B2B payment processing can be complex, with high-volume transactions and longer payment cycles.
Businesses are increasingly turning to modern technology to streamline the process with the global B2B payments market expected to reach $174.38 trillion by 2030.
Construction companies are among those adopting digital technology, with contracts signed online and payments made through apps instead of with cash and paper checks.
However, with increasing digitization comes a growing cybersecurity risk. So, how can you keep your B2B payment processing secure? That’s what we’re about to find out.
What is B2B payment processing?
B2B (or business-to-business) payment processing is the act of handling financial transactions between two companies. This includes sending and receiving payments, as well as managing invoices and reconciling accounts.
After the goods or services are provided, the seller generates an invoice to request payment and sends it to the buyer. The buyer’s accounts payable (AP) department reviews and approves the invoice, selects a payment method, and makes the payment. The seller’s accounts receivable (AR) department receives and verifies it and then reconciles it with the original invoice.
Smooth and secure payment processing is vital for the financial health of your organization and building strong relationships with customers and partners. But in comparison with B2C (business-to-consumer) transactions, B2B payment processing is a more complex affair.
B2B payment types
Let’s take a quick look at some of the payment methods typically used for B2B transactions.
- Credit cards: Credit means that your clients always have access to funds, meaning that you get paid faster. But if a credit card saved in your system expires, you won’t be able to take payment immediately—which causes problems with cash flow.
- ACH (Automated Clearing House): This electronic bank-to-bank method is a secure way of sending and tracking money, as each payment has a routing number. However, it only works in the US and its territories. You’ll likely have to pay a premium for same-day transactions.
- Wire transfer: These transactions happen in real time, so the money’s actually in your bank account in seconds. You can automate transfers for regular payments. The snag is that the payer has to manually enter the bank details, so there’s potential for error.
- Cash: You know where you are with cash, and there’s no need for bank accounts or an Internet connection. But it’s difficult to track and risky to store onsite—and customers may think you’re trying to avoid paying tax.
- Paper checks: Some traditional organizations still use these. They’re tangible, with an obvious paper trail. But checks can be stolen or counterfeited, and payers can write them despite having insufficient funds. Plus, you have the inconvenience of handling them.
- Digital platforms and gateways: Online payment platforms are secure, and efficient, and they let your business accept various payment options. They can also help you with invoicing and accounting, providing digital receipts and instant payment notifications.
The importance of security in B2B payments
Because B2B payment processing comes with additional complexity, you have to pay extra attention to security. B2B companies tend to experience a high volume of transactions from multiple customers, making it harder to keep track of everything.
Those payments are typically high in value, with longer payment terms than you’d see in B2C transactions. B2B businesses rely on repeat customers, which probably means you’re saving their payment details in your system for convenience.
Many B2B companies offer various pricing models, including discounts for bulk orders. They also offer multiple payment methods. B2B transactions often involve complex contracts requiring several layers of approval for payment—with sensitive financial data passing through many pairs of hands.
With a large customer base, you’re dealing with payments via multiple banks and financial institutions. Global B2B enterprises have to process international payments, factoring in currency conversions and compliance with regulations.
All of this means more opportunities for payment fraud, such as identity theft and breaches of financial information. According to a 2023 study, the construction industry is the most targeted sector for cybersecurity incidents.
There are serious consequences, from financial losses to legal action and reputational damage. By securing your B2B payment processing, you’re keeping confidential data safe and showing clients and suppliers that you’re reliable and professional.
5 best practices to secure your B2B payment processing
Top-notch security is paramount in B2B payment processing—so let’s take a look at how to achieve it.
1. Evaluate your current state
The first step is to evaluate your current payment processing operations and identify any problems that need addressing. For instance, are you finding it hard to keep track of payments? Are you experiencing delays in getting paid? Do you have the latest security protocols in place?
Set clear objectives and a plan for improvement. You could consider modeling your business capabilities to find gaps or weaknesses in your processes that might compromise security. (Wondering what is a business capability? Click the link to find out.)
2. Centralize your financial data
One of the best ways to prevent fraud is to keep a close eye on your B2B financial transactions—and you can only do that if they’re all in one place. As well as helping you manage payments and reconciliations and track your cash flow, a centralized system gives you complete visibility.
When you have a single view of all activity, you can quickly identify anything that doesn’t look right, such as unusually large transactions or suspicious invoices, and flag them for further investigation. With real-time data, you can run an analysis to identify trends that might signal potential fraud.
You can also avoid making unauthorized payments by implementing checks and balances; for instance, you should only approve outgoing payments once you’ve checked that work has been completed or goods have been received.
BONUS TIP: Make sure you keep a careful record of all transactions and any related documentation, such as contracts, change orders, lien waivers, and receipts. This is super helpful for audit readiness, tracking business performance, and planning future budgets.
3. Adopt a digital platform for payments
Digital platforms for B2B payment processing are more secure than many other methods, with built-in security protocols and a digital “paper” trail of transactions. Of course, you’ll need to choose a trusted service provider and discuss your exact requirements with them.
These tools also let you accept a variety of payment methods and currencies for the convenience of your clients, which can even help to overcome objections in sales. By making it easy for people to pay you, you’ll speed up your payment cycle. Plus, you can integrate the tools with your accounting or ERP software for reconciliation and financial reporting.
Digital payment portals often come with automated tools for extra speed and convenience. For instance, they’ll automatically generate electronic invoices (with no risk of paper copies being lost or intercepted), track them, and match them with transactions.
As well as saving time, automation reduces the risk of manual errors and inaccuracies in your payment processes, which could lead to security risks. It lets you handle an increasing volume of transactions without compromising efficiency or security.
BONUS TIP: It’s worth having backup payment options in place in case there’s a technical glitch or the client’s preferred payment method is denied due to something like an expired credit card. It’s in your interest to help them pay smoothly, and it’ll help you to build strong relationships.
4. Use advanced security protocols
If you’re going to process payments online, you’ll need to put robust security measures in place. Think firewalls and intrusion detection systems to monitor and block suspicious network activity, plus regular backups with data stored in multiple locations.
Authentication protocols guard against unauthorized access to your system. For example, multi-factor authentication (MFA) requires more than one form of identification, such as the user’s own login details plus a fingerprint or code sent to their phone. This makes life harder for scammers.
You should enforce complex passwords with a mix of uppercase and lowercase letters, numbers, and special symbols. Implement data access controls for sensitive information, with permissions based on user roles. That way, full access is only granted to those who really need to see the information.
It’s crucial to train all employees on how to avoid and recognize security threats, such as phishing emails or fake invoices. If your staff is going to access the payment processing system outside the office (such as from a construction site), you can secure their devices with a VPN (Virtual Private Network) to protect data transmitted over the internet.
BONUS TIP: If stakeholders from outside your organization are sharing financial data, you’ll need to work with them to ensure that it’s kept secure. For example, construction projects often comprise multiple stakeholders in the supply chain—and a security breach for one affects you all.
5. Stay up-to-date
It’s important to keep updated about payment compliance and security, as well as be aware of recent cyberattacks. For example, you should know about the Payment Card Industry Data Security Standard (PCI DSS), anti-money laundering (AML) regulations, and know-your-customer (KYC) protocols.
It’s also worth keeping yourself informed about new technology that can enhance your security (and streamline your payment processes). Alongside AI, blockchain technology can help to keep B2B payments secure and transparent, and it also offers smart contract capabilities.
If you’re investing in new tech, consider implementing strategic enterprise architecture, which ties business objectives to your IT infrastructure. This provides a framework for modernizing systems, standardizing processes, and implementing security and compliance measures.
Final thoughts
Due to the complexities of B2B payment processing, it can be harder to ensure robust security. But by centralizing your data and using online payment platforms, you can keep a close eye on all transactions and streamline your processes.
Conduct regular security audits to identify and address vulnerabilities and update your payment processes accordingly. It’s easier if you choose technology with advanced security protocols built in.