Back to Blog
Originally published on LinkedIn.
As a small business owner, you’re familiar with the delicate balance of managing finances and maintaining a steady cash flow. But when payments drag on and take forever to process, it can throw a wrench in your plans and mess with your ability to keep things on track. If you’ve been struggling with slow payment processing times, you’re not alone.
Rebecca Xing, CEO of Trustana, experienced the challenges firsthand. She shared, “Slow payments put an increased burden on our teams handling accounts receivable and payable, diverting their time away from productive tasks.” This is a common theme among many small businesses struggling to balance financial stability with growth.
The challenges of slow payment processing
When it comes to processing payments, two popular methods stand out: checks and Automated Clearing House (ACH) transfers. Each has its own set of challenges. Sure, checks are familiar and easy to use, but waiting for checks to arrive and clear can take days. That wait can lead to frustrating delays, especially if you’re depending on that cash flow. While ACH is generally faster than checks, ACH payments can still experience delays due to bank processing times, weekends, or holidays. If you’re hoping for a same-day ACH transfer, well, you might have to wait till the next day since there are limits on when they can happen. These unpredictable hold-ups can be tough to manage.
Cash flow disruptions
Cash flow disruptions from slow payment processing can really mess your day-to-day operations, especially when we need funds quickly for important expenses. Small businesses hold a cash buffer of just 27 days, which makes them more vulnerable to cash flow issues caused by slow payments.
Rhett Stubbendeck, founder of Leverage, knows how challenging slow payment processing can be for small businesses. Delays in clearing client checks put a strain on cash flow and add stress as businesses struggle to cover critical expenses. On top of that, an ACH payment delay due to client issues can impact payroll and lead to cash flow adjustments.
Strained relationships
Slow payments don’t just affect your cash flow—they can also harm your relationships with vendors and clients. Chasing down late payments takes time away from growing your business and can frustrate your partners if they’re left waiting longer than expected.
Simon Bacher, co-founder and CEO of Ling App, shared how slow payments disrupted his cash flow and put a strain on relationships with vendors and suppliers. His team had to pivot to alternatives like online payment platforms and wire transfers to speed up transactions and keep things running smoothly.
Missed opportunities
When cash flow problems pop up due to slow payments, you can end up missing out on new business opportunities or investments. That can stall your growth and expansion plans.
Renee McBride, Digital Marketing Manager at Acumen Connections, points out how slow payment processing can strain customer relationships and disrupt cash flow. Traditional manual processes can cause operational inefficiencies, making it tough for small businesses to meet their financial obligations. Delayed payments can also mean missing out on opportunities and hindering expansion plans.
Supply chain disruptions
Delayed payments to suppliers can throw a wrench in your supply chain, affecting your ability to deliver goods or services on time and potentially harming your reputation with customers.
Jason Woo, founder of Able Hardware, explains the hurdles he faced with slow payment processing in his manufacturing business, particularly because of his complex global supply chain. He recalls one instance where a delayed ACH payment caused a shipment to be held up at customs, which led to expedited shipping fees and derailed his production schedules. These delays not only cost extra money but also created headaches for his team as they tried to work around disruptions and keep operations on track.
The impact goes beyond logistics, too. Slow payment processing can eat into liquidity, creating bottlenecks in cash flow that make it harder to manage operational costs and invest in the business. When liquidity tightens, there’s less room for error, and companies may have to make tough choices about scaling back or pausing investments and growth opportunities.
Operational setbacks
Slow payment processing can lead to operational setbacks that disrupt your business in various ways, from delaying critical shipments to impacting your production timelines and overall operations. slow payment processing can touch every part of your business, causing setbacks that ripple through your operations, staff, and reputation. Addressing these delays quickly is crucial to maintaining smooth, efficient business practices.
Chris Estrada, CEO of Nationwide United Auto Transport shares how slow payments have hurt his business. During busy seasons, delayed payments put a strain on cash flow because his company ends up using resources while waiting for payments to come through. In one case, a late check during an RV transport job caused a domino effect, delaying his ability to pay suppliers and impacting service delivery to customers.
Zachary Jarvinen emphasizes how crucial cash flow is for small businesses, calling it the lifeblood of operations. Delays in check processing or ACH transfers can lead to disruptions like late payments to vendors, supply chain issues, and unhappy customers. It can also affect payroll, leading to uncertainty among employees.
Overcoming slow payments
Slow payment processing is a real pain for small business owners—it’s a constant thorn in your side. We’ve heard from countless small business owners who share the same frustration, waiting endlessly for checks to clear or ACH transfers to take forever. It’s aggravating, to say the least. But there’s hope! Business owners like Rhett Stubbendeck and Renee McBride have found clever ways to speed things up and keep their businesses going strong.
If you’re eager to learn about the four practical solutions to tackle this challenge, check out our blog for more details.
