Let’s be honest, no modern business wants to chase late payments and struggle with reconciliation. Today, organisations want to make payments seamlessly and in real-time — improving cash flow and ensuring that financial resources are managed and spent effectively.
But, manual business to business payments are complex, often with greater friction throughout the payment process. Continue reading to discover how digital B2B payments have emerged as an opportunity to streamline payments and accountancy going forward.
B2B payments often lag behind the innovations happening in consumer payments. Unlike B2C, B2B payments are impacted by:
- People Involved. Typically, there are accounts receivable, accounts payable and billing teams involved with every B2B payment.
- Volume. B2B payments between merchants are generally larger than payments made between consumers.
- Frequency. Businesses and merchants often have regular contracts that facilitate recurring transactions. For example, monthly recurring shipments from suppliers.
- Delays. B2B payment cycles aren’t instantaneous like B2C payments, lasting between 30 to 90 days on average.
- Industry. Certain industries have specific payment requirements. For example, due to privacy regulations healthcare providers commonly use custom B2B payment systems.
With B2B payments typically being a complicated procedure, an increasing number of businesses have begun to take the leap and opt for trackable, digital payment options.
Using a variety of technology solutions, digital B2B payments solutions are designed to issue, receive, and process payments faster — ultimately helping to improve business cash flow and streamline the work of accountants.
In a global world, the need for real-time payments (with real-time feedback) is essential. As globalisation snowballs, businesses are finding that their supply chains are becoming increasingly international, and no longer solely reliant on one specific geographical jurisdiction.
Digital B2B payments address the current need for real-time, secure, cross-border financial experiences. That said, developments in the B2B payment world mean that banks and payment service providers must be ready to handle the new challenges and shifting expectations created by instantaneous digital payments between businesses.
Do Digital B2B Payments Streamline Accounting Processes?
Both the B2B payments and accounting world are riddled with manual processes, disjointed systems, and inefficiently long payment processing times. The high levels of manual work involved in B2B payments results in time-consuming tasks prone to human errors or fraud.
As a solution to an archaic system, digital B2B payment solutions help simplify accounts payable and receivable. Instead of managing large numbers of checks coming and going, robust software has the capacity to scan, record and store large quantities of payments automatically.
Most digital B2B payment systems can integrate with bookkeeping software for shared data management — which makes filing taxes and staying on top of financial resources simpler. Forward-looking accounting professionals view digital business payments as a secure way to increase speed of processing and reconciling payments at anytime from anywhere.
Leaving an automatic audit trail of every payment, electronic systems eliminate slow, laborious, and even spreadsheet-intensive processes. In turn, this helps organisations to efficiently manage cash flow and provides accountants with the data-driven insights to act as trusted financial advisors.
Wire transfers digitally facilitate real-time B2B payments, typically for e-commerce and other electronic transactions. For businesses and organisations who rely on international or cross-border payments, wire transfers transfer funds between business bank accounts.
Some wire transfers do have limitations though. They can be slow and expensive with banks having to deal with each other directly for each individual transfer. On top of that, some wire transfers have daily cut-off times and can potentially take days to process.
While payment gateways are a third party involved in processing business payments, the software enables payments and streamlines the billing process. Through a “virtual terminal”, a B2B payment gateway enables organisations to accept a variety of payment options, from credit and debit cards to email or telephone payments.
As Open Banking grows in popularity, more organisations around the globe are adopting Open Banking platforms and open application programming interfaces (APIs) that connect accounting and payment systems directly to business bank accounts.
Similar to payment gateways, open banking platforms support seamless business processes by issuing invoices and processing B2B payments with ease. Open banking can also help businesses collect data, gather insights from analytics and aggregate bank account data into one single accounting portal giving organisations a holistic overview of company finances.
While not yet widely adopted, cryptocurrency B2B payments (like Bitcoin-based transfers) between businesses stand to fix an inefficient system. Cryptocurrency payments offer businesses a faster, inexpensive, secure payment system that protects the privacy of users throughout transactions.
Both distributed ledger technology and accounting share the common goal of ensuring validity when transferring the ownership of (financial) assets, while maintaining the integrity of data and information.
In short, cryptocurrencies offer a real potential to eliminate traditional risks involved with B2B payments while improving work required from accounting professionals. Find out more about the relationship between blockchain skills and modern accounting in our recent guide.
Firstly, digital payments create cost savings for your organisation. Governments, businesses, organisations and individuals regularly waste precious resources making and receiving cash payments. Electronic payments are made quickly and efficiently, ultimately decreasing costs.
Secondly, opting for digital payments is a more transparent and accountable option. Cash payments are anonymous and difficult to trace, making secure transactions much more difficult to achieve. Alternatively, digital B2B payments can be tracked, reducing the risk of theft and corruption.
Finally, B2B payment systems automatically record and store your transactions. This simplifies bookkeeping and makes it easier for your organisation to file taxes. Integrating your preferred digital payment method with accounting technology avoids the loss of checks and invoices, streamlining the process for both you and your accountant.
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