B2B payments explained: Best practices and how Stripe can help


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  1. Introduction
  2. What are B2B payments?
  3. Types of B2B payment
    1. Electronic transfers
    2. ACH and Bacs transfers
    3. Paper cheques
    4. Credit cards
    5. Peer-to-peer platforms
  4. How B2B payment processing works
  5. B2B payment processing best practices
  6. How does Stripe help B2B payment processing?

B2B payments are more than just an exchange of funds between businesses. The many elements involved – including compliance, security, currency conversion and invoicing – have the potential to create a well-oiled machine or a tangled web of inefficiencies. And now, as businesses increasingly operate globally, transactions are becoming more complex and the stakes are rising. For many businesses, manual processes won't cut it. Instead, businesses must rely on automation, precision and a keen eye for detail. For today's B2B businesses, providers such as Stripe are instrumental in converting sets of complicated steps into straightforward and largely automated processes.

In the B2B sector, which was projected to reach a market value of nearly US$1.59 trillion in 2023, the effectiveness of your payment process matters. Time you spend grappling with payment issues is time you could spend driving your core business. An optimised payment system affects a business's bottom line by reducing errors, increasing speed and elevating the customer experience. Below, we'll walk through some important aspects of B2B payments and see how Stripe's tailored solutions can help.

What's in this article?

  • What are B2B payments?
  • Types of B2B payment
  • How B2B payment processing works
  • B2B payment processing best practices
  • How does Stripe help B2B payment processing?

What are B2B payments?

B2B payments are transactions between businesses – typically for goods, services or information. Unlike customer transactions that tend to be smaller and more frequent, B2B payments often involve larger sums and longer payment terms. These transactions usually involve complex contracts and multiple stakeholders, adding layers of approval that can slow the payment process down. Compliance and security are more complicated in B2B payments, which contribute to operational complexities that the payer and payee must manage.

Types of B2B payment

Electronic transfers

Electronic transfers are instant, direct transactions between bank accounts. These instant payments are often the go-to choice for large, time-sensitive transactions. Although they offer speed and a high degree of reliability, they cost more than many other B2B payment types: fees can range from US$15 to US$45 per transaction, and both parties must share sensitive financial information to initiate the transfer.

ACH and Bacs transfers

Automated Clearing House (ACH) payments in the US and Bacs payments in the UK are electronic funds transfers that have gained substantial traction, especially for small to medium transactions. These payments run through a secure, centralised system and are particularly well suited for recurring payments. In 2020, the number of B2B payments made using ACH grew by more than 8% compared with the year before, according to Nacha, which manages the ACH Network. ACH transfers have lower fees than electronic transfers, but the processing time is longer – typically 2–3 working days.

Paper cheques

Cheques might seem outdated in our digital age, yet they remain a common payment method in B2B transactions. In the 2020 Association for Financial Professionals (AFP) Electronic Payments Survey, 68% of businesses that responded reported that they made the majority of their B2B payments by cheque. Although cheques provide a paper trail, they come with inherent risks: a cheque could bounce, for instance. And operational overheads, including manual processing, can introduce delays.

Credit cards

Credit cards offer the convenience of instant transactions but are generally reserved for small to medium payments. Their convenience comes at a cost – often in the form of fees paid by the business. Typically, credit cards are not used for large transactions because of credit limits imposed by issuing businesses and because the fees that businesses must pay for accepting credit card payments are often a percentage of the total transaction amount.

Peer-to-peer platforms

PayPal and similar platforms act as intermediaries, facilitating domestic and international payments. These platforms provide customers and businesses with the advantage of quick transactions without the need to share banking details with the other party. Fees can vary depending on several factors, such as currency and country of origin. PayPal, whose total payment volume passed US$1.3 trillion in 2022, also offers fraud protection and compliance measures, which can be attractive to businesses that operate across borders.

Other digital payment platforms, such as Square and Venmo for Business, are also vying for a slice of the B2B payment pie. These platforms are similar to PayPal in many ways: all three provide quick transactions and varying fee structures. Often, these platforms offer features such as inventory tracking and invoicing capabilities that appeal to small and medium-sized businesses.

How B2B payment processing works

  • The invoicing stage: After delivering a product or service, the seller issues an invoice that specifies the cost, quantity and payment conditions. Although a paper-based invoice process is still common, many businesses are transitioning to electronic invoicing systems. These systems integrate with the customer's accounting software and make it easier to track and expedite payments.

  • Approval processes: Payment authorisation in a B2B context often involves several layers of approval, usually across multiple departments, such as finance and procurement. This workflow can be accelerated with automated payment platforms, which also help maintain compliance with the organisation's internal rules.

  • Choosing a payment method: Several options are available for making the payment. These range from traditional methods, such as cheques and bank transfers, to newer platforms, such as digital wallets. It's common for businesses to use ACH or electronic transfers for larger amounts because of fewer fees and increased security measures. International transfer methods, such as SWIFT, are the best option for transactions that involve different currencies.

  • Data protection: Safeguarding financial and transactional data during the payment process is important. Standard safety measures – including encryption and two-factor authentication – mitigate the risk of data breaches and fraudulent activities.

  • Reconciliation: After the payment has cleared, both parties should confirm the transaction in their respective financial records. Automated systems help by matching transactions with invoices and updating accounting records almost immediately.

  • Regulatory compliance: Complying with laws and industry regulations is non-negotiable. From anti-money laundering (AML) regulations to know-your-customer (KYC) protocols, each business must be aware of and follow these rules to avoid legal repercussions.

The B2B payment process involves several stages, and each stage has its own set of complexities and considerations. Automation and technology play an increasing role in making these processes more straightforward.

B2B payment processing best practices

The ideal B2B payment process does more for a business than just transfer funds. It's a complex environment of practices, platforms and partnerships that, when done right, can contribute significantly to your business's bottom line. Here's a rundown of best practices that B2B businesses should consider when developing their payment strategy:

  • Go digital with invoices: Switching to digital invoices has several advantages. For example, most modern accounting systems can generate invoices by pulling in all necessary data fields from other parts of your business. This minimises manual errors, accelerates the invoicing process, and guarantees that your invoices are accurate and up to date. Going digital also makes it easier to integrate invoicing into a larger, automated workflow that can notify you of late payments, initiate follow-ups and integrate with your inventory management system to ensure that you don't bill a customer or client for a product that you can't deliver.

  • Make approval workflows transparent: Complex B2B transactions often require multiple levels of approval – both within an organisation and on the client side. You can use role-based automation platforms to assign specific approval responsibilities to individual employees. When everyone knows their role in the approval process, transactions proceed more smoothly. This level of transparency allows businesses to identify bottlenecks more quickly, making it easier to pinpoint where a transaction is getting held up. With this data, it becomes easier to refine the process, turning each transaction into a lesson for improvements.

  • Be flexible with payment options: Offering a variety of payment methods helps your business cultivate better customer service while enhancing your financial operations. Every payment option has different benefits and potential drawbacks. Electronic transfers, for instance, are often used for large transactions because of their reliability, but they have fees and can be slower than other options. Credit cards have processing fees (and the potential for fraud), but the transactions are processed immediately. Digital wallets offer fast transactions and have relatively low fees but are not as widespread as credit card transactions. By offering your clients a range of options, you can meet their needs.

  • Don't overlook compliance: With constant changes in regulations, especially regarding digital transactions and data protection, staying up to date with compliance can be tricky. At times, compliance might seem like an inconvenience, but it's important for avoiding legal issues, and it adds credibility to your business. However, many modern payment platforms offer built-in compliance features that update automatically as laws change, which allows your business to maintain legitimacy with minimum effort.

  • Adopt advanced fraud protection: Fraud risks are ever present in digital transactions, and basic authentication measures are not enough to ensure the security of your transactions. Multi-factor authentication – which can use something the customer knows (such as a password), something the customer has (such as a phone) or something that identifies the customer (such as a fingerprint) – can make it much more challenging for would-be scammers to access information. Advanced AI algorithms can also monitor transactions in real time, identifying unusual patterns or suspicious activities and flagging them for review before the transaction is approved.

How does Stripe help B2B payment processing?

Stripe simplifies the complexity surrounding B2B payments. From invoicing to recurring billing, Stripe allows businesses to automate many steps in the payment process. Automation reduces manual work and lowers the risk of errors – which can help your business focus more on core functions rather than getting tangled up in the intricacies of B2B transactions.

  • Application programming interface (API) flexibility: Stripe's API is designed to be flexible, which allows businesses to create customised payment solutions. This adaptability makes it easier to meet specific payment requirements as they arise.

  • Multiple payment methods: Businesses have the option to accept many forms of payment through Stripe. This includes credit cards, digital wallets such as Apple Pay and Google Pay, and bank transfers. This variety makes Stripe adaptable to different B2B payment preferences.

  • Multi-currency support: Stripe can handle transactions in multiple currencies, simplifying the process of international business. This removes the need for businesses to manage currency conversion separately.

  • Automated invoicing: Stripe automates the invoicing process. It can handle recurring bills automatically, which saves time and administrative effort, especially for businesses with long-term contracts.

  • Security protocols: Stripe uses encryption and other technologies to protect data during transactions. This minimises the risk associated with online payments.

  • Subscription billing: For businesses engaged in recurring transactions, Stripe offers a subscription billing service that automates the billing cycle, which helps in managing B2B relationships.

  • Payment Links: Stripe generates payment links that allow for quick and straightforward transactions. Businesses can send these links to their partners, who can pay with a click.

  • Radar for fraud management: Stripe's Radar uses machine learning to identify potentially fraudulent activities. This allows businesses to concentrate on their operations rather than on security concerns.

  • Accounting integration: Businesses can integrate Stripe with accounting software, such as QuickBooks, which eases the process of reconciling payments and updating financial records.

  • Reporting and analytics: Stripe provides detailed transaction reports, which can help businesses make data-driven decisions.

  • Financial services: Stripe Capital is a financing option for businesses that require extra capital for large projects or other expenditures.

To learn more about how Stripe creates tailored, flexible, easy-to-implement solutions for B2B payment systems, go here.

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