B2B Payments Guide: Everything Businesses Need to Know

B2B payments are everywhere – in fact, the B2B payments market is over twice the size of all consumer payments. But if you’re a business selling to business, you’ll quickly realise that B2B payments have their own unique demands . This applies to wholesalers, retailers, manufacturers, and service providers alike. Given the higher volumes, recurring orders, and multi-step approvals involved, B2B transactions often involve extra steps, more flexible terms and, occasionally, complex processes.

‍

What are common B2B payment methods

For businesses, paying for goods or services is intimately tied up with how the business works. For example, if you’re a retailer buying inventory, you may well want to delay the payment until you’ve actually sold the products. That’s why businesses will often vary their payment methods depending on the purchase or provider involved. Key methods to be aware of include:

1. Direct debit payments

For businesses looking for recurring payments, direct debits are a popular choice, particularly for services like utilities, leases, and software subscriptions. Around 60,000 UK organisations use direct debits  to collect bills of all kinds, including paying bills, organisational subscriptions, charity donations  and B2B regular invoicing. 

These can be simpler for both sides of the transaction – just set it up once and the payment repeats – delivering lower costs and making it easier to predict cash flow. In the UK, these are handled by the Bacs Direct Debit scheme, which handles the bank-to-bank transactions..

2. Wire transfers

Wire transfers are commonly used for high-value or time-sensitive payments. They are also often a common method for international transactions, given the rapid settlement and security available. You might come across these if you’re a UK-based exporter looking to handle cross-border payments while making sure you’re in line with international rules on money transfers.

3. Credit and debit cards

While more originally prevalent in consumer payments, credit and debit cards are used in B2B transactions for smaller purchases or online payments. The advantages include immediate processing and fraud protection, making them ideal for ad hoc needs. However, high processing can be a deterrent for sellers, especially for larger transactions.

4. Digital payment platforms

Digital payments cover a wide range of options, from online banking apps to mobile wallets, as well as more flexible tools like iwocaPay, GoCardless, and PayPal, which are adding new possibilities into the payment space. 

These platforms offer a range of add-on features that make B2B payments easier, such as buy-now-pay-later (BNPL)  automated invoicing, instant payments, and customisable terms. For instance, iwocaPay enables suppliers to receive upfront payments while allowing buyers to spread costs over three to twelve months, helping sellers sell more with trade credit, without the risk of buyers defaulting on their payments.

5. Electronic Funds Transfers (EFTs)

Also known as account-to-account (A2A) payments, EFTs allow businesses to transfer funds directly between bank accounts electronically. They are efficient, fast and cheap, which makes them handy for businesses handling frequent or high-volume transactions. They’re also growing in popularity. In fact, EFT payments are predicted to grow 212% by 2027. In the UK, they’re run by the Faster Payments Service (FPS), which offers near-instantaneous EFT processing.

Payment terms in B2B transactions

One of the distinctions when it comes to B2B payments compared to B2C payments is that many businesses use trade credit. This means that the buyer pays the seller some time after the purchase is made –  the ‘when’ and ‘how’ of that payment is dictated by payment terms agreed between the parties. The goal of these terms is clarity and trust for both sides. 

Common arrangements include:

• Net 30/60/90: Payments due within specified days after invoicing.
• Discount terms: Early payments earn discounts, e.g., "2/10 net 30," incentivising quicker payments from the seller.
• BNPL payments: With solutions like iwocaPay, buyers can spread costs over months while sellers enjoy upfront payments.

The role of payment terms varies in line with wider economic conditions – when times are tough, businesses want more time to pay. Recent research by iwocaPay found that the proportion of suppliers offering repayment terms over 60 days to customers has leapt from just 7% of suppliers in 2020 to 17% in 2024.

Common challenges in B2B payments

Despite their importance, B2B payments remain a big headache for many businesses, due to inefficient processes, outdated tools and client difficulties. The big problems include:

1. Late payments

Late payments are a common issue – and serious – issue for businesses, cutting into cash flow and rippling down supply chains. According to UK Finance, 52% of businesses report late payments as a significant challenge. SMEs are especially vulnerable, with invoices settled on average 7.3 days late, with sectors such as retail and hospitality seeing the worst delays. The wait to get paid often pushes businesses to rely on external financing or slow down their operations for lack of cash.

2. Manual processes and admin

Many B2B payment systems require people to do most of the work, which is time-consuming and makes it easy to make a mistake. For example, businesses often spend significant time chasing payments, issuing reminders, and reconciling invoices to keep their books in order. This administrative burden detracts from core business activities and adds costs for finance teams.

3. Lack of standardisation

The absence of a universal B2B payment system for all businesses creates inconsistencies. For example, different businesses might use varying payment terms and methods, which makes transactions more complicated and delays payments. 

4. Security Risks

B2B transactions can be high-value and involve sensitive data, which makes them a prime target for fraud. Weak security systems, such as limited encryption or a lack of authentication measures mean that, in 2024, one survey found that 53% of businesses had experienced up to six fraud cases.

5. Cross-border complexities

The growth of online, sell-anywhere business models mean more businesses are having to deal with challenges like currency conversion, overseas regulatory compliance, and regional payment practices. Traditional payment methods that work just fine domestically can be expensive, slow or uncertain when used across borders.

‍

{{iwocapay-pr-report-cta="/components"}}

‍

The role of automation and technology in B2B payments

For businesses looking to build a more efficient, compliant and cost-effective B2B payment process, there are a range of new technologies available. Working with up-to-date payment can help businesses offer a better customer experience while also keeping more of their revenue by reducing costs and inefficiency, ultimately improving cash flow.

• Invoice automation: Tools like OCR and machine learning can now take care of capturing and validating invoice data, providing live information to run your business.
• Automated workflows: Automated approval processes and payment scheduling can reduce uncertainty about when and how an invoice is to be paid, ensuring your stay on top of your bill.
• Reconciliation: Real-time dashboards and automated matching can help you maintain reliable financial records and reduce manual work.

Integration with accounting systems

One of the most useful elements of modern payment tools is their ability to integrate with cloud accounting systems like Xero or QuickBooks. With a direct link between the tools you use to issue invoices or pay your bills, you can also make sure the transaction is tracked instantly in your records, making the process of reconciling payments and staying on top of cash flow faster and simpler.

Cross-border B2B payments

As mentioned above, working across borders makes B2B payments much more complex.  Not only do different countries have their own currencies, payment habits and payment processors, but they may also have distinct financial infrastructure which doesn’t directly connect with the payment’s original region. 

This leaves buyers and sellers dealing with:

• Higher transaction fees, depending on the routing and payment method
• Slower payments as transactions are routed through multiple financial providers
• Limited visibility and control when monitoring payment progress
• Higher risk of fraud and data breaches due to complex, opaque international payment systems
• Differing payment rules on a region by region basis

 This is a particular issue for online businesses who sell to multiple countries, where different regions will bring different payment costs and processes, cutting into margins and delaying settlement.

Security and fraud prevention

Businesses working with B2B transactions have a responsibility to protect their buyers’ data and security in line with rules such as GDPR. This requires working with systems that can guarantee security at every stage of the conclusion, including:

• Encryption to protect sensitive data at rest and in transit
• Multi-factor authentication to ensure only authorised parties can access payment systems
• Fraud monitoring tools to real-time oversight, catch suspicious activities and reduce fraud risks. 

There is both a compliance and commercial incentive to invest in security – not only does it protect your business from penalties or fraud, but it also builds trust and protects your reputation.

Regulatory compliance in B2B payments

There are a range of regulations that businesses need to be aware of when it comes to processes B2B payments. The main ones to be aware of are  Anti-Money Laundering (AML) and Know Your Customer (KYC) standards, which transactions are legitimate and free from illicit activity.

• AML: These rules help prevent the use of business payments for money laundering or other illegal activities by monitoring and reporting suspicious transactions.
• KYC: Businesses must verify the identity of their clients, ensuring they know who they’re doing business with. 

Practical steps to compliance

• Customer onboarding: Collect and verify detailed customer information as part of due diligence.
• Ongoing monitoring: Regularly review transaction data to detect and address unusual patterns.
• Record keeping: Maintain accurate and detailed records to meet regulatory audits and requirements.
• GDPR Compliance: Implementing robust data privacy measures, such as encryption and access controls, and ensure transparency in how data is collected, stored, and used.

B2B payment cost management

Most B2B payments involve some level of cost – whether it’s fees, exchange rates, or just the time you spend managing them. Keeping control of these costs is a key way to make sure your payment processes are helping your profitability and efficiency, not harming it. 

Major areas to monitor include:

• Transaction fees: High fees can erode margins, particularly for frequent or high-volume transactions. Regularly review your payment providers and negotiate better rates to ensure you’re not overspending.
• Currency exchange rates: For businesses involved in cross-border transactions, exchange rate fluctuations can significantly impact costs. Utilising platforms with competitive rates and automation for currency conversions helps stabilise your financial planning.
• Administrative costs: Manual processes can drain resources. By automating tasks such as invoice generation and reconciliation, you reduce labour costs and minimise errors that could lead to financial losses.

Customer Experience

Every payment interaction is an opportunity to strengthen your business relationships. Whether it’s offering flexible payment terms, providing an intuitive platform, or ensuring lightning-fast processing, prioritising your customers’ experience builds loyalty and encourages repeat business. In a crowded market, a seamless payment process can set you apart.

Data Analytics

Your payment data holds the keys to unlocking new opportunities. By analysing spending patterns and cash flow trends, you can forecast more accurately, identify growth areas, and mitigate risks. With actionable insights at your fingertips, you’re equipped to make decisions that drive success and sustainability.

Embrace the future of B2B Payments

The B2B payment landscape is always evolving in line with the needs and challenges of businesses. Today, having a great payment experience is a crucial part of running an efficient, agile business, as well as offering a great customer experience. 

iwocaPay is specifically designed to address the challenges and opportunities of today’s B2B payments. 

• Offer more flexibility: iwocaPay allows trade customers to spread payments over 3 to 12 months, helping them manage cash flow while you get paid upfront.
• Instant access to funds: Unlike traditional payment methods, iwocaPay ensures you receive your payment as soon as the transaction is completed, eliminating delays and boosting your cash flow.
• Cost-free options: With no card fees or hidden charges, iwocaPay helps reduce overheads, enabling you to keep more of your revenue.
• Secure and seamless payments: From encrypted bank-to-bank transfers to streamlined invoicing, iwocaPay is built for security and ease of use, building trust with your customers.
• Simple integration: Whether you’re sending invoices, managing payments online, or taking payments in person via QR codes, iwocaPay integrates effortlessly with systems like Xero and QuickBooks for automatic reconciliation.

Ready to make the most of your B2B payments?

‍

{{iwocapay-2-col-trade-credit-ctas="/components"}}

‍

B2B Payments FAQs

What are the most efficient B2B payment methods available in the UK?

Popular methods include bank transfers, electronic funds transfers (EFTs), Direct Debit, and digital platforms like iwocaPay. These offer low costs and high reliability. The right solution will depend on your business model and customer needs.

How can I ensure timely payments from clients to maintain healthy cash flow?

To secure timely payments, it’s essential to establish clear payment terms in contracts, such as Net 30 or early payment discounts. 

You can also use automated invoicing and payment reminders to reduce administrative work piling up and prompt clients for you. For regular customers, implementing payment platforms like Direct Debit ensures control over the payment schedule, reducing reliance on client-initiated transactions.

What are the costs associated with different B2B payment solutions, including hidden fees?

Costs vary by method and provider. Bank transfers and Direct Debit often have low fees, while credit cards can incur higher transaction fees. Digital platforms may charge setup fees, subscription costs, or a percentage of each transaction. Always review the provider’s pricing structure to identify hidden fees, such as currency conversion or administrative charges.

How can I integrate new payment systems with my existing accounting software?

Choose payment systems compatible with your accounting software, such as Xero, QuickBooks, or Sage. Integration typically involves connecting APIs or using prebuilt plugins. These integrations sync invoices, payments, and reconciliations automatically, streamlining financial reporting and reducing manual work.

What security measures should be in place to protect against fraud in B2B transactions?

The first step is to educate employees about phishing attacks and fraud prevention, since the most secure system is still vulnerable to human error. Beyond this, ensure robust encryption protocols to safeguard sensitive data and implement multi-factor authentication for account access at a minimum. 

How do I comply with UK regulations concerning B2B payments, such as AML and KYC requirements?

Compliance involves verifying client identities during onboarding (KYC) and monitoring transactions for suspicious activity (AML). Many businesses will work with an accountant or use a specialised platform to automate these processes, ensuring thorough record-keeping. 

What are the best practices for managing international B2B payments and currency conversions?

Use platforms with competitive exchange rates and automated currency conversions to minimise costs when working across borders. You can also plan payments strategically to avoid currency fluctuations. It’s also crucial to ensure compliance with international regulations by staying updated on local requirements for cross-border transactions.

How can automation streamline my company's payment processes and reduce errors?

Automation can reduce manual workloads by generating invoices, scheduling payments, and reconciling accounts automatically. This minimises the chance for errors and accelerates your payment efficiency. Tools like OCR and AI-powered platforms also improve your data quality by capturing data and identifying issues in real-time.

What should I consider when choosing a B2B payment service provider?

Evaluate providers based on transaction costs, integration capabilities, security measures, and customer support. Consider scalability to ensure the service can grow with your business. Read reviews and request a demo to assess ease of use and compatibility with your operations.

How are emerging technologies like blockchain and AI impacting B2B payments, and should I adopt them?

Blockchain offers transparency and security by creating tamper-proof transaction records, making it ideal for international payments. AI enhances efficiency by automating repetitive tasks, detecting fraud, and providing actionable insights. Adoption depends on your business needs; these technologies can offer a competitive edge but require careful implementation.

‍