In a world that’s spinning faster by the day, business owners and decision-makers are looking for ways to keep up. Especially when it comes to managing the lifeblood of their businesses: cash flow. For small to medium-sized businesses (SMBs), you’re all too familiar with the inevitable bottlenecks of traditional payment methods. Transaction delays can lead to cash flow hiccups, which can disrupt your entire operations. Thankfully, the future of fast, quick payments is here.
In this article, we’ll answer common questions about instant B2B payments, including:
- What are instant payments?
- How do instant payments get processed so quickly?
- How can small businesses improve their cash flow with instant payments?
What are instant payments?
Instant payment solutions are precisely what the name suggests: immediate funds transfer between two bank accounts. The Federal Reserve states that consumers and businesses can send and receive funds from their accounts at banks and credit unions in real-time, any time of day, any day of the year, with funds immediately available to receivers.
What’s more, it’s not just about speed. They hold a significant advantage over traditional payment methods such as ACH, credit cards, and checks. The same goes with same-day ACH, which doesn’t always process before the end of bank hours. When you send a payment, you’re left in the dark, wondering when it will be settled. Instant payments can help improve cash flow, minimize manual processes, enhance both customer and supplier experiences, and potentially be more robust in defense against fraud. In a 2023 AFP Payments Fraud and Control report, 65% of businesses surveyed were victims of payments fraud attacks in 2022.
On July 20, 2023, The Federal Reserve Bank launched its own instant payment network called the FedNow Service. 35 early-adopting banks, credit unions, and the U.S. Department of the Treasury’s Bureau of the Fiscal Service are active on the network and committed to working with more than 9,000 financial institutions. Alongside The RTP® (Real-Time Payment) Network from The Clearing House, these services are set to revolutionize how SMBs and accountants process payments with their instant, secure, and anytime payment capabilities.
Faster transactions mean improved cash flow, as funds can be accessed almost immediately. It reduces the time, money, and resources spent on manual processes, freeing up staff to focus on more strategic initiatives. Bank of America estimates that processing a single business check costs $4 to $20. Instant payments allow businesses to build better relationships with customers and suppliers by ensuring fast and ready-to-use capital.
How do instant payments get processed so quickly?
Well, it’s relatively simple. FedNow settles payments directly into central bank accounts. The process begins with payment initiation, where the payor initiates a payment through their banks or platforms like Forwardly. The system then authenticates the transaction, validating the parties involved and ensuring funds are available. Once it’s established the money is there, the funds are transferred and settled. The whole process is quick. Not quick as in “Same-Day ACH,” but quick as in “Same Minute.” For instance, the Clearing House’s RTP network requires the bank to confirm the settlement within 22 seconds or cancel the entire transaction.
How can small businesses improve their cash flow with instant payments?
For business owners having a payment process that keeps pace with their business operations is not just a luxury; it’s a necessity. According to The Clearing House, real-time payment volumes have increased by more than 10% per quarter for 16 straight quarters, dating back to 2018. On a global scale, instant payment volume is expected to exceed 235 billion by 2027.
Unlike traditional banking hours, instant payment systems are designed to be available round-the-clock, including weekends and holidays, 24/7/365. Unlike conventional payment methods like wire transfers, checks, ACH, or credit cards, there is no guessing game and waiting around; you’ll know if funds are deposited or canceled fast.
Initiating an instant payment through a bank requires manual reconciliation, which can be cumbersome for accountants and small businesses. However, innovative fintech solutions like Forwardly aim to simplify the payment process, offering real-time reporting and automatic reconciliation, making it seamless for SMBs.
Forwardly’s groundbreaking B2B real-time payment solution integrates seamlessly with QuickBooks Online and Xero; it was created with small business accountants in mind. Unlike other B2B apps with payment capabilities, Forwardly’s bank-agnostic transfers allow instant payment settlements and reconciliation within seconds, providing something unique to small businesses and accountants in the USA.
Ready to streamline your payment processes and improve cash flow management? Start thinking Forwardly and sign up today to experience the benefits of faster business payments for your small business or accounting clients.