Payment Acceptance | B2B Finance Glossary

What is Payment Acceptance?

Payment acceptance – also known as authorization rate – is the percentage of payments that go through compared to the total number of attempted payments. This metric is often used by eCommerce businesses and marketplaces, but it’s also a critical metric for SaaS companies.

How Can the SaaS Business Model Have a Negative Impact on Payment Acceptance?

Different elements of SaaS business models can have a very negative impact on payment acceptance rates. This is a result of the fact that many SaaS processes are not properly optimized or managed, especially when it comes to how effective businesses are at collecting recurring revenue, how much of the business relies on online purchases, and whether or not the business is set up to take international payments.

• Recurring revenue. Suppose your business is ready to accept recurring payments. In that case, it’s essential to ensure proper customer retention efforts and that customers have no issue making recurring payments. Otherwise, you might find your churn rate and revenue going down.
• International payments. While SaaS products can be easily accessible in countries worldwide, you need to ensure that your company is set up to take international payments and is compliant with any laws pertaining to these types of payments. If this doesn’t happen, your company will miss out on an important income stream.
• Online transactions. Online payments are much more likely to fail than in-person payments. Today, most companies rely on online payments to meet their revenue goals, so it’s important to ensure that you offer customers more than one online payment option in case their primary payment option (i.e., their credit card) does not go through.

How is Payment Acceptance Calculated?

Low payment acceptance indicates a loss of revenue, so it’s important to properly calculate payment acceptance and use this metric to indicate how well your business is doing in bringing in cash. Remember: a low payment acceptance rate means money is being left on the table.

Payment acceptance is calculated by using the following formula:

Total Number of Successful Payments / Total Number of Attempted Payments

 

Why is it Important to Keep Track of Your Payment Acceptance Rate?

Remember, a low payment acceptance rate is tied to lost revenue. More specifically, if your company has a low payment acceptance rate, it’s primarily losing money from 2 main sources: existing customers who are trying to use or even increase the use of your products or services and new customers who are trying to purchase your product or service but are unable to because their attempted payments are not working.

By analyzing both groups that are making attempted payments, you can more easily discover the root cause behind why these attempted payments are failing, and you can make any adjustments on your company’s end so that more attempted payments become successful.

How to Improve Your Payment Acceptance Rate

Different businesses will need to implement solutions to solve their payment acceptance rates on a case-by-case basis; however, it’s important to explore different options to see what will be best for you and your company.

It’s a good idea to explore different payment options that can be added to your website so that customers have different options if their initial payment choice fails to go through. You can consider offering PayPal or wire transfer options since consumers often have issues with online credit card payments due to insufficient funds or their banks holding the payment in an attempt to prevent fraud.

You can also make your customer service information clear on the payment page so that customers can reach out if there’s a problem, and even provide a digital chat option to connect your customers quickly to a customer service representative. You can also remind existing customers to ensure that their payment details are up to date so that their credit card payments do not fail if the card they use is expired.

Finally, you can also consider switching to a digital payment alternative that allows your customers to make direct-bank payments and allows your business to break up with online credit card transactions for good.

The Paystand Bank Network makes it possible to digitize your B2B payments process fully, seamlessly transitions your existing customers to a next-gen payments solution, and ensures that you improve your payment acceptance rate. On top of that, Paystand also automates essential AR processes that can greatly reduce your DSO and free your finance team from spending so much time on manual labor. You can schedule a demo here if you want to speak with one of our payment experts.