While business to consumer transactions and vice versa are relatively smaller and hassle free, business to business payments require substantially more efforts and a higher degree of management from those in-charge. In order to make transaction and their related processes more streamlined, businesses have to incorporate state of the art procedures and techniques to help cut their overall costs and other operational hindrances. This blog discusses some of the risks associated with the current system of B2B payments and what can be done to fix them.
Payments times and overall costs
It is a common assumption amongst businesses that an on-time payment is good enough. What most businesses fail to realize is that usually these payments are made through checks, which take days to cash and finally transfer to their account. All through this time there are additional costs incurred in operations and other departments. Having the other party pay through a channel that offers fast processing time or even getting them to make payments before the scheduled date can help businesses save a variety of extra overhead costs and make their operations more productive.
Paper based transactions
When it comes to B2B payments, organizations tend to rely on paper based processes which makes the entire process disorganized, unreliable and time consuming. The use of paper-based credit applications can also serve as a breach of certain compliance regulations in a variety of sectors. These are issues that have to be investigated before relying on financial transactions in cash or managing them through paper-based agreements.
Additional costs from in-house payments departments
In the modern day and age most companies have outsourced payments collection processes to automated systems or other trusted professionals that can electronically collect payments and deliver them to their clients. Others, however, still believe that this is risky and prefer to keep the department of payment collection in-house. This means that they have to handle a lot of dealings and negotiations as well as payment processing operations through their own staff.
While this might put the management at ease by ensuring that there payments come through their own hands, it can add a substantial chunk to the overall expenses of the company, causing profit rates to fall. There are a number of trusted institutions like banks or online payment management systems that can help businesses streamline payment collection while avoiding any monumental costs.
Another major risk with B2B payments, especially with companies that tend to perform them in-house, is that a number of representatives are constantly in touch with the other party in order to retrieve the payments. This erases any proper chain of command and standard operating procedures. As a result, not only the vendor, but the business itself suffers from mismanagement. This is because there are a variety of instructions and information that different individuals hold and are conveying to the other party, making the process shrouded in mystery to those who need the information.
One of the most viable solutions that cater to almost all these risks simultaneously is the use of online payment processing solutions. These eliminate the risk of paper backed processes, defray additional overhead costs from using internal representatives and specialized departments and also mitigate the hassle of many communication points. Additionally, these solutions don’t compromise the reliability of receiving payments on time because they are backed by reputed financial organizations.