The B2B payments glossary

Hokodo

A

ACH – An automated clearing house (ACH) is an electronic network for processing transactions between financial institutions. Not to be confused with the Automated Clearing House network in the United States.

Accounts payable (AP) – Accounts payable is the money owed by a business to its suppliers. It is a short-term debt payment occurring when a business has purchased goods or services on credit terms. The company owing payment is known as a debtor.

Accounts receivable (AR) – Accounts receivable is the money owed to a supplier by its customers. The company owed payment is known as a creditor.

Acceptance rate – The percentage of customers who are eligible for payment terms.

API – An Application Programming Interface (API) is a machine-friendly way to interact with a computer system, often over the internet or a network. Think of it as two computers talking to one another.

Average order value (AOV) – The average value of all transactions of a given seller, marketplace or other commerce platform.

B

B2B Buy Now, Pay Later (B2B BNPL) – B2B BNPL is a financing solution allowing businesses to purchase goods or services and then pay for them after an agreed period of time (e.g. 30, 60 or 90 days). 

B2B payments – Transactions processed between a supplier and buyer in exchange for goods or services delivered.

C

Cart abandonment – When a potential customer shows intent by filling their online basket with goods or services and beginning the checkout process of an order, but doesn’t complete the purchase.

Cash flow – A measure of the total amount of money a business has coming in or going out over a period of time.

Chargeback – The return of funds to a payer of a transaction (often a credit card transaction). This happens when a customer disputes a purchase directly with their bank.

Clawback – The act of retrieving money that has already been paid out.

Collections – Collections is the process of pursuing payments that are owed to a creditor. See also: dunning.

Conversion rate – The percentage of buyers who have completed a desired action, such as making a purchase.

Credit insurance – Insurance for businesses wishing to protect their accounts receivable from loss due to credit risks such as protracted default, insolvency or bankruptcy.

Credit limit – The maximum amount of credit available to a given business.

Credit scoring – The act of analysing data to determine a score that represents the creditworthiness of a business. Repayment history, debt levels and various other factors are taken into account.

Credit terms – The number of days, weeks or months (i.e., the term) given to a business buyer to settle their account. See also: payment terms and trade credit.

Creditor – A business to whom money is owed.

Creditworthiness – The extent to which a business is considered suitable for the receipt of credit, based on their credit score.

Cross-border payment – A transaction involving a buyer and seller who are based in different countries.

D

Day sales outstanding (DSO) – The average number of days that it takes a company to collect payment.

Debtor – A business that owes money to another business.

Deferred payment – When a buyer chooses to pay for their purchase at a later date.

Dispute – When a customer questions the validity of a transaction, either because it was unauthorised or due to an issue with the order such as non-delivery or faulty goods.

Dunning –  The process of communicating with customers to ensure the collection of debt. Communications may include emails, postal letters and telephone calls. See also: collections.

E

Electronic funds transfer (EFT) – The digital movement of funds from one bank account to another.

Electronic money institute (EMI) – An entity authorised to issue e-money in accordance with the European Communities (Electronic Money) Regulations 2011.

Embedded finance – The integration of financial services directly into the products, processes or platform of a non-financial business.

Want to learn more about how embedded finance can help B2B businesses accelerate revenue growth? Watch a replay of our recent webinar.

Embedded lending – A type of embedded finance whereby buyers are offered financing products at the point of need.

Embedded payments – A type of embedded finance where buyers are offered convenient payment options from third party providers without leaving the platform they’re on. Think Paypal or Apple Pay.

Enterprise resource planning (ERP) software – A type of software used to manage the day-to-day activities of a business such as accounting, procurement, risk and compliance, project management and supply chain operations.

F

Financing – The act of providing funding to a business.

Fraud – In the context of B2B payments, fraud is the act of an individual or group of individuals attempting to access credit and buy goods or services without the intention to pay for them.

G

Gross merchandise value (GMV) – GMV is a term used to indicate the total monetary value of merchandise sold through an online marketplace over a certain period.

H

Headless commerce – A separation of the front end and back end of an ecommerce application that enables greater customisation and creativity.

I

ID theft – When a fraudster attempts to use the identity of a real business or employee in order to gain access to credit terms.

Insolvency – When a business can no longer fulfil its financial obligations to lenders and suppliers.

International Bank Account Number (IBAN) – A standard numbering system developed to identify an overseas bank account.

Invoice – A document relating to a transaction that indicates the products, quantities, and prices for products or services. An invoice is issued by a seller to a buyer, and usually states the payment terms.

Invoice factoring – When a third party, such as a bank or financial service provider, will quickly pay you the invoice amount up front, and collect it from the buyer when the payment terms expire.

M

Marketplace – An online e-commerce platform connecting multiple sellers and buyers.

Merchant – A seller providing goods to buyers.

Merchant of record (MoR) – A merchant of record is the legal entity selling goods or services to an end customer.

N

Non-payment – Failure of a buyer to pay money that is owed to a seller for a past purchase.

O

Offer rate – The percentage of buyers who are offered trade credit.

Omnichannel sales – The act of selling goods or services across multiple channels such as via a website, telesales, a mobile app and a brick and mortar store.

Order to cash cycle – The journey from when a buyer places an order through to receipt of payment to the seller.

P

Payment methods – The ways in which a seller can accept payment for an order. This could include credit card, debit card, bank transfer and buy now, pay later, among others.

Payment service provider (PSP) – A third party provider that helps a supplier to accept electronic payments. PSPs are intermediaries between those who make payments and those who accept them.

Payment terms – Payment terms are an agreement between buyer and seller that specify the payment schedule of a purchase. See also: credit terms and trade credit.

Purchase order – A document issued by a buyer to a seller outlining types, quantities, and agreed prices for products or services.

R

Real-time underwriting – A technology powered type of underwriting that enables merchants to make instant credit decisions.

Refund – Repayment to a buyer, usually because they were unsatisfied with their purchase.

 

S

Share of wallet (SoW) – Share of wallet represents the amount of money that a consumer spends with a particular supplier.

T

Trade Credit – A type of B2B financing that enables businesses to place and receive an order for goods or services, while deferring payment for an agreed period of time, usually 30, 60 or 90 days.

U

Underwriting – The process of examining and accepting or rejecting insurance risks.

User experience (UX) – The overall experience of using a website or other online platform, especially relating to ease of use and aesthetics,

W

White label – When a product or service produced by one company is rebranded to appear as if another company had made it.

Working capital – A measure of a company's liquidity and short-term financial health, calculated by subtracting current liabilities from current assets. Put simply, it’s the capital available for use in day-to-day operations.

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