How and why to improve the B2B payment experience

It may surprise you to hear that only 36% of B2B invoices were paid on time in the US (2023). You read that correctly: in 2023, the majority of business-to-business payments came in later than they should have. 

At a time when credit has a much higher price tag than days gone by, every late invoice payment is a red mark on your own books. Pay delays need addressing. Urgently.

The most common response to the cash flow crisis caused by B2B payment default is to increase the resources dedicated to chasing overdue invoices. Effectively, this means responding to the symptoms of a problem without addressing its causes. Yet it’s vital, of course, to look at why your buyers aren’t respecting your net terms.

The answer might just be your less-than-ideal payment experience. Namely, your business is making it too hard or too unpleasant to make payments. Not convinced? Let’s look at some scenarios in more detail.

The modern B2B payment experience

Consider the buyer in a typical invoice payment scenario. 

Marlene in accounts payable has to locate your invoice, look up your company’s bank details, seek approval from her finance director, log an ACH request, verify which budget to allocate the spend to, collate the details for reconciliation, and then notify you that payment is on the way. 

It’s a laborious process. You can see why Marlene is slow to progress your payment. 
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“Low cost” payment methods contribute to invoice debt

Lengthy payment procedures may be one of the reasons you’re not being paid on time. One survey found “complexity of the payment procedure” was a delay-causing difficulty for roughly half of B2B customers. 

A lack of payment methods could also be damaging your AR health. While bank transfers, eChecks and ACH can seem like the only cost-effective payment methods, it may be these very “low cost” processes increasing your burden of invoice debt. 

The problem is clearly observed in cross-border B2B commerce, an area identified as ripe for significant growth between 2024 and 2027 by McKinsey, and others. Consider that eChecks are the most frequently used cross-border payment method for 56% of US B2B buyers – yet just 8% named it as their preferred payment method. One in five (21%) are using physical checks most often, with only 2% stating it’s their favored way to pay. This proves that buyers are forced to use payment channels they find inconvenient or somehow unpleasant.

The same study found that 40% of professionals preferred to use either a digital wallet, payment provider or credit or debit card to make such payments. What’s clear from the research is that no single payment method is universally preferred – although a few are generally unpopular. The oldest forms of payment – cash and physical checks – are the least preferred ways to pay.

As well as improving the buyer experience and increasing conversion, diversifying payment options could even encourage more repeat purchases. A notable 72% of B2B buyers say they’re more loyal to a business that allows them to pay with their preferred payment method.
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The appetite for payment modernization

Market-leading analysts advocate for flexible digital solutions to allow for innovation that improves efficiency and profitability.

Effective digital payment processing is a time-saver for all parties. And trust is a critical piece of the puzzle; to assist with this, increasingly sophisticated security technologies are allowing for stronger KYC and identity verification protocols. 

As technology evolves, so, too, does the share of revenue coming through digital channels. In 2023, the proportion of UK B2B organizations’ revenue from digital channels was 46%, up from 33% in 2021. This is projected to rise to 56% in 2025.

And there is growing interest in upgrading international payment systems, too; when surveyed, a considerable 61% of global B2B professionals said automation and digitization of cross-border transactions are a top priority for their business. Just 2% said it was not at all important. 

And yet, despite the available benefits, integrating additional payment channels can seem like an insurmountable challenge. Not only is engineering perceived as too resource-intensive, a culture of inertia can also impede modernizing initiatives. 

Unfortunately, the reluctance to embrace new solutions can undermine wider business goals; P&L optimization and risk reduction somehow seem less appetizing than carrying on with familiar (if inefficient) payment processes.

Digital payment methods that speed time to cash receipt

Back to Marlene, who has moved onto paying the next supplier. She notices this vendor has included a Payment Link alongside the invoice. Marlene opens the link to find she can pay with a range of digital payment options that use the company credit card. Marlene selects Apple Pay, as her business card is already loaded in her Apple Wallet. 

Her device authenticates the payment request, displaying a thank-you message that confirms the supplier has been paid. She can now take an early lunch break.

That was a fictional example. But real evidence shows the efficacy of convenient payment methods in curbing late invoice payment.

In the US, a B2B workwear supplier saw time to cash receipt accelerate by 15 days (at net 30) after recently introducing a Visa credit card payment gateway. That vendor saw cash acceleration improve by 0.35% and operational efficiencies uplift by 0.25%.

When considering the cost of credit card processing, you must remember to factor in the positive effects on the wider finances of your business. Many businesses are finding the expense of card acceptance is actually a net gain in terms of payment conversion, debt reduction, and unblocked cash flow.

Here are some further advantages of offering digital credit card processing for your B2B payments:

Easier accounting

Processing your payments with Level 3 data is extremely beneficial for reconciliation purposes. If you receive a bank transfer, wire transfer or paper check as payment for an invoice, it takes extra work to reconcile each line of the invoice to the total payment amount. By contrast, the division of payload data into unit prices and quantities, costs of taxes and duties, freight and shipping, and so on, helps businesses to maintain accurate accounts.

Improved conversion

Credit card processing is a familiar option to all kinds of consumers, including B2B buyers. It’s also more accessible and straightforward than multi-step processes such as bank transfer or eCheck payment. That helps to break down psychological barriers, contributing to your checkout optimization process.

Dispute resolution

When you’re relying on ACH, or other direct-to-account payments such as SEPA Direct Debit, there’s precious little you can do about a payment reversal request. By contrast, a chargeback request through a credit card scheme generally offers opportunity for representment of disputes. 

Fraud filtering

Accepting credit card payments means collecting more types of data from your customer. This provides more points of reference for your fraud engine to make informed decisions.
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Better liquidity management with company cards

Accounts receivable isn’t the only department that can benefit from some modern process upgrades. Wouldn’t you prefer a more efficient way to make supplier payments from your own business?

Virtual payment solutions are helping forward-thinking businesses to better balance cash flow demands. For example, our issuing program means merchants can make sales revenue available for business purchasing on company-branded cards. We can offer this as a dedicated issuer-acquirer financial institution, in partnership with Mastercard.

The benefits of an in-house issuing program are more impactful than you might think. Consider these advantages:

• Automation for speedy financial management: Funds are available for use on company cards, which saves humans from carrying out the slow, repetitive process of initiating transfers every time a supplier needs paying.
• Faster supplier payment: Payment with a virtual card can transfer funds much faster than other B2B payment methods, such as eChecks, bank transfer or ACH. 
• Easier financial reporting: Each card has a unique identifier for easy payment traceability. That means payments are tracked at every stage, decreasing the headache-inducing problems of missing data or missing payments. 
• Better security and payment controls: Custom card controls ensure funds are allocated properly and payments to suppliers will be blocked if they don’t meet business policy criteria. 

If those benefits seem a bit abstract, you can learn about how an online grocery business made efficiency gains with its custom virtual card program. 

Improve your B2B payment performance with Checkout.com

When unpaid invoices are hurting your business’s cash flow, you should look into modernizing your payment systems. There’s a lot you can do to make the payment experience much easier – increasing the chances of timely payment. 

Checkout.com offers a range of digital payment solutions from one central platform. That means data is easily tracked, with great data visibility thanks to our end-to-end owned and operated transaction management. As an acquirer, processor, issuer, and payment management services provider, we can offer you more control over your transactions than disjointed legacy providers. 

We’ll help you create smooth payment experiences for both your clients and suppliers, so transaction management is one less burden.