transferring funds to another electronically. Cash-based wire transfers involve funds being sent or approved at a cash office, then collected by the recipient.
International wire transfers can be useful if your business buys or sells internationally, as they tend to clear more quickly than other forms of payment.
Direct debits
Direct debits are another form of bank-to-bank payment, often used for repeat payments – for example, subscriptions or monthly bills. The buyer or customer approves a direct debit agreement, then you can pull payments each pay period without the customer needing to approve each transaction.
In Australia and New Zealand, direct debits are processed through the BECS (Bulk Electronic Clearing System) network, which governs transactions between registered banks and financial institutions. Direct debit payments are usually processed in large batches at the end of each day, making them cheaper but slightly slower than other payment methods.
Digital payments
Digital payments are electronic funds transfers that don't rely on banks or external processing systems. This type of payment is processed through an online platform or digital wallet, like PayPal, Venmo, Google Pay or other online payment provider. Because digital payments don't draw funds directly from a bank account, some people see them as a more secure method for online purchases. However, the transaction fees associated with digital payments can be high compared to direct debits or credit cards.
B2B payment trends in 2024
B2B payment trends for 2024 are focused on ease and speed – including cryptocurrencies, mobile payments, payment automation and real-time payments.
Cryptocurrencies
Several businesses in Australia and New Zealand accept payment via cryptocurrency. Worldwide, B2B businesses are increasingly using Blockchain transactions to make cross-border payments – although this type of payment still makes up a small fraction of all B2B transactions.
Taking crypto payments gives your customers another way to pay and lets you work outside the bank system to avoid fees and chargebacks. It's also relatively simple to set up, with no complex integrations. But, if you choose to accept crypto payments, you'll need to either exchange your crypto for cash or use it to buy goods or services for your business.
Mobile payments
Mobile payments – those made on a tablet or smartphone – are increasingly common in the B2B space. These can include invoice payments through a platform like PayPal, or using a mobile device as a portable payment terminal. For example, if you're a contractor providing building services to other companies, you could take instant payments through your mobile while you're on-site. Mobile payments are quick and easy, which makes them appealing to clients and business owners alike.
Payment automation
Payment automation is a way to eliminate manual invoice management and accelerate the payment process. AP automation technology uses AI to recognise and process invoices as they come in, route them to the correct employee for approval, and complete the payment. If you're a business owner, it means less time dealing with paperwork, fewer missed or unpaid invoices, and quicker payment processing.
Real-time payments
Real-time payments are new, speedier forms of digital transfer. Unlike traditional bank transfers and direct debits, these are cleared and settled in seconds, even overnight and during weekends and holidays. This technology speeds up the payment process, freeing cash and improving financial visibility. Because real-time payments include data from the seller, they also make it easier to reconcile invoices on your end, boosting payment processing efficiency.
Virtual cards
Virtual cards are a way to reduce the risk associated with using credit cards online. Increasingly common in the B2B space, a virtual card is a digital credit card generated for a single transaction – for example, to pay a large invoice from a supplier. You use the virtual card as you would a standard credit card, but your credit card details aren't exposed to potential fraud during the transaction. Because virtual cards have a set payment limit, they also reduce the risk of overdrawing your account.
Improved cross-border payments
Cross-border payments have been complicated and slow for a long time, particularly for B2B businesses. However, as cross-border B2B has increased – transactions are set to hit $40 trillion in value in 2024 – technology has improved. New technologies offer near-instant processing, simpler management and higher security standards, making cross-border payments quicker and easier for everyone involved.
How to choose a B2B payment system
Here are some steps you can take to choose the right invoicing and payment system for your needs:
Research potential solutions
Research into potential solutions is crucial – as it is with any new software. Payment options, price, ongoing costs, scalability, support, security and integration – you need to know what you're getting before you make a decision.
Compare transaction fees
Transaction fees vary between providers, with most charging in one of two ways. Some charge a flat monthly fee that covers all costs and a set number of transactions, while others charge a transaction fee for each payment made through the platform. These fees cover the costs associated with a transaction, including assessment and interchange fees charged by credit card providers and other entities involved.
The right payment method for your business comes down to the frequency and size of your sales. For example, individual transaction fees might be more cost-effective if your business only completes a few transactions each month. If you've a large number of transactions, a flat fee makes more sense.
Understand integration potential
Integration potential tells you whether your new platform can merge with the rest of your technology stack. Look for a scalable, open business management platform that allows you to do more than send invoices and accept payments. MYOB Business, for example, offers accounting software, payroll, inventory management, reporting, insights and more.
International payments
Does your business take payments from overseas clients? Ensure that your potential payment platform can handle cross-border payments efficiently – you want to make payment as easy as possible for your customers.
Payment methods
Payment methods are another key point of comparison. Offering more makes it more likely that you'll get paid promptly – and it's also great customer service. That's why it's crucial to find a platform with a variety of payment methods, including credit cards, digital wallets and direct debit. While each method has its advantages and disadvantages, offering more options lets your customers make the decision for themselves.
Security features
Security features help reduce the inherent risk that comes with online payments, including the risk of fraudulent payments and stolen data. A payment platform with high-level security features helps protect your data and your client's information and identify potential fraud before it happens.
B2B payment FAQs
What is the difference between B2B and B2C payments?
The key differences between B2B and B2C payments are audience, size and frequency. B2B payments tend to be less frequent and involve large amounts of money. B2C payments go from individual consumers to businesses and tend to be more frequent, but lower in value on average. B2B payments may also be more complicated than B2C, as they can involve repeat payments, contract terms and cross-border transactions.
What are the most popular B2B payment methods?
The most popular B2B payment methods include credit cards, payments through mobile wallets and old-fashioned cheques.
What is an example of a B2B transaction?
Here's an example of a B2B payment transaction using a credit card:
Business A supplies a product and sends an invoice to business B.
Business B reviews the invoice, checking the date, supply terms and price details.
Business B clicks to pay the invoice via credit card.
The credit card company processes the transaction.
The payment appears in Business A's account.
Business A records the payment in its accounting software and financial ledger.
Better B2B payments with MYOB
B2B payments are becoming more like B2C payments, with more options, faster processing and fewer complexities. MYOB is a business management platform that can help change the way you manage payments in your business, making it easy to take payments through credit cards, digital wallets and more. With built-in payment buttons on invoices, it couldn't be easier to get your invoices paid.
Check out our plans and pricing today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.