The Economics of Digital Payments

When did you last write a check or wait for a wire transfer to clear? If you’re like most foodservice businesses, it’s probably been more recent than you’d like. While consumer payments have gone almost entirely digital, the back-of-the-house world is still catching up. Yet the shift toward digital payments in foodservice B2B transactions is gaining momentum, and for good reason: they’re efficient, secure, and cost-effective.

Let’s dive into the economics of digital payments in the B2B space and explore why they’re no longer just a "nice-to-have" but a must-have in today’s business landscape.

Digital Payments Cut Operational Costs

Handling traditional payment methods like checks isn’t free. Consider the costs of processing paper invoices, reconciling accounts, and managing late payments. In the foodservice industry, with its tight margins, these inefficiencies can be costly. By transitioning to digital payments, businesses can significantly reduce these overheads.

Take distributors, for example. Processing checks involves administrative tasks like manual data entry, mailing, and follow-ups for delayed payments. Digital payments, on the other hand, often integrate seamlessly with accounting and ERP systems, automating many of these tasks and reducing errors. Automating means your staff save time too; one click replaces a multi-stage workflow.?

“Payment reminders are so much easier than downloading an invoice, attaching it to an email and hitting send. You click ‘payment reminder,’ and you're done.” - Samantha Evans, Billing and Collections Manager, Golden Gate Meat Company

Manufacturers also benefit from streamlined payment processes. Digital payment platforms can provide real-time tracking and automated reminders, ensuring invoices are paid on time. Fewer delays in payments mean smoother cash flow and better planning for production schedules.

Speed = Savings

Time is money, and nowhere is this truer than in foodservice. Traditional payment methods like checks can take days—even weeks—to clear, delaying cash flow. Digital payments, on the other hand, often settle within hours or, at most, a day or two. Some studies have shown that businesses that automated AR for more than half of their processes saw their DSO reduce by 32%, equal to 19 days.?

For distributors, faster payments mean fewer disruptions in the supply chain. Delayed payments can lead to postponed deliveries, straining relationships with both suppliers and customers. Similarly, manufacturers rely on prompt payments to fund raw material purchases and meet production deadlines.

The speed of digital payments also facilitates smoother operations for restaurants, especially when working with multiple distributors. Quick, reliable payments help ensure that inventory remains stocked and that operations can run without hiccups.

Unlocking New Opportunities

Digital payments aren’t just about cutting costs—they’re also about creating opportunities. With digital systems, businesses can adopt payment options like recurring billing, early payment discounts, or even dynamic pricing based on payment speed. These options make stronger relationships between manufacturers, distributors, and restaurants.

For instance, distributors can offer early payment discounts to restaurants, incentivizing timely transactions while improving their own cash flow. Manufacturers can implement subscription models for consumables or spare parts, ensuring steady revenue streams and simplifying budgeting for their clients.

Moreover, digital payment data opens up a treasure trove of insights. Businesses can analyze transaction data to identify purchasing patterns, optimize payment terms, and better tailor their offerings to customer needs. Insights like these turn transactional relationships into strategic partnerships.

Barriers to Adoption—And How to Overcome Them

Despite the clear advantages, some businesses are hesitant to adopt digital payments. Common concerns include upfront costs, integration challenges, and resistance from partners accustomed to traditional methods.

The good news? These barriers are shrinking. Many digital payment providers now offer affordable, scalable solutions tailored to businesses of all sizes. Integration with existing systems is becoming easier thanks to APIs and cloud-based platforms. And as more B2B partners embrace digital payments, the pressure to modernize will only grow.

For manufacturers and distributors, adopting digital payments can improve relationships across the supply chain. Faster, more transparent payments signal reliability and build trust. Restaurants, too, can benefit by ensuring timely payments to suppliers, maintaining a steady flow of essential goods.

The Security Advantage

Let’s address a common concern: security. While traditional payment methods like checks might feel secure, they’re vulnerable to fraud, theft, and loss. Digital payments, on the other hand, come with robust security measures.

Modern payment platforms use encryption, tokenization, and multi-factor authentication to protect transactions. These layers of security make it much harder for unauthorized parties to access sensitive information. For B2B transactions, where payment amounts are often larger, this level of security is essential.

Additionally, digital payment systems often include compliance features that help businesses meet regulatory requirements. Automated tax reporting and audit trails reduce the risk of errors and potential penalties, giving businesses a peace of mind.

The Future Is Digital—Are You Ready?

The economics of digital payments extend far beyond the transactional level. By embracing these systems, manufacturers, distributors, and restaurants can save money, increase efficiency, and unlock new growth opportunities. The shift to digital payments isn’t just a trend; it’s a transformation reshaping how the back-of-the-house in foodservice operate and succeed.

So, what’s stopping you from making the leap? The time to adapt is now, and the rewards are too significant to ignore. Whether it’s faster cash flow, reduced operational costs, or stronger supply chain relationships, digital payments are the key to staying competitive in an ever-evolving industry. Are you ready to make the switch??