B2B Payment Processing: Methods, Terms & Digital Tools

When a business pays another business, the payment processing journey isn’t going to be as straightforward as most other payments. After all, business-to-business (B2B) transactions involve distinctive processes, larger payments and often more complexity than run-of-the-mill consumer sales.

Despite this complexity, the international B2B payments market reached $1.5 trillion in 2022 and is projected to surpass $3.7 trillion by 2032.¹

Particularly for growing businesses with small teams, understanding and optimizing B2B payments is a must, and that’s what this article will help you do! In doing so, you can expect to better maintain cash flow and efficient operations when it matters most.

In this guide, we’ll cover what B2B payment processing means, how it works and the options available. You’ll learn about popular B2B payment methods, including traditional approaches like checks and emerging digital solutions.

Other topics we’ll discuss include B2B credit card processing, mobile payments and concepts such as payment terms and payment gateways in the B2B context. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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What is B2B Payment Processing?

Any time a payment is made from one business to another, B2B payment processing comes into play.

B2B payment processing refers to the workflows and systems that facilitate financial transactions between two businesses. In simple terms, it’s how one company pays another for goods or services.

B2B transactions are often higher in value and more complex than business-to-consumer (B2C) payments. They may require approval from finance teams and alignment with purchase orders or contracts.

Unlike a quick retail purchase, B2B payments involve some added steps, such as:

• Creating and sending an invoice
• Extended payment terms
• Sometimes prior negotiations or contracts

These aren’t the only ways that B2B payments differ from B2C payments; they also tend to use different methods and infrastructures than consumer payments. Consider how you usually make a payment while you’re shopping. If you’re like most modern shoppers, you pay instantly with a card or a mobile app. Businesses, however, tend to rely on methods like bank transfers, checks or credit terms.

There are also more parties involved in the process (mainly behind the scenes) to ensure the payment is authorized and recorded properly.

These parties include:

• The buyer
• The seller
• Intermediaries like banks or payment processors

How Does B2B Payment Processing Work?

The B2B payment process follows a sequence of stages from when a sale is made to when money is in the seller’s account.

Here’s an overview of a typical B2B payment workflow, broken into seven steps:

1. Purchase Order or Agreement

Before any payment happens, the buyer and seller agree on a sale. Sometimes, this involves a formal purchase order, or it may be a contract that details the goods or services, price and payment terms.

For example, a retailer might send a purchase order to a wholesaler for 100 units of product, agreeing to pay within 30 days.

2. Invoice Issuance

After delivering the product or service, the seller sends an invoice to the buyer. The invoice lists what was provided, the amount due, any applicable taxes and the agreed payment terms. Modern payment processing services often include digital invoicing tools to streamline this step.

3. Approval Workflow

Next, it’s time for the buyer’s accounts payable team to actually approve the payment.

To do this, they need to:

• Verify the invoice against the order
• Ensure the goods were received
• Obtain approval from the appropriate manager or department

This internal review can involve multiple stakeholders, especially for large payments, which is why B2B payments aren’t instantaneous.

4. Payment Initiation

Payment initiation follows payment approval. This means, now that the sale has been approved, the buyer makes the payment to the seller. They might do this via an ACH bank transfer, a wire or just mailing a check.

Ideally, buyers will carefully choose their B2B payment processing method based on cost, speed and convenience. For instance, they might choose an ACH transfer for a routine domestic payment or a wire transfer for urgent or cross-border transactions.

5. Processing and Settlement

After initiation, it’s time for payment processing to begin.

If it's an electronic method, that will involve:

• ACH transfer
• Wire transfer
• Credit card or debit card
• Digital wallet or platform

During processing, banks or processors are tasked with verifying the payment details and ensuring funds are available. Security checks (fraud screening, compliance verifications) occur at this step, too.

Once cleared, the payment is settled, meaning the money is delivered to the seller’s account. Depending on the method, settlement can be nearly instant (for some wires or card payments) or take a few days (like ACH or checks).

6. Confirmation and Receipt

Now, the seller is notified that the payment has been received. If the funds went into a merchant account (for card payments), the seller can then transfer those to their business bank account.

The timeline of all of this varies. For example, credit card payments might take a day or two to show up in the bank after authorization.

7. Reconciliation

Both the buyer and seller update their accounting records to reflect the transaction. The seller marks the invoice as “paid” in their accounts receivable, meanwhile the buyer records the outflow in accounts payable. In turn, both the buyer’s and seller’s internal records match bank records.

Many modern B2B payment solutions integrate with accounting software to automatically reconcile payments with invoices, which saves both parties time and can reduce the risk of errors.

Throughout every step of this process, straightforward communication and precise documentation are paramount. With that in mind, it’s no wonder so many businesses use software or payment processing platforms to streamline their payment processing workflow.

Often, they’ll turn to these tools for help with:

• Tracking these stages
• Sending reminders for overdue invoices
• Keeping everything organized

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Most Popular B2B Payment Methods

When it comes to B2B payment methods, businesses have more options today than ever before. Traditional methods like paper checks are still widely used, but there’s a steady shift toward electronic payments and automation.

B2B payment Method and How They Work
Paper Checks: Checks remain very popular in B2B transactions. In fact, roughly 40% of businesses' B2B payments are still made with paper checks.2 Companies often favor checks for their familiarity and because they provide a tangible record.However, relying on checks has downsides: they require manual processing, can be slow to arrive by mail, and are relatively easy to lose or even forge.
ACH Transfers (Bank-to-Bank: These are electronic bank transfers using the Automated Clearing House network, primarily in the United States. This is basically a direct deposit or electronic check.ACH transfers are popular for domestic B2B payments because they are low cost (bank fees are low or sometimes free) and fairly convenient once set up. They work well for recurring payments, like paying a monthly supplier or service subscription.ACH payments take about one to three days to clear, which is faster than mailing a check. Each party usually needs to fill out a form or provide bank details to set up an ACH relationship, which is a one-time effort.
Wire Transfers: A wire transfer is a direct electronic transfer from one bank account to another. Wires are often used when speed is vital or when sending money internationally.In a B2B context, if you need to send a large payment overseas the same day, a wire is a reliable choice. With this method, funds often arrive within 24 hours or even a few hours of initiation.Wires don’t rely on batch processing like ACH, so they can be quicker. The trade-off is cost: banks typically charge significant fees for wire transfers, and if it’s international, both the sending and receiving banks might take fees.
Credit Card Payments: Paying a vendor or supplier with a credit card can be as easy as filling in an online form or reading out the number over the phone. For the buyer, it offers a grace period until your credit card bill is due, which can come in handy for cash flow purposes. Some businesses also earn cashback or travel points on corporate cards for every dollar spent. For the seller, accepting cards means they can get paid quickly and potentially attract customers who prefer to pay by card. However, card payments come with processing fees (often around 2% to 3% of the transaction), which either the seller or the buyer (through surcharges) must absorb. The credit cards used in B2B can differ from consumer cards: companies will often use corporate or purchasing cards with very high credit limits and special terms. They also often have lower interchange rates (processing costs) than normal consumer cards. Security and fraud prevention are also important here, as lost or mishandled card details could lead to unauthorized charges.
Cash: Actual cash is rarely used for B2B payments except in very small or local transactions. While most organizations will accept cash if offered, it's impractical for anything other than in-person exchanges. Not to mention, it’s risky to send cash through the mail. For accounting transparency and safety, businesses usually avoid cash beyond petty cash needs.
Digital Payment Platforms: A growing category in B2B payments is the use of digital platforms and mobile wallets that enable businesses to pay each other without traditional bank checks or wires. For instance, a freelance design agency may send an invoice link to a client, who can pay it online with a couple of clicks. Platforms often provide a dashboard to track payments and may integrate with accounting software. Digital solutions can speed up transactions and often come with added security features (like encryption and fraud detection) that give peace of mind to both payer and payee.
Virtual Cards: A special type of digital payment worth mentioning is virtual credit cards. These are temporary, unique card numbers generated for a specific payment or vendor.They work like regular credit cards but are used only once (or have a short expiration), adding an extra layer of security. Payers can generate a virtual card to pay an invoice, and the vendor processes it like a normal card transaction.

Each payment method has its pros and cons, so businesses will often use a blend of them to reap the rewards and avoid the pitfalls of each. The best choice depends on the size of the transaction, urgency, fees and whether your partner is domestic or overseas.

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Understanding B2B Payment Terms

Payment terms are another unique feature of B2B payments worth discussing. These terms or “conditions” define when and how the buyer must pay the seller. You’ll usually find them on the invoice.

Here are a few common B2B payment terms:

• Net 30, Net 60, etc.: This means payment is due within 30 days, 60 days or whatever number is set.
• 2/10 Net 30: This is an example of an early payment incentive. It means the buyer gets a 2% discount if they pay within 10 days; otherwise, full payment is due in 30 days.
• Upon Receipt: Payment is due immediately upon receiving the invoice (essentially no extended timeline).
• Milestone or Progress Payments: For big projects, terms might require payments at certain stages (e.g., 50% upfront, 50% upon completion).

B2B payment terms set the expectations for timing. They should be part of your payment processing strategy, and it’s wise to review them periodically.

The Role of B2B Payment Gateways

When businesses transact via electronic methods, especially credit cards or online payments, they often use a B2B payment gateway like Wise. A payment gateway is a technology that securely captures the buyer's payment data and routes it to the relevant bank or processor for approval.

Think of it as the digital equivalent of a point-of-sale card terminal, but for online or invoice payments.

For example, if you want to accept credit card payments from your B2B clients, you'd likely use a gateway. You might send a client a link to pay their invoice online; when they click it, a secure payment form (the gateway) takes their card details.

The gateway encrypts that information and sends it through the card networks to get authorization from the buyer’s bank. Once approved, you get a confirmation and later the funds (minus fees) are deposited into your account.

B2B payment gateways can do more than just process cards. Many also handle ACH transfers or other payment types through one interface.

They often have features important for businesses, like:

• Integration with invoicing
• Support for Level II/III data
• Recurring billing
• Fraud prevention tools
• Multi-currency processing³

B2B Payments Are Going Digital and Global

As a growing business, you’ve likely noticed that two big trends are shaping how you handle B2B payments: digitalization and globalization.

Even if you’re a 10-person company, you might have vendors abroad or remote clients, and new tools and practices are making those transactions easier:

• Shift to Digital: As noted earlier, companies are gradually moving away from paper checks and manual processes. They are adopting online invoicing, electronic payments and automation. This shift saves time and can also cut costs. With the help of digital methods and automated accounts payable, businesses can save on the labor and materials of processing checks.
• Mobile and Remote Payments: With more people working remotely or on the go, B2B mobile payments are becoming more common. Business owners can use mobile banking apps or payment apps to approve payments from anywhere. Likewise, salespeople or service providers out in the field can collect payment immediately via a mobile card reader or app, rather than invoicing later.
• Cross-Border Payments: Traditional international wires are costly and sometimes slow. Fortunately, modern fintech solutions (including services like Wise, which is built for low-cost international transfers) allow smaller businesses to send cross-border B2B payments more easily. They offer features like holding multiple currencies, avoiding hefty intermediary bank fees and favorable exchange rates.
• Security and Compliance: Digital B2B payment processing also means paying attention to security. Companies must protect payment data and comply with standards like PCI DSS for card transactions and anti-money-laundering (KYC) regulations. The good news is that many payment platforms include advanced security and encryption by default.

Frequently Asked Questions

What is B2B payment processing?

B2B payment processing is the system of financial transactions between businesses.

It includes:

• Sending/receiving invoices
• Executing the payment via methods like bank transfers, checks or credit cards
• Confirming the money has moved

In contrast to consumer payments, B2B payments typically involve extra steps like invoice approvals and extended payment terms (e.g., net 30 days).

What are the most popular B2B payment methods?

Among the most popular B2B payment methods are:

• Paper checks
• ACH bank transfers
• Wire transfers
• Credit cards

What is B2B order processing?

B2B order processing refers to the workflow a business follows to fulfill a customer’s order in a business-to-business context.

The process kicks off the moment a purchase order is received or a contract is signed.

It includes steps like:

• Order fulfillment (picking/packing goods or delivering a service)
• Invoicing the customer
• Processing the payment
• Reconciling the payment with the order

In essence, it's the end-to-end process of receiving an order from another business and completing it through payment. Efficient B2B order processing ensures that once an order is placed, everything from inventory management to invoicing and payment happens smoothly and on time.

What is B2B pay?

“B2B pay” is an informal term that just means business-to-business payment. It refers to any payment made from one company to another, as opposed to a consumer making a payment to a business.

Some financial services or platforms might use “B2B Pay” in their name, but generally, it’s shorthand for the same processes involved in B2B payment processing.

This includes things like:

• Invoices
• Bank transfers
• Managing payment terms between businesses

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Sources:

1. FinTech Futures – B2B Payments Market Size to Surpass USD 3,795.34 Billion by 2032
2. BAI – Payments Paper Jam: Why Banks and Corporates Should Break the B2B Check Habit