As a business owner, you probably don’t get paid by regular paychecks. You’d rely on clients paying invoices you’ve sent. 

When your clients are other businesses, you might be dealing with larger sums and long processing times. But did you know that businesses can pay each other in many different ways? 

From paper checks to fast electronic payments, business-to-business (B2B) payments help companies send and receive money. And understanding how these payment methods work can help you get paid faster and make managing your small business easier. 

Here’s everything you need to know.

What Are B2B Payments?

B2B payments happen when one business pays another for goods or services. Depending on the payment terms, it could be a one-time or regular payment. For example, a business might pay a marketing agency to have a graphic designer create a new logo, resulting in one small project. But they might also hire a web agency to perform security updates and make monthly payments for those services. 

Solopreneurs and small businesses, like a graphic designer who works as an independent contractor, would also receive B2B payments. They don’t need to work for a larger company like an agency.

B2B payments often deal with larger amounts of money than the average transaction, which means they can take much longer to process. Because of this, it takes longer for selling business to receive any payments owed.

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B2B Versus B2C Payments

While B2B and business-to-consumer (B2C) payments both involve one party paying another, there are some big differences in the processes. Let’s explore exactly what makes B2B and B2C payments different: 

Quantities

B2B transactions often involve large amounts of money because businesses buy in bulk or make big investments. B2C payments are usually smaller because consumers are buying one or a few items at a time. 

Someone running a furniture company, for example, wouldn’t buy their lumber from a hardware store. They’d likely buy in bulk from a lumber mill or producer. A B2C transaction would be the average person buying boards for a DIY project at a hardware store. 

Payment Times

B2B payments take a lot longer to process than B2C payments. Businesses may agree to pay for goods or services over days, weeks, or even months. Invoices might require approval from several departments or team members. And when the payment is for a large sum, it takes longer for banks and financial institutions to process.

B2C payments, on the other hand, are much faster. Consumers might pay right away when they buy something, whether it’s in a store or online. And if individuals don’t pay upon purchase, they likely agreed to pay an invoice after receiving a service. These invoices likely have clear payment deadlines, like 30 days later. 

Frequency

B2B payments are often made on a regular basis, especially if the businesses have ongoing agreements or contracts. The purchasing business might also settle their account with installments. That means instead of paying a huge invoice all at once, they pay back a certain amount each month.

B2C payments are more likely to be one-time purchases. But, recurring payments might happen if someone subscribes to a service, like a streaming platform.

How Do B2B Payments Work?

B2B payment processing can happen in different ways, depending on the business. But the standard process goes like this:

• After a service or product is delivered, the supplier sends an invoice to the purchasing company. This invoice shows the amount owed and payment terms.
• The purchasing company reviews the invoice to make sure all the details are correct. Then, they start the payment process. 
• Unless the business is paying with a paper check, they use a payment gateway to manage an electronic payment. It acts like a secure bridge between the business’s bank and the payment method. For paper checks, the selling company must deposit it and wait for the bank to transfer the funds. 
• When the payment has been made, both businesses update their financial records. The supplier marks the invoice as paid, and the buyer records the expense. 

Throughout the B2B payment process, security measures are in place to protect the data and funds transferred. Both companies must follow the rules and regulations to prevent any legal issues. 

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6 Most Common B2B Payment Methods

When businesses pay each other for goods or services, some methods are faster, while others are more traditional. Here are six of the most common ways small businesses handle B2B payments:

1. Checks

Many businesses still use paper checks, even though they’re slower than other methods. They allow businesses to keep a clear record of their check payments. 

Real-Life Example: A family-owned bakery may pay a supplier with a check after receiving a bulk shipment of ingredients, like bags of flour. This ensures they have a paper trail for large purchases, which helps with accounting and audits.

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2. ACH Payments

ACH stands for Automated Clearing House. This type of electronic bank transfer is a faster payment method than paper checks. It’s a batch-processing network of banks that handles multiple transactions at once. Because they process so many transactions at once, they usually have lower fees but take longer. 

ACH transfers also help improve cash flow, as you always know when the funds leave or enter your account. 

Real-Life Example: A business might use ACH payments to pay its monthly rent electronically. ACH payments can be automated, so they’re ideal for recurring payments. The company also saves money by avoiding high processing costs. 

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3. Credit Cards

Credit cards are convenient for B2B payments and are easy to track through monthly statements. Regularly using credit cards for large purchases can help your company build its credit history. A strong credit history helps your business get larger loans or better borrowing terms in the future.

Real-Life Example: A small business owner may use a company credit card to buy office supplies or equipment. This gives the business owner more time to pay later and builds their credit history.

4. Digital Platforms

Online payments are made through B2B payment platforms like PayPal, Venmo, or Google Pay. These payment platforms let businesses transfer money electronically but may charge high fees, depending on the transaction.

Real-Life Example: A small business may use PayPal to pay an overseas freelance worker for their services. This offers their customers the convenience of a quick, trackable transaction. 

5. Wire Transfers

Wire transfers are a fast and secure way to send money between two bank accounts. They’re commonly used for larger payments or international transactions. Unlike ACH payments, wire transfers are processed immediately, so they’re ideal for time-sensitive payments. Just note that the speed often comes with high processing fees.

Real-Life Example: A company may use a wire transfer to send payment quickly for a rush shipment of goods. The money is immediately available to the supplier, making this method useful for urgent or international transactions.

6. Cash

Cash is sometimes used for smaller business transactions, especially for local services. But it lacks the traceability and security of other payment methods.

Real-Life Example: A contractor might pay a local supplier in cash for a small order of building materials, as it’s fast and doesn’t involve any fees. Keeping receipts lets you track business expenses paid by cash, since you don’t have the same electronic records.

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3 Tips to Make and Receive B2B Payments

Making and receiving B2B payments can be easier and safer if you follow a few helpful tips. Here are three tips to improve your B2B payment process:

1. Make Your Invoices Digital. Switch from paper invoices to digital ones. Digital invoices are faster, easier to track, and can be sent immediately by email or through online systems. This speeds up the payment process and keeps everything organized.
2. Adopt Fraud Protection. Protect your business from fraud by using tools like secure payment platforms or virtual credit cards. These methods provide extra layers of security, making it harder for scammers to steal your money or information.
3. Accept New Payment Methods. Be open to accepting new payment methods from other businesses, such as payments from mobile devices or digital platforms like PayPal. Offering more ways to pay can help speed up transactions and make it easier for businesses to pay you.

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Invoice Management Software | Web & Mobile | Invoice Simple

Handling B2B payments can feel complicated, but with the right tools, it gets easier. Invoice Simple’s invoice management software helps you organize your payments. You can send invoices online, see when they are read, and track when they are due. 

You can also keep a record of clients to track your monthly income. Whether you use the app or the website, Invoice Simple makes accepting and sending business payments hassle free.