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The financial industry has been on its toes to ensure a more reliable and efficient way to conduct payment transactions. B2B payments were quite a big breakthrough that put aside the use of cash at hand.
Checks, credit cards, ACH transfers, electronic funds transfers and online payments are common ways to receive and make B2B payments.
If you’re debating between the different B2B payment methods, consider the pros and cons of each one, listed below. Here are five common ways to receive and make B2B payments:
Checks are among the oldest methods still in use today. Though it may seem out of place to walk around with checkbook, it actually does a great job.
Writing a check is a cheap, easy way to transfer money. You don't need a diverse system to operate or a capital for installation. Checks also offer a long float. Your payment transaction isn’t complete immediately, yet you still receive your service or product.
However, checks require a lot of paperwork. And printing and mailing paper checks can become costly. Not only that, but you also don’t know exactly when your check will arrive or be processed.
The process involved is usually exhausting, and checks have the chance of being lost or stolen. Retrieving what was originally yours will take more effort than it took to write and mail the check.
2. ACH payment
Automated Clearing House (ACH) has also gained a place in the B2B payment world. Payments done this way are usually fast compared to checks. It may at most take four days.
However, you need to make a full payment before any transaction, and it requires a lot of your time just to sign up.
ACH Transactions are usually encrypted, providing more security and privacy. Payments can be reversed by any party if at all needed (but this may not be good for the seller if a dispute arises). These type of payments require a lot of paperwork, but with technology’s development, it makes forms much easier to access and complete. The speed of ACH transactions is now fascinating.
3. Electronic funds transfer
Electronic funds transfer is a fast payment method. The transfer happens immediately, completing the business for you.
Transactions are usually completed through a simple phone call to the bank. It is, however, a costly B2B payment method. Fees range from $35 to $65 for international wire transfers and $15 to $50 for domestic wire transfers.
Considering the expense, it is wise to choose an alternative payment method. If using electronic transfers, consider also offering other payment options. Credit cards and checks may work well for your business while wire transfers will only be needed as a last resort.
4. Credit card
Credit cards are another way you can make B2B payments. They are usually fast and effective. You won’t have to wait a day or two to close a payment.
In addition, you will be able to control your own payments without anyone's knowledge, allowing for privacy. It will also be difficult to receive disputes. Any controversies will be directed to the credit card company.
With a credit card, you will not be able to reverse the cash like with ACH. They are also very expensive. Remember most credit cards take three to five percent of any payment. If you have a large payment, you will incur a great loss in the process. Use checks for large money transfers to avoid costly fees.
5. Online payment platform
With the great rise in technology, we can complete our transactions online. We are now able to transfer money anywhere and anytime at the touch of a button.
These transactions are usually done through different platforms. In the United States and Europe, PayPal is the most commonly used platform. Stripe, Authorize net and Venom are also popular.
B2B payments have seen success in digital payments. Most businesses have taken this in since online payments are quick and easy.
Online payment platforms charge a fee just like credit cards. Choose carefully when considering a platform. It can make you succeed in your business or take a turn for the worst.
Knowing the importance of your B2B payments, it calls for great care when choosing transaction methods. Looking at the given advantages and disadvantages, you can choose the options that best fit your business.