Historically, businesses had to accept a settlement period on card payments. Banks imposed a delay on releasing funds from merchant accounts to regular business accounts for security reasons. In some cases, the wait could be as long as seven days.
However, thanks to next-day settlements, that’s all changing. Transfers from merchant to business accounts can now be much faster, reducing cash flow risks.
What is next-day settlement?
As the name suggests, next-day settlement is a type of settlement process that releases funds to your account the next day, usually within 24 hours. Here the acquiring bank authorises the release of funds to your account quickly, instead of imposing a delay.
In the past, businesses often had to wait a minimum of three days before being able to get their hands on the money. In some cases, the wait was as long as five days, which could be frustrating and inconvenient.
What are the benefits of next-day settlement?
Naturally, the primary benefit of next-day funds is that it boosts cash flow. Instead of waiting several days, firms get the money they need fast.
Negative cash flow is a serious issue. This accounting situation occurs when companies lose cash faster than they receive it. Typically, this happens because of payment delays. Managers expect money to flow into the firm but, because of settlement period policies, they receive cash later than they expect.
This is critical. Businesses are only viable if they have cash on hand. If they have nothing to pay staff or suppliers, then they can go out of business fast, even if they are profitable long term. To remedy this, they must often use expensive lines of credit from banks and other lenders.
Failing to get money quickly from acquiring banks can also lead to a lot of stress and internal problems at the company. In extreme situations, staff may threaten to walk out or vendors may begin legal action against you if they don’t get their money. These issues take up your time and attention, distracting you from running your business.
Next-day settlements on card payments deal with both these issues. They help to reduce the risk of negative cash flow and ensure that your accounts receivable is as small as possible, reducing stress and discord in your firm.
Get next day settlement
MultiPay Merchant Services can deliver money to your bank account within 24 hours of customer payments. Our flexible banking window allows for a range of needs, whether you close your doors at 5 pm or 12 midnight, so you get your money fast.
For further details please get in touch.
