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Business owners are a complicated bunch. While some small businesses employ over 50 people, many in the United States are sole proprietorships or general partnerships with only one to four people. As such, they have a unique issue when accepting bill payments as “The Business.” Rolling back to the stone age and accepting checks just to get paid is a pain when as a consumer, you can pull up an app like Zelle and see the money move instantly.  

Luckily for them, times are changing. Real-Time Gross Settlement (or RTGS) or Real-Time Payments (RTP) is a payment technology that works around the clock to process transactions instantaneously. First launched in the USA by The Clearing House in 2017, the RTP® network is not yet widely used by small businesses, although it did transfer over $174 m in 2022. As the Federal Reserve prepares the initial launch of the FedNow Service in July 2023, knowledge of real-time payments will grow and reshape how businesses in the United States receive funds, send funds, and improve the standing of their overall cash flow.   

While the USA stands out in many ways, it’s trailing behind other countries when introducing payment technology. For example, in the UK, they use the Faster Payments Service, a technology widely known as A2A, or account-to-account instant payments launched in 2008. In India, they have utilized the Unified Payment Interface (UPI) widely since it was introduced in 2016. In contrast, Japan introduced the first real-time payments system Zengin in 1973. In 2022, 73% of the world was planning to launch or had a real-time payment system in place already.

Don’t rely on aging tech: futureproof your business

Some payment methods, like checks, have been tried and true for several generations. Others, like ACH and credit cards, are newer but very well-established. However, whether you’re using checks, ACH, or credit cards to process transactions and make or receive your business payments, there are smarter ways to efficiently receive or send money online.  

Be on the cutting edge of payments

One of the best ways to improve the timeliness of your B2B payments is to leverage top-tier technology. In this case, that means leveraging the newest RTP solutions available. The USA’s first real-time payment network was launched in 2017, but with FedNow’s incoming release, RTP will continue to pick up steam with more instant payment options available to businesses.

Since the technology boom caused by the pandemic, businesses and customers now expect speed at all points of their transactions. Companies and individuals pay bills online, but so far, instant payment technology has only benefited consumers with apps like Venmo and Zelle. With the growth of RTP comes apps directed at giving small business owners and accountants the same experience they have when shopping or paying a bill as a consumer; instant payments for a fast-paced digital world.

Pay anytime: 24/7/365

“The check is in the mail,” “I couldn’t get there before the bank closed,” “I forgot, it’s a holiday today.” All are excuses that plague traditional payment options like checks, ACH, and credit cards. But real-time payment networks don’t run on bank hours; RTP is a solution available 24 hours a day, every day of the calendar year. There are no off days when it comes to instant payments. On the other hand, if it’s a weekend, a bank holiday, or after 5 p.m., that will slow down an ACH transfer from one to four days. With checks, you also need to consider the delays from the mail systems. If you put it in the mail after hours on a given day, you will need to add additional business days. When the time it takes you to get paid expands, so do your potential cash flow gaps.

While checks, ACH, and credit cards are popular, they take time. It’s common for ACH to take up to five days, with a check taking up to two weeks in some cases. Credit cards can also take several days to process. In comparison, instant business payments take only seconds to land in your account.

Reconcile transactions faster

A common hurdle arises with ACH process batches; it is common for multiple payments to be sent as one single unit. The same can be said for funds that come in. Reviewing batches rather than individual transactions can make it difficult to reconcile your recent payments to ensure that everything is accurate and that you’ve been paid in full. Instant payments, by comparison, are run individually. This makes it a breeze to check and reconcile transactional data. 

Some instant payment providers take this one step further and directly sync with your accounting or ERP software to automatically reconcile all received and paid transactions. This means users can spend more time on value-creating work than simply cross-examining spreadsheets. 

Stop giving money to the bank

We’ve all seen the dreaded, “If you’d like to pay by card, I can send you an updated invoice.”

When it comes to B2B transaction processing, prices vary significantly. Credit cards are the highest cost, with up to 4% in fees common for accepting business payments. In business, this cost is often passed along to the paying client because it can be fairly high depending on the transaction size. ACH payments are usually the cheapest, as many banks and services offer them for discounted or even free rates. However, if you want to send same-day ACH transfers (only available during banking hours), there is usually a premium charge. With instant payments, some banks offer it for free upon manual request, while other providers offer a limited capped cost of about 1% of the transaction.

While cost should always be considered as a factor, it shouldn’t be the only factor to consider. Choosing payment options that are less expensive but take longer to process transactions can significantly impact your business’s cash flow. Whether your clients take longer to pay, the mail service loses a check, or you spend precious work hours deciphering and reconciling ACH batches, everything should be considered when choosing a way to get paid.

Stop giving interest to digital wallets

While e-wallets like Venmo have grown in favor over the past few years and can offer time value to consumers, they aren’t perfect for businesses. For one, they’re a closed-loop system that requires pre-funding, almost acting as a bank account. That means the money in your wallet is earning interest for the wallet company, not your business. Signing up can also be complicated, requiring time-consuming onboarding for you and your clients.

Some companies have built real-time payment solutions that are bank agnostic. A non-bank payment provider may require you to sign up for an account to send payments with higher limits, but that is necessary for security purposes because the money transfers instantly from bank to bank. Once you initiate a payment, the receiver gets their money in seconds. Because of this, businesses can hold onto cash for longer to invest in the business and make payments on the last day.

Financial health matters too

No matter how well orders are coming in or being fulfilled, it doesn’t matter if you’re not getting paid. You can’t pay your bills with promises; traditional payment types, are often slow to process transactions and can be costly in either fees or time spent managing them. Instant B2B payment solutions are ideal for improving your business’s cash flow and collecting payments faster.

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