Credit cards are being employed in more and more business-to-business (B2B) transactions. From the seller's point of view, that can mean a lot of money walking out the door in credit-card fees.

A recently released report from REL Consulting shows the use of credit cards in B2B has increased dramatically. According to REL, the information it gathers on large companies shows credit card use almost doubled between 2012 and 2013, to represent 9% of all B2B payments. REL estimates B2B sellers in the U.S. now incur an average of $2.2 million in credit card processing fees per $1 billion of revenue.

“It's almost a hidden cost that a lot of organizations haven't really noticed,” said Veronica Wills, a director at REL and leader of its customer-to-cash practice. “The reason it goes unnoticed [is] a lot of organizations look at the profit for a particular product or service as being the direct cost versus what they sell it for, and the direct cost isn't going to include the cost of the payment.”

The pickup in the use of credit cards was triggered by the recession and companies' efforts to manage their cash flow. Wills also cited the rebates that card companies offer as they try to build the use of cards in the commercial marketplace.

“Buyers these days are trying to encourage more use of cards, and for higher-ticket items, because the banks that issue the cards are sharing their revenue with buyers through something they call rebates,” said Nancy Atkinson, a senior analyst at Aite Group . “Basically they're buying the business of the buyer by sharing some of that interchange [fee] they get from the sellers. In some cases, purchasing departments go from being cost centers to profit centers.”

Atkinson said accepting card payments can make sense for sellers as well, if it allows them to receive the payment earlier.

But the REL report cites credit card fees ranging from 2% to 3.5%. Such fees can mount, particularly if the transaction involves a big-ticket item.

Lyle Wallis, a vice president at the Credit Research Foundation, said that while credit card use has picked up, he is not seeing companies accept cards for big-ticket items.

Wallis argued that fees associated with credit cards are offset to some extent by the savings companies realize by avoiding having to process paper checks. “There are definitely costs associated with that because there are a lot of manual processes—you've got to process the checks, you've got to key in the information,” Wallis said. “A lot of that is done automatically with credit-card payments.”

Credit Cards and Payment Terms

Many companies don't have rules about whether they should or shouldn't accept credit cards, REL's Wills said. “They don't put the policies and procedures around it to ensure that there's a really good trade-off.”

One key point is how a company's rules about accepting credit card payments interact with payment terms. If a company extends payment terms to its customers, for example giving them 30 days to pay for the purchase, and it also allows the use of credit cards, it is incurring not only the credit card fee, but its cost for that money it is owed over the 30 days, said Wills, pictured at left.

The REL report outlines several ways companies can try to balance the cost of using credit cards with other business considerations.

One approach is to give customers a choice between payment terms and the use of a credit card. “They can say to their customers, 'We'll allow you to pay by credit card, but we're taking away your payment terms,'” Wills said. “That tends to be most popular because they feel they're not alienating the customer as much.”

In the wake of a 2013 settlement in an antitrust case brought by retailers against the credit card companies, sellers are free to impose a surcharge on customers that pay them with credit cards. Wills said none of the companies she works with are currently using surcharges, and she linked that to the fact that some states have laws forbidding surcharges. “If they're selling in multiple states, it's difficult for companies to understand how to apply that [surcharge] in certain states and not others,” she said.

But a survey on the use of credit cards in B2B transactions conducted by the Credit Research Foundation and the Federal Reserve found that 13% of companies claim to assess a surcharge if customers pay with a credit card, according to a report the foundation released earlier this year.

Wallis cautioned that he's not a lawyer, but said that one way companies deal with the differences in state laws is to note in the sales contract that the transaction is subject to the laws of one of the states that allows surcharges.

The survey also looked at whether companies limit credit-card use to payment at the time of delivery, or allow customers to use credit cards in tandem with sales terms like net 30 days. Fifty-four percent of companies said they accepted credit cards for all terms of sales.

REL's Wills prefers an approach that distinguishes between different segments of customers. For some customers, a company might not allow credit cards at all and might specify that prohibition in the sales contract. It can differentiate depending on the size of a customer's average transaction, saying no to card payments for organizations whose transactions are sizable, she said. Other considerations include whether the company is offering the customer credit terms and whether the customer is regarded as high risk.