Late payments are a persistent issue for businesses, especially small- and medium-sized businesses (SMBs), where cash flow challenges can threaten day-to-day operations. The impact of payment delays is not limited to financial strain; it also disrupts supplier relationships and reduces operational efficiency. Faster payment solutions address these challenges, offering significant benefits to businesses of all sizes.
The problem: Late payments are hurting cash flow
Late payments remain one of the most significant obstacles to healthy cash flow. A recent PYMNTS report, Need for Speed: Faster Payments Are Key to Businesses’ Financial Health, highlights that 51% of suppliers receive payments after their due date, and 57% of invoices are paid late. Even more concerning, 33% of these invoices take over 90 days to settle. For SMBs, this delay can be catastrophic, with nearly 30% of small business owners citing late payments as a top challenge.
The professional services sector exemplifies this problem. Payment delays averaged 48 days in 2023, with one-third of payments taking 60 days or more. Such delays force businesses to navigate disruptions in accounts receivable (AR), often leading to reliance on alternative financing methods that come with high costs and risks.
Businesses allowing extended payment terms of over 30 days are 57% more likely to face serious AR issues. When payments take over 90 days, the challenges compound—companies struggle to cover operational expenses, pay employees, and maintain supplier relationships. These persistent delays underscore the urgency of effective solutions to improve cash flow management.
The solution: Real-time payments
Real-time payment systems, such as same-day ACH transfers, improve businesses’ cash flow management. They ensure funds availability almost immediately, significantly reducing the delays associated with traditional payment methods. According to the report, 88% of firms using faster payment options have reported improved financial health and business growth.
For SMBs, the benefits are particularly pronounced. Faster payments strengthen their finances, enabling timely supplier payments and avoiding expensive financing. Among employees at mid-sized and large companies, 54% said real-time payments effectively address overdue payments, while 32% noted improvements in cash flow management.
Building stronger business relationships
The benefits of faster payments extend beyond operational improvements. They are also important in building stronger B2B relationships. Businesses that offer real-time payment options build trust with their suppliers by demonstrating reliability and efficiency. According to the report, two-thirds of SMBs will likely continue working with companies that provide instant payment solutions.
For larger enterprises, the impact is equally significant. Adopting real-time payments has enhanced supplier relationships among major players, such as large retailers, manufacturers, and insurers. The report shows that, thanks to instant payment options, 89% of large retailers, 91% of manufacturers, and 80% of insurers have experienced stronger connections with their suppliers.
Faster payments and financial stability
The adoption of real-time payments contributes to overall financial stability for businesses. With cash flow no longer constrained by lengthy delays, companies can plan and execute their operations more effectively. They can also avoid the high costs associated with traditional financing options, such as short-term loans or credit lines, often used to bridge cash flow gaps caused by late payments.
Moreover, faster payments reduce the administrative burden of tracking overdue invoices and following up with clients. Businesses can allocate these saved resources toward growth initiatives, such as expanding their market reach or investing in technology upgrades.
The future of business payments
As the benefits of faster payments become more apparent, businesses across industries are increasingly adopting these solutions. Real-time payment systems address critical challenges like cash flow management, overdue payments, and supplier trust, making them indispensable for SMBs and larger enterprises.
The growing availability of these systems, supported by advancements in financial technology and strategic partnerships, ensures that more businesses can leverage tools to improve their cash flow globally.