Singe Breaks Down Payment Types
There are many different payment types in the B2B transaction world. Depending on the relationship between the buyer and supplier, how often payment is needed in the relationship, and most importantly what is the best option for each party, can make some payment options better than others.
Virtual Card
A virtual card for businesses is a digital payment solution that offers flexibility, security, and convenience in managing financial transactions. Unlike traditional physical cards, virtual cards exist only in electronic form and are securely emailed to suppliers.
Virtual card payments generate a 16 digit single use card for every payment, and are only allotted for the specific cost of the service/product. If the card is not used within the agreed upon number of days, it will expire, adding an additional security measure to reduce the risk of unauthorized transactions or data breaches. Additionally, virtual cards often come with customizable spending limits and detailed transaction tracking, providing businesses with greater control over their expenses, reconciliation and ensuring compliance with budgetary constraints.
New to digital payments? Go to the 7 Step-By-Step Breakdown to get down the details.
While virtual card payments are secure and convenient, they can also generate additional revenue for businesses. With every transaction paid through virtual cards, a cash rebate will be generated based on a percentage of the total dollar amount paid at the end of each month.
Virtual cards can be issued instantly, enabling businesses to respond quickly to payment needs, whether it's making urgent purchases or managing recurring expenses. The seamless integration of virtual cards into the digital landscape aligns with the modern business environment, where efficiency, speed, and security are paramount considerations in financial transactions.
ACH
Automated Clearing House (ACH) is a digital bank to bank transfer through an electronic network. ACH transactions are commonly used for various types of electronic fund transfers, such as direct deposits, payroll payments, supplier payments, and bills. Unlike traditional paper checks, ACH transactions are processed electronically, providing a more efficient and cost-effective method for moving money between accounts.
To initiate an ACH transaction, the buyer that owes money will submit an electronic payment request through the ACH network, typically done with the bank holding the account. The request will contain bank account numbers of the buyer and supplier, the transaction amount, and type of payment (credit or debit). But this payment type has its own pros and cons as most banks will charge the buyers a fee for each ACH per transaction, and/or a flat fee for a batch of ACH payments. Additionally, there are no chargeback protections when it comes to ACH payments. They can be difficult to work a return and with that, making reconciliations difficult.
So while ACH transactions offer a streamlined and cost-effective method for electronic fund transfers, it's important to be aware of associated fees and the absence of chargeback protections, factors that may impact the overall convenience and security of this digital banking process.
Check
The most well known payment type is a check, known best for its long standing job as being the primary payment method up until the 2000s. Checks stand in place for cash payments and are written instructions to the bank on where the money owed should be transferred from.
On every check the routing number, name, and account will be featured for whomever comes in contact with the check, which is how the bank knows where to transfer from, but can also expose sensitive information that businesses do not wish to be public.
Since a check is a stand in replacement for cash, it still needs to be in hand for depositing. This can slow the payment process down since it has to be mailed to reach the supplier’s AR. Plus, anything involving mail is slow and unreliable, there’s a reason it’s called snail mail! While security, reliability, and speed can be questionable at times with checks, businesses still use them because it is a tried and true method (some historians believe a check-like payment method has been around since ancient Roman times!). Although, as times become more digital, newer generations see less value in this payment type, with nearly half of (adult) Generation Z have never written a check.
Integrated Payables
Seeing all the options available for payments does not mean a business can only use one. Actually, quite the opposite is recommended by those running successful businesses. Instead of one payment method, choose to use the integrated payables approach! This means any and all payment types are chosen by your business, and it depends on your individual needs for which to leverage and when.
Have all payment types in one place with an integrated payables solution. This creates the best way to pay with increased efficiency and less errors moving in between different platforms.
Payments are Unique to Each Business
The B2B transaction landscape offers various payment types, each with its own advantages and considerations.
Traditional checks, though time-tested, face challenges in terms of security, reliability, and speed, especially in a digital era where newer generations prefer more streamlined methods. ACH transactions provide efficiency and cost-effectiveness in electronic fund transfers, yet businesses need to be mindful of associated fees and the absence of chargeback protections. On the other hand, virtual cards emerge as a modern and secure digital payment solution, offering flexibility, speed, robust security measures, and potential revenue through rebates.
The choice of payment method ultimately depends on the nature of the business relationship, frequency of transactions, and the preferences of the involved parties. Whatever you chose, make sure your business stays personal, with Singe Payables.
Enjoy a free supplier analysis to see how many of your suppliers are currently accepting virtual card payments today. Schedule a meeting and tell them Singe's Industry Insights sent you – then enjoy a free analysis and start making money from your payments!
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