B2B suppliers have traditionally restricted or discouraged card acceptance in favor of alternative methods that offer lower upfront costs. However, the total economic value that can be unlocked through card acceptance can significantly outweigh these costs. To do so, suppliers must know how to leverage the power and ease of card payments in their favor.

Understanding B2B payments: payment terms, Days Sales Outstanding, and aged debt

B2B payments are highly complex, and there are a number of important points to consider to understand suppliers’ historical reluctance to accept cards.

First are the terms a supplier offers to a buyer who purchases their product. Typically, suppliers offer terms at Net 30, 60, or 90 days. At this point in the transaction process, suppliers are using their own money to finance the buyer’s payment, which can quickly grow costly for the supplier. As a result, some suppliers may offer a net 10 days with a 2% discount to encourage faster payment.

Second, buyers often exceed their set terms and default to an average Days Sales Outstanding (DSO) as the days they actually pay their invoice. For the terms identified above, the average DSOs are 45, 75, and 110 days.

The third issue is that B2B card acceptance has traditionally been sold to suppliers based on price and not value. This outdated approach has left many suppliers without a clear understanding of how credit can actually work to their advantage and become more than just another line-item cost.

Fourth, many B2B suppliers have gravitated to accepting card post-term at the DSO, relying on the convenience and credit to help facilitate payments and close out transactions. This has a two-fold effect for the B2B supplier. The first is, they have already financed the receivable to the DSO. The second is, they then accept a card as payment, which further adds to their costs.

Taken altogether, these factors have resulted in limited acceptance within the B2B payments space. Selective acceptance and defaulting to card acceptance only after trying other methods, particularly in instances of aged debt, have only added to the common perception that cards are the most expensive method of payment suppliers can use to collect on invoices.

Using cards to accelerate payments

The value of B2B card acceptance is closely linked to how and when a supplier accepts cards for payment and how much it costs them to finance their receivables. For many suppliers, gaining a clearer picture of the true costs (including the impact of the time factor of money) for all their payment methods can help them better understand the opportunity that card acceptance presents.

The mission of the Visa B2B Acceptance team is to communicate the value of card payments on both sides of the payment transaction. Visa does this through a unique, holistic approach which helps increase transparency and build strong, sustainable business relationships. By striking a balance between buyers and suppliers, Visa helps cardholders pay with their preferred method, and strives to make cards the preferred method of receiving payments for more suppliers.

Download our latest case studies to learn how Visa has supported B2B suppliers to materialize the value of commercial cards as one of the best ways to pay and be paid.