Every small business owner knows the familiar frustration of waiting.
Waiting for invoices to be paid, waiting for funds to clear, waiting for cash to hit the bank account.
This isn’t just an annoyance; According to numerous reports, it’s a $200 billion problem for small businesses every year in lost productivity, fees, and delayed growth.
But it’s a problem that real-time payments are finally going to solve.
The old payment system, built on decades-old infrastructure, is broken for modern commerce.
Think about it.
ACH transfers can take days to settle, credit card transactions have their own labyrinthine clearing process and checks?
(Let’s not even get started on checks.)
For a big corporation with deep pockets, a few days' delay might be a rounding error. But for a small business on thin margins, that same delay can be the difference between making payroll and missing it, between investing in new equipment and putting off growth, or even between staying open and closing down.
To understand the size of the problem, you have to look at the domino effect of delayed payments.
It starts with the most obvious pain point: liquidity. A small business might have thousands of dollars in outstanding invoices, but if that money isn’t in the bank, it’s not available to pay for inventory, marketing, or employee salaries.
That’s why many have to resort to high-interest lines of credit or loans just to bridge the gap, essentially paying a fee to access their own money.
Beyond the direct financial cost, there’s the massive waste of time and energy. How many hours a week does a small business owner or their accountant spend chasing late payments, reconciling accounts, and manually tracking incoming funds?
This is time that could be spent on strategic initiatives, serving customers, or developing new products. A slow payment system can be a major productivity drain for a business, and it's a cost that many companies don't even consider.
The problem is further exacerbated by the rise of the gig economy and the increasing use of contractors and freelancers.
These micro-businesses are at the mercy of their clients’ payment cycles, which can be inconsistent and slow. Maddeningly so. Instant payments are a huge help for independent workers. They don't have to wait for their money, which makes it easier to pay bills and stay on top of their finances.
The $200 billion figure is born from late fees, the interest on short-term loans, the lost productivity, and the missed opportunities for growth. And who’s paying this massive tab?
Small businesses.
But there’s good news: The concept of real-time payments (RTP) where funds are transferred and available in a recipient’s account within seconds is no longer some “nice idea.”
It’s here.
FedNow Service is a new system that lets banks send money to each other instantly, any time of day, any day of the year. This is a massive change from the old way, where banks had to wait for set times to process and send money, which could take days.
This new infrastructure will help small businesses in many ways:
-
Instant Access to Cash Flow: The most immediate benefit? Waving goodbye to payment delays. An invoice paid by a customer using a real-time payment system means the funds are instantly in the business’s account. This provides the immediate liquidity to manage day-to-day operations without having to dip into credit lines.
-
Better Vendor Relationships: A business can pay its suppliers and vendors instantly. which can lead to better terms, discounts, and stronger relationships.
-
Enhanced Customer Experience: Real-time payments aren’t just for B2B transactions. For example: A plumber could instantly receive payment from a customer on-site via a mobile app/
-
Simplified Reconciliation: Instead of manually cross-referencing transactions (which is an absolute drain on time), the system does the work for you by linking the payment directly to details like the invoice number, client, and project. Time? Saved. Mistakes? Poof.
For a small business owner, moving to real-time payments isn’t about ditching everything overnight. If you throw everything over you shoulder like its trash, that could complicate things. Instead, strategically add new technologies that solve specific pain points. Platforms like Stripe, Square, and other payment processors are already building real-time payment capabilities into their offerings, so it’s easier for small businesses (like yours) to get started.
Let’s break down your next steps:
-
Talk to your bank: Ask if they are part of the FedNow network or if they offer real-time payment options for business accounts. More banks and credit unions are joining every day.
-
Look at new payment platforms: Check out payment processing services that are known for innovation. Need your money now? Some platforms offer instant payouts for a small fee. Is the fee worth the convenience? That’s up to you.
-
Educate your customers and vendors: The more partners you have using real-time payments, the more you benefit. Encourage your customers to adopt this option for faster, easier payments.
-
Automate wherever possible: By using accounting and invoicing software that connects directly to real-time payment systems, you can automatically update your financial records the moment a payment is made. This makes it easier to keep track of your money and saves you the time and effort of manually entering payments.
So, let’s sum it all up: For small businesses, waiting for money to come in is a huge problem. It's estimated that these delays add up to a whopping $200 billion in lost opportunities and extra costs every year.
That’s $200 BILLION with a “B.”
The current payment system is slow and clunky. It was designed for a different era, and it just can't keep up with today's fast-paced world.
The solution is real-time payments.. It puts small businesses in control of their money, frees up time spent on paperwork, and lets them focus on what really matters: growing their business.
The future of payments is already here, and it's a lot faster.