More and more businesses check payment methods before confirming an order online, with e-
commerce accelerating the trend towards ‘buy now, pay later’, which can cause significant problems
for the receiving firm. Most of the usual methods for facilitating B2B payments come with their own
problems, and it can be a struggle to choose the right method for your business. There is a general
trend away from trade accounts, credit card payments and other traditional methods towards online
payments, especially on a BNPL model.
Traditional invoicing is buyer-friendly in that it gives a significant delay during which the paying
business can make the payment, normally 30 days. This offers flexibility to payers, many of whom
take advantage of it to pay as late as possible, giving their business operations time to fund the
payment. 57% of all B2B invoices are paid late, a practice that results in reported problems for
around 25% of businesses, who then have to pass on the cost of delay to suppliers or spend money
chasing non-payers. Invoicing, unless it includes a credit facility or trade account, normally does not
include any kind of credit check or due diligence for the customer, and invoices are considered
standard practice across most industries. Not offering invoice payments could potential limit your
client pool, as many B2B customers are used to and rely on the favourable terms available.
Another option is the use of third party payment apps like PayPal, which allow for rapid transactions
but incur significant costs, with fees as high as 3 or 4%. Especially when dealing with foreign currency
transactions, PayPal and similar payments platforms can become hugely expensive, and are
unpopular with clients for large purchases. Payoneer represents a similar but slightly cheaper option,
with the same advantages and disadvantages as PayPal, with slightly lower fees but significantly
worse foreign exchange rates.
Trade accounts are the norm in some industries, notably construction, where clients make large
regular payments. Trade accounts normally involve a credit facility with limits set to the client’s
capacity, but the due diligence required to accurately gauge the credit-worthiness of your
counterparty is expensive, and mistakes can be more costly still with non-payment of multiple
orders. Trade accounts, even more so than invoicing, are extremely client-friendly and favourable
credit terms will result in additional orders and client loyalty; you just need to be sure they are
credit-worthy enough to warrant the risk.
Credit and debit cards are relatively unpopular, especially debit cards since they are limited to the
amount of cash currently present in the account. Credit cards still see B2B use, but high annual
interest rates mean they are less and less popular for large purchases. Bank transfers are popular
but struggle with international payments, where currency exchange fees can be far over the market
rate.
Retail conversion rates have drastically increased alongside the popularity of ‘buy now, pay later’
(BNPL) solutions, which result in a higher proportion of customers completing their baskets, as well
as larger overall ticket sizes. B2B customers are also – hopefully – more insulated from the credit
issues raised by BNPL in a B2C context. B2C BNPL is arranged to align with the cycle of paydays for
private employees, whereas B2B BNPL simply splits the cost over a longer period, allowing for the
normal business operations to fund the purchase.
Choosing the right payments solution for your business will depend on both your customers wants
and requirements and your own. Offering large credit facilities to all clients with 60 day payment
invoicing will probably result in an upswing in orders, but this will come at the cost of delayed
payments, credit risk and possible non-payment. Likewise, insisting your clients make a transfer from
the same bank as your business in the same currency, or pay in cash, may be convenient for you but
will likely harm your order flow. Particularly in an e-commerce setting, retention drops when
payment types offered are narrow or focused more on seller need than client. Biller BNPL offers an
interesting solution where you can maximise your appeal to clients while still protecting key
advantages for your business, such as immediate payments.
There is no 100% perfect solution for all businesses – if you are focused on the domestic market,
issues around foreign currency transactions are probably far from your mind, but for some
businesses these fees can make or break their profit margins. Whichever solution you choose, you
will need to find a balance between attractiveness to the client and your own bottom line; BNPL is
justifiably popular for exactly this reason.
