Why B2B payments need a tailored solution

Partner Guest Blog by Balance

According to Gartner, 80% of B2B sales interactions will be digital by 2025. To be able to meet these projections, merchants have to consider payments. B2B payments are mostly managed offline today - but manual trade credit processes, faxed invoices, and paper check collection are all incompatible with the instant and frictionless nature of ecommerce. While some merchants do offer digital payment options via credit card or PayPal, B2B buyers expect and need more payment functionality than that. In this article, we’ll explain why, as well as discuss what other challenges call for a sophisticated B2B payment solution.

The challenges of B2B payments

In the simplest terms, B2B payments refer to the transaction process between buyer and supplier. To facilitate that transaction, however, there are a lot of moving parts. First, buyers have strict cash flow requirements that influence when they can make a purchase and at what price. In addition, whether they prefer to pay via check or credit card, typically depends on other teams, budgets, and working capital needs. Let’s say for example a customer typically pays via credit card. But this particular month they need to pay via Net 60 terms because they have less cash on hand due to lower sales volumes. The entire checkout flow built to only accept credit cards now falls short. Meanwhile, suppliers have their own challenges when it comes to managing account receivables, collections, underwriting, and invoicing. For example, ACH can complicate the payment process. It can be difficult for suppliers to immediately see what charges they’re related to in order to apply the funds to the correct invoice. This might result in them choosing not to offer this payment method, even though buyers might prefer to pay via ACH due to their enhanced security and lower payment processing costs. As you can see, the B2B payment process can create friction for both sides of the transaction. What buyers might want in their payment experience doesn’t always match up with the tools merchants have to support it and vice versa. As a result, merchants often have to settle when it comes to their payment offering. The problem is that this can result in lower conversion rates, cart values, and sales volumes—all critical metrics that can limit the success of your ecommerce business.

Covering common B2B ecommerce payment methods

The major problem with B2B payment methods offered today on ecommerce sites is that they are the same ones used for consumer payments. While in theory, the idea of borrowing from B2C is not a bad one, the functionality that’s needed in business purchasing is far more nuanced and complex. For example, with 35% of business buyers willing to spend $500,000 or more in a single transaction on digital channels, credit cards alone won’t suffice. Based on 2020 data from Experian, the average small business credit card limit was $56,100. So purchasing expensive products, which is a standard in B2B, on a credit card, can be extremely limiting. Even with the amount of credit available, if the balance is not repaid in full each business cycle, there are high credit card interest rates. And then there’s also the problem of risk for both the merchant and the buyer. For the merchant, they have to deal with the potential for chargebacks. On the buyer side, there’s always the risk of fraud and data scams with credit card usage. Another common payment method offered in the B2B checkout is PayPal. While PayPal is a popular consumer payment method, there are a number of reasons it doesn’t solve the needs of business purchasing. One of the most important considerations here is payouts. Suppliers don’t want to have to wait days for their payment. They need upfront payment so that they can protect the cash flow of their business. With PayPal, it can take up to 3 days for vendors to access funds. Plus, all payments are managed within the PayPal account. So, there is the risk that if the account ever gets suspended or frozen at any time, merchants are pretty limited in what they can do until the issue is resolved.

How can B2B ecommerce payments help your business?

Payment methods are a great way to start to grasp just how much room there is for improving the B2B payment experience. But digitizing and automating B2B payments is about much more than payment methods. It can enable instant and digital invoices for every payment, with multiple payment methods attached. It can mean instantly paying suppliers the full amount of the invoice, while giving the buyer the option to choose to delay payment at checkout. Ultimately, what it comes down to is that B2B payment solutions need to simultaneously address the ecommerce needs of the customer, while simplifying the backend process for the merchant. When both are met, businesses have a lot to gain. For example, on the ecommerce side, a sophisticated digital experience can enable a conversion-driving checkout. According to a PYMNTS report, 74% of Millennial B2B buyers have swapped vendors because the new company offered B2B experiences more like consumer payments. And with more than 80% of business buyers holding their ecommerce channel to the same or higher standard as other channels, merchants can’t claim that B2B is evaluated any differently in the eyes of the buyer. Those that choose to see their ecommerce channel in this way, will risk losing out to competitors that meet or exceed customer expectations. On the business and revenue side, a consolidated and modern technology stack can reduce overhead costs associated with clunky and outdated payment infrastructure. A great example of this is BNPL for B2B. While net terms, or trade credit, have always existed as a payment option for businesses, as traditionally offered, it is resource-intensive for the seller. This usually includes a complex qualification process where teams have to manually review applications and typically work with a third-party institution to extend financing, while also dealing with collections and following up on outstanding invoices. With tight margins, offering net terms and the risk of non-payment, can be a big financial burden on businesses. BNPL for B2B digitizes that entire process, while providing buyers with the instant and seamless experience they expect. So the benefit is two-fold: Businesses can enable self-service purchasing without losing important functionality intrinsic to B2B buying. Plus, it’s a critical way for buyers to have more cash flow, while the seller merchant can grow AOV and conversions.

Do you need an end-to-end B2B payment solution?

The advantages of B2B ecommerce payments are clear. The functionality and efficiency needed to support B2B ecommerce is clear. For businesses that truly want to give buyers the payment experience they need and want, while streamlining their accounts receivables, an end-to-end solution is the way to go. Ecommerce payments on the frontend allow you to provide an experience that meets both the cash flow requirements and consumer-like expectations of business buyers. On the backend, seamless payment processing, financing, and AR automation, can bring significant cost savings and efficiency to merchants. With Balance, you don’t have to compromise on a solution that’s comprehensive enough, while still frictionless for your customers. With Balance, companies can process any payment method, offer flexible terms, and get paid instantly - all in one place. Balance has partnered with dozens of B2B merchants to shift traditionally offline industries like food, steel, chemicals and apparel to an eCommerce model that resembles B2C.

How can Calashock help?

We are Award-winning BigCommerce specialists with 13 years of experience helping businesses accelerate their growth with sensational ecommerce transformations. We understand the unique challenges faced by B2B merchants and how to design and build tailored websites and tech stacks that maximise ROI. Whether you are looking to implement a new payment solution or re-platform your store.

Get in touch with our expert team if you’re ready for the next step in your ecommerce journey.