What’s the most frustrating part of running a small to mid-sized business? Managing cashflow! One of the reasons small to mid-sized businesses (SMBs) struggle with cash flow issues is because of their payment processing strategies. Historically, SMBs often struggle to balance accounts, handle unexpected expenses, or seize timely opportunities due to delays in payment processing.
Traditional payment systems can involve multi-day processing time. However, a new tool may help speed up payment processing. Same-day payment transfers are becoming increasingly popular; even the Federal Reserve is investing in this technology with its Fedwire service for high-value, time-critical transactions for banks, businesses, and government agencies.
In 2023, the number of Fedwire fund transfers was $4.3 trillion, an increase of 2.5%. This increase shows that the adoption of this technology is valuable. As Galileo Finacial Technologies Chief Product Officier, David Feuer said, “The assurance of a same-day secure transfer is crucial so that there’s not this risk window, where, for instance, a supplier has shipped a product, but the payment for that product is in jeopardy or can be recalled.”
Advantages of same-day payment transfers for SMBs
- Improved Cash Flow Management: SMBs can reduce the lag between invoicing and cash flow with real-time transfers. This immediacy helps businesses manage operating expenses more effectively, ensuring they can cover essential expenses.
- Enhanced Financial Flexibility: Quick access to funds empowers SMBs to respond swiftly to opportunities, such as purchasing discounted inventory or investing in new projects. This action can allow SMBs to capitalize on opportunities to help their businesses grow.
- Reduced Financial Risks: Same-day payment systems reduce exposure to delayed payments which can help a small business avoid unnecessary strain and improve overall financial stability.
- Strengthened Supplier Relationships: Faster payments also enhance relationships with suppliers. By ensuring prompt payment, SMBs can negotiate better terms, potentially securing discounts and favorable conditions that contribute to long-term cost savings.
- Streamlined Operations: Real-time payments integrate seamlessly with modern financial technologies, simplifying account reconciliation and reducing errors associated with manual payment processing methods. This streamlining allows SMBs to focus more on growth and less on administrative challenges.
As these same-day payment systems continue to evolve, SMBs need to be willing to evaluate their payment processing and account receivable procedures to integrate these tools. Our team at Richmond Financial can help your company devise a strategy that embraces this tool and other automated payment processing solutions. With our help, your company can focus more on growth opportunities and spend less time and money managing your cash flow and payments. Book a consultation today with our team!
