B2B payments are a massive part of every business’ operations. However, these transactions can be burdensome for companies that rely on antiquated payment methods like wire transfers and commercial credit cards.
These outdated workflows increase invoice processing expenses, provide less actionable data, and extend payment cycles. Thankfully, many companies are removing these barriers to buyer enablement by implementing payment-agnostic accounts payable automation systems.
eChecks
As the name suggests, eChecks are digital versions of traditional paper checks. Banks and other financial institutions confidently rely on the Automated Clearing House (ACH) network to efficiently process transactions. Almost any time you pay directly from your bank account (like when renting a car or sending someone money) is an ACH payment.
To make an eCheck, a client must first authorize the payment using their bank’s online banking portal or a secure payment processing solution. Once the merchant receives this authorization, they can “save” and submit the payment to the ACH system. Then, the eCheck transaction is processed, and funds are withdrawn from the customer’s bank account and deposited into the business’s bank account. Finally, a payment confirmation receipt is sent to the client.
eCheck transactions offer higher security than credit cards since they rely on authenticated bank account information rather than credit checks to verify the cardholder’s identity. Moreover, the security measures eChecks utilize, such as public key cryptography and digital signatures, make it hard to duplicate or intercept a price.
Additionally, eChecks are generally lower in processing cost than credit card payments. It makes them ideal for subscription-based businesses and those who manage large payment volumes. As a result, eChecks are becoming increasingly popular among law firms and many other companies.
Wire Transfers
Wire transfers offer a swift and reliable method of transferring funds without exchanging physical cash. They are settled electronically through a global network of banks and move service agencies. They can be sent domestically or internationally, though there are additional fees for international wires. They also tend to have higher transaction limits than other payment methods.
Typically, funds will appear in the recipient’s account within a few hours of the request being made. That makes them popular for business-to-business payments and personal transactions such as selling a real estate purchase or buying a car. They can also be used for paying legal fees or tax payments.
They are perfect for B2B payments on the blockchain or significant purchases like a new commercial space or automobile because they frequently offer far higher transaction limits than conventional payment options. In many cases, the elevated fees that come with a wire are worth it to get the funds into the hands of the recipient as quickly as possible.
One important thing to note about wires is that they cannot be reversed, so using them only for transactions with trusted recipients is essential. In addition, the information that must be provided when sending a wire can be gathered by criminals to commit fraud and should always be kept secure.
Virtual Credit Cards
The digitized world of business payments has made virtual cards one of the most popular tools businesses can use to cut out paper-based processes. But their benefits continue beyond there. Virtual card payments attract B2B buyers like moths to a lamp because of their security and flexibility.
A virtual card is a tokenized card number that links to a specific bank account and conceals the original credit or debit card number. It can be generated instantly and in multiples, and it’s possible to set spending limits on the card to prevent fraud.
This digital payment method also improves business spending control in a remote work environment. For example, instead of sharing a single physical business card with employees and contractors, you can generate unique virtual cards for each person, automatically delivered remotely via an app. Each transaction is captured in your payment system as a separate card line item, and the individual recipient can only spend up to the limit you’ve set.
Aside from the increased accountability, virtual card payments can also reduce the time to process a purchase from days to minutes. Traditionally, when a supplier gets paid by virtual card, the accounts payable team receives the total card number and remittance advice in an email that they must manually enter into their ERP system. But with the right automation, this step is eliminated. Almost half of the survey respondents cited automatic reconciliation of virtual card payments with open invoices as one of the top benefits of this payment method.
Commercial Credit Cards
Commercial cards are credit or debit cards that businesses give to their employees so workers can make purchases on the business’s behalf. The cards are often co-branded with specific retailers or gas stations, which limits the cardholders’ ability to use the cards at other establishments. According to prediction, the volume of transactions is set to rise from $493B in 2017 to $686B in 2022. Many startups, in particular, rely heavily on issuing commercial cards to cover operating expenses.
One of the main benefits of adopting commercial cards is that they help companies automate and streamline financial processes. By allowing employees to charge company-related expenses on the cards, businesses can eliminate reimbursement processes and reduce the risk of fraud. Companies can also set spending limits and restrict the types of items that can be purchased with each card.
In addition, the issuance of commercial cards can offer the benefit of helping businesses to build credit. However, the ability to do so depends on the card issuer’s policies regarding credit reporting, which is formally known as data furnishing.
Compared to business cards, commercial cards can offer more flexibility and features, such as higher credit limits, the ability to support multiple cards within a single program, and the capability to integrate directly with accounting software. Moreover, while business cards typically require the business owner to provide a personal guarantee, commercial cards generally do not.
