As the global economy continues to face uncertainty and instability, businesses are grappling with mounting financial challenges, including rising costs of operations and declining profit margins. In the B2B sector, suppliers are the ones that especially feel the pinch as they struggle to keep up with their day-to-day expenses while navigating the rapidly evolving market landscape.
From rising energy bills to escalating inflation, suppliers are experiencing a range of economic difficulties that threaten their sustainability and long-term growth prospects. This article explores how B2B payment transformation can help them optimize financial management, streamline transactions, and reduce plenty of costs.
Instead, B2B merchants need to explore other ways of maintaining their profit margins without overburdening their clients. One way to do this is by identifying areas of internal inefficiency and implementing improvements.
For many B2B players, payments are a key challenging area, with paper invoicing and Bacs transactions that take 3 working days to clear being particularly prone to human error and wasted time.
Modernizing these payment processes can help to reduce costs and improve cash flow without compromising the quality of the services delivered.
This method is not secure and poses challenges for businesses in terms of PCI-DSS compliance and data protection. Besides, if a payment is late, the supplier will have to incur additional costs when chasing creditors, which is not sustainable, especially in the current economic climate.
To reduce the likelihood of late payments, suppliers should make it as easy as possible for buyers to complete transactions. This is why many B2B merchants are adopting new payment methods that are more efficient and secure.
For instance, accepting commercial cards is critical for suppliers, as they are becoming increasingly popular among B2B buyers. What’s more, commercial cards offer benefits to both parties, allowing buyers to extend their days payable outstanding (DPO) while minimizing the supplier's days sales outstanding (DSO) and reducing the cost of cash collection.
Additionally, optimizing B2B payments through payment links also improves efficiency. It converts risky over-the-phone transactions into secure online transfers by simply forwarding links to buyers via email, text, or e-invoice. The link takes the buyer to a secure hosted payment page where they can complete the transaction using their card or Click-to-Pay.
Another useful practice suppliers must consider adopting is straight-through processing (STP). It is a buyer-initiated process that automatically pushes a payment and remittance to the supplier using a commercial card at the point of order or post-invoice. STP eliminates manual processing for both parties and reduces the burden of PCI-DSS compliance.
It is also essential for B2B merchants to take advantage of real-time reporting data provided by digital payment platforms to be able to make forecasts regarding their resources, gain a clear overview of their cash flow, and ensure informed business decision-making.
While cash has been overtaken by digital payment methods in the B2C payments landscape, the B2B sphere is still playing catch-up. Recent research confirms that the adoption of new payment methods in this area has been slow so far, and the management of account payable and receivable processes has created an overly complex ecosystem.
Yet, big changes are underway, with 35% of revenue from embedded payments forecasted to derive from the B2B segment by 2027. This improvement is sure to be heavily influenced by such solutions as Click-to-Pay and STP, as they simplify the buying and supplying process by enabling effortless instant purchases.
All in all, suppliers need to implement smoother payment processes to build and maintain reliable buyer-supplier relationships. With that in mind, they should be prepared to accept the fastest and most convenient payment methods to keep pace with the industry.
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