B2B Payments: All You Need To Know About.

Last Updated on July 18, 2023

B2B payments - business payment

Just like individuals, a business has to make various payments. It has to pay its employees, suppliers, and other expenses incurred for several activities. You may know that there are many payment methods for individuals. Have you wondered how the companies made B2B payments? No? Then you have come to the right place.

In this article, you will get to know everything about B2B payments. What are you waiting for? Let’s get started.

Table of Contents

What are B2B Payments?

Business to Business (B2B) payments implies the transactions which occur between two businesses. For example, the transactions between Maruti Suzuki and MRF. As MRF supplies tires for the automobiles that Maruti Suzuki produces.

As you may have guessed, B2B payments are relatively more complex than B2C transactions due to more policies and controls. 

Method of B2B Payments

Technology has come a long way. There is no area where technology has not improved. The e-payment sector is no different. There have been innovations that have led to the birth of payment methods like UPI, NEFT, etc.

Due to their ease of use, they have become the most popular payment method in the B2C space. But that is not the case with B2B payments. As they require various approvals, companies still rely on traditional payment methods:

  • Paper Cheques: When was the last time you paid through a cheque? It feels like a decade, right? It is so because new payment methods have overcome the limitations of the paper cheque. And they have simplified the overall process. But that is not true for B2B transactions.

According to Pymnts.com, cheques remain the most common method of B2B payments, accounting for 80% of the total transactions across the world. Still, you can’t ignore the downsides. Some of them are long clearing time, more charges, and increased chances of error.

  • Real Time Gross Settlement (RTGS): It is a method to transfer money on a real-time basis. Although it is costly, it is generally used for high-value transactions. It is so because other fund transfer methods have a upper limit attached to them. RTGS is the best method available for large-value transactions.
  • Unified Payment Interface (UPI): Although it is a relatively new method, it overshadows the other methods. You can transfer the money for free. Also, you don’t need an OTP or a complex password to make a transaction. You just have to remember a numeric PIN of 4 to 6 digits.

Due to its competitive benefits, it has become the most popular payment method. It is evident by the fact that UPI witnessed more than 3200 Crore transactions till July 2021! (Source: NPCI)

Other Methods

  • Debit and Credit Cards: It is a reliable way of payment. But you have to pay high transaction fees, especially in the case of credit cards. Also, there are transaction limits. So, you can’t use them frequently.
  • National Electronic Fund Transfer (NEFT): Each of the above methods has some or other disadvantages. But electronic fund transfer overcomes it to the maximum possible extent. Here, the transaction gets processed at a faster rate and lower cost. It is so because the process is entirely digital.
  • Immediate Payment Service (IMPS): In NEFT, it takes some time to process the transaction. But that is not the case with IMPS. Here, the transaction gets processed immediately. What’s more, you can even initiate an IMPS transaction without the internet, i.e., with the help of SMS Banking or ATM as well.

The electronic space is insufficient for B2B payments. But thanks to Covid, there has been a substantial change in the working of the business. Now, many organizations have adopted electronic means for transactions.

Payment Cycle

If we were to summarize, there is a trade-off between the controls and the manual efforts. If you want more control over the transaction, you have to do a lot of manual work. On the other hand, you can eliminate manual intervention for transactions. But it may compromise the security of the transaction.

The business payment cycle is not as simple as you think. You have to perform the following steps:

  • Approval of Sale: After initiating the purchase from one business to another, the buyer must approve the sale and its terms. It is to ensure that the seller has legal rights against the buyer if he defaults in payment.
  • Business Accounting: After the buyer approves the sale, business accounting comes into the picture. Each party issues the relevant documents and sends them to the other.
  • Generation of Invoice: When the order gets processed, the seller generates an invoice and sends it to the buyer. The buyer has to pay as per the agreed terms.
  • Issuing the Receipt: When the buyer makes the payment, the seller provides a payment receipt, which acts as proof of payment. In case of a delay in payment, he may levy a late fee as well.

Do you think this process is complex? With Enalo, you don’t need to worry about payment collection, disbursal and accounting part. You can collect payment using the payment link and payment page using many payment methods like UPI, Net Banking, Credit Cards, Debit Cards etc. To make easy business payments, Enalo provides a Payouts facility to make vendor payments, salary payments and many other outward business payments. You can generate GST-compliant invoices effortlessly. What’s more, you can even customize the template and track the account receivables. You also get an easy-to-understand dashboard to make better business decisions.

Anyways, you can use account payable automation to minimize your manual efforts. It has taken the industry by storm. You will be amazed to know that automating the business process cuts up to 80% of the manual processing time!

Summing Up

Even though B2B transactions may look similar to their B2C counterparts, there are many differences between the two. You have to follow different processes for each of them. Also, the preferred payment methods are altogether different due to their merits and demerits.

But technology is constantly changing. So, you can’t be 100% sure about the future. What if a new method is there? It may overshadow these current payment methods. And will bring a revolutionary change in this field.

If you want to ease your payment process, Enalo is your one-stop solution. With the help of Payouts, you can pay your employees and vendors in the blink of an eye. You can also send refunds to customers. All of it gets completed in 3 simple steps. So, what are you waiting for? Check it out and transact like never before!

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About the Author: Prasuk Jain

I am an inquisitive and tenacious person with a mix of enthusiasm and a positive attitude, currently pursuing CA.