A Guide to B2B Payment Processing
Surprisingly, many well established and successful businesses are often unaware of the potential financial benefits of accepting corporate and government purchasing cards as a form of payment. For merchants already accepting payment cards from other businesses or government, there is sometimes confusion or misinformation on how best to improve B2B and G2B processing for maximum efficiency and profits.
One thing is certain: corporate and government purchasing card use is growing exponentially and now makes up more than 50% of all B2B and G2B transactions according to RPMG research studies. The use of these cards has doubled just within the last five years, and is projected to increase by 10% annually over the next five years. Today we highlight the major benefits B2B and G2B payment acceptance and provide a few tips for merchants already accepting corporate cards and government purchasing cards.
Isn’t it expensive?
Among the common misconceptions, is the idea that accepting B2B and G2B is generally expensive. While there are initial set-up costs and processing fees (a percentage usually 2% to 4% on each transaction), being able to accept a wider range of payments including corporate and government purchasing cards provides tremendous convenience to your customers and creates more sales and higher profits that can offset the costs associated with B2B and G2B card acceptance. In fact, a well documented study by Dun & Bradstreet found that purchase amounts regularly increase 12% to 18% when cards are used as payment.
“Nearly a quarter (23%) of government spending contracts (upwards of 83 billion dollars per year) go to small businesses.”
Customer knows best… especially when it comes to paying.
To better understand the psychology behind the dramatic increase in B2B and G2B card use we need to examine card benefits through the eyes of a customer. For starters, credit cards result in more favorable outcomes during purchase disputes and provide substantial buyer protection against fraud and unauthorized purchases. Even returns and exchanges tend to be much easier when purchases are made via credit card. Credit cards also provide loyalty points and exclusive offers which further entice customers to use cards over cash or checks. A recent study by research institute, Statistic Brain, found that 60% percent of card holders have a rewards credit card.
Further on the monetary side, credit cards provide customers a 30 day float period before actual payment is due, and often offer financing options which can further increase cash flow within an organization. There is also rarely a customer fee or surcharge associated with credit card use. Credit cards are often the cheapest and most convenient payment option when printing checks, postage, accounting paperwork and other associated costs are taken into consideration.
Another major reason behind the recent surge in B2B and G2B credit card use has little to do with the personal preferences of the actual cardholder, and more to do with company policy. Credit cards in general, create a much more detailed transaction footprint which can provide companies with a more comprehensive purchasing record. Even high level government officials are often mandated to use only purchasing cards to pay for products or services in order to create financial transparency. In other words, whether ordering office supplies or paying for a meal during a business trip, paying by cash or check is just not an option for a huge demographic of corporate and government cardholders.
Credit cards are good for merchants too.
Understandably, the ability to process an ample variety of credit cards including corporate cards and government cards often leads to preferred vendor status among customers and provides further merchant legitimacy. However, B2B and G2B credit card acceptance provides benefits far beyond just merchant prestige, in the form of workflow efficiency and tangible financial gains.
The same RPMG study also found that accepting B2B or G2B card payment on a $2500 purchase saves merchant’s an average of $70 per transaction. Furthermore, integrating credit card processing activities into accounting systems facilitates recurring payments and makes debt collection far more successful. Merchants often assume that processing B2B and G2B is a complicated process involving infinite regulations, not realizing that a reputable credit card processor can handle all technicalities, absorb financial liabilities and regulations, and streamline the entire transaction process.
We take checks… always have, always will.
Still many merchants argue that checks provide an adequate payment option for most business purchases. For some long established merchants collecting payments is defined by the familiar adage of “If it ain’t broke-don’t fix.”On a logistical level, postal mail has always existed and provided fairly reliable check delivery. Unfortunately, there are far too many occurrences when a check in the mail is just too long of a solution to finalize a business transaction.
Printed checks also bring increased risk to businesses. According to the Association for Financial Professionals, 60% of organizations were exposed to fraud during 2013 with checks accounting for 82% of those instances. For merchants, credit cards do not require for a payment to clear as with checks and provide much faster merchant payouts- usually between one and three days. The risk of bounced checks, stopped payments and incorrectly filled out checks are also eliminated.
“Author Robert Cialdini, a leading expert on customer persuasion, documented that just the visibility of Visa and MasterCard logos within a place of business increased sales as much as 29%.”
Am I getting the most out of my current B2B and G2B processing?
For merchants that are already accepting corporate cards and government purchase cards, a periodic review of processing costs and overall B2B and G2B efficiency is a good idea. Surprisingly a large number of businesses are currently processing these cards inaccurately at higher rates, which leads to thousands of dollars in lost revenue annually.
Merchants also often don’t realize that optimal B2B and G2B processing requires tools and technologies that enable efficient processing of such transactions. An experienced and reputable merchant services provider can provide guidance on how to set up payment processing for successful acceptance of corporate and government cards.