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Small business cash flow – The state of payments

Cash flow is important to the success and growth of any business – and QuickBooks® recognizes how important getting paid and managing the payments process is for small businesses. As a continuation of “The State of Small Business Cash Flow” report released earlier this year, we are further exploring the State of Payments among small businesses.

The State of Small Business Cash Flow report found that nearly two thirds (66%) of small business owners report that the time it takes money to process after receiving a payment has the largest impact on their company’s cash flow, compared to not getting paid by customers or clients within the terms of the payment system (34%).

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This lag between what we consider “getting paid” – such as seeing a customer swipe a card or paying an invoice – and having that money finally hit a small business’ bank account can be an excruciating wait.

In fact, for credit card payments, it can take two to three business days for the payment to post, and for bank transfers or Automatic Clearing House (ACH) payments, it can take up to seven business days.

This means that even if a customer pays on time, processing the payment can drastically slow down the time it takes for the funds to hit the small business’ account, and therefore, negatively impact cash flow.

Our research found that for more than two in five (44%) small business owners, customers not paying on time is the biggest obstacle when getting paid by their customers, followed by credit card companies not paying fast enough (35%) and customers having insufficient funds (28%).

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Nearly a third (31%) estimate it takes more than 30 days to get paid by customers, clients, vendors or banks. The average wait is 29 days.

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It’s clear there’s a need to speed up the process to get money into the pockets and bank accounts of small businesses faster.

The overwhelming majority (82%) of small business owners’ companies accept credit cards. Some companies, however, are slow to embrace change.

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Nearly half (49%) of Boomer small business owners do not accept credit cards—making them three to four times less likely to eschew cards than Millennial (12%) or Gen X (14%) small business owners. 

[graphic with the following text: Credit Card acceptance rates vary by generation, with Baby Boomers 3-4 times more likely to eschew cards that Gen-X and Millenial small business owners] 

For those who do not accept credit cards, three in five (60%) small business owners report it is not necessary in their line of work. Others cite processing fees as too expensive (26%), cost of renting and repairing card terminals is too high (19%), and credit cards can slow down cash flow (19%).

While accepting credit cards for payment can be a daunting step to take for small business owners, investing in QuickBooks will take all of the unknown and complicated steps out of the process. Adopting QuickBooks will allow for small business owners to accept credit card and free bank transfer payments, get paid two times faster, be able to track everything all in one place and much more.

Intuit® also makes it easier for small businesses that will need to accept payments on the go. With QuickBooks’ free card reader, they will be able to swipe debit cards and credit cards, and the sales will automatically appear in QuickBooks in real time.

With QuickBooks Payments, small businesses can streamline, speed up and automate payments. Additionally, as no one enjoys being the collector, QuickBooks provides a recurring payments feature that charges customers on a monthly or ongoing basis with automatic payment requests.

Intuit strives to solve small businesses’ payments needs, which centers largely on getting paid fast and ensuring their cash flow remains strong as a result. Small business owners who use QuickBooks get paid three times faster than the average, and when invoices are sent pay-enabled on QuickBooks, the median days to paid is 5.8 days. According to the National Federation of Independent Businesses, 64% of small businesses have invoices that go unpaid for 60 days or more, so this is a vast improvement.

On top of the broader QuickBooks Payments offerings, Intuit is announcing a new innovation to help customers get access to their money sooner: Next Day Funding for both credit cards and ACH. Next Day Funding represents a massive opportunity to improve cash flow for small businesses, freeing up valuable funds that can help businesses manage and grow. This is especially significant for ACH payments, which often are subject to longer payment times for small businesses.

The State of Small Business Cash Flow was conducted by Wakefield Research in Fall 2018 and surveyed 3,000 small business owners of companies with 0-100 employees in the U.S., UK, Australia, Canada and India. To read more of the survey data, you can read the full State of Small Business Cash Flow report here.

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