Your Business Credit

Should I use next-day deposit to improve my cash flow?

Next-day payment options can help during a cash crunch, but you might also want to offer an array of payment options to clients and reexamine your payment processes


Diversifying your payment options to clients and revising your payment processes can help you improve cash flow and reduce the chances of receiving late payments. This is what you can do.

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Dear Your Business Credit,

I run a small marketing firm. I use QuickBooks as my online invoicing software. It offers a feature where I can get paid the next day for a client’s electronic payment by ACH, instead of waiting for it to clear.

Some of my clients have been sending their checks to pay me very late recently, and sometimes I’m extremely short of funds, to the point where there is almost no money in my business bank account.

I’ve been paying for business expenses on a credit card in those cases, but I had a late payment two months ago and my interest rate shot up to about 24 percent.

Is it worthwhile to use the next-day payment feature when I’m short on cash? – Jamie

Dear Jamie,

Cash flow is the lifeblood of any business, so if you get into a serious cash crunch, I would take advantage of the next day payment option. QuickBooks charges a fee of 1 percent of a payment, up to a maximum of $10, so we’re not talking about an exorbitant sum of money to get some peace of mind.

It’s not great to spend money on fees when you don’t have to, but every business needs to have some money in the bank. Relying on a high interest credit card isn’t a good way to deal with cash flow challenges, except in a real emergency. It can be very hard to pay down debt when you’re paying a steep interest rate.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: Will accepting credit cards help my business’s cash flow?

How to ease payment friction and increase cash flow

I’d do three things in your situation. First, take a look at your accounts receivable to see which clients are late on paying you. Touch base with them to remind them the payment is due.

Sometimes offering late payers a credit card or ACH payment option is all it takes to get them to pay. You can do this by checking the appropriate boxes on QuickBooks and sending the invoice electronically.

Clients sometimes delay sending out checks because of the hassle factor involved. By asking if they would prefer an electronic option, you may be able to speed up some of the payments owed to you.

How to lower the cost of using cards for business expenses

Second, call your credit card company and see if it will lower your rate, so you are not overpaying when you need to use it. Sometimes, all you need to do is ask.

If your late payment was a one-time occurrence and you’ve been a customer for a while, the credit card company may be wiling to cut you a break.

If you’ve received any zero-percent balance transfer options, it would not hurt to mention them when you call, to see if the credit card company can match them.

Know all your payment process options

Third, I would familiarize yourself with the next-day ACH payment feature. If any electronic payments do come in during a cash crunch but haven’t hit the bank when you need the money, you may want to consider using this service.

Many entrepreneurs underestimate the toll that cash flow challenges have on their stress levels and peace of mind.

Knowing you have money in the bank will allow you to function at your best and make decisions from a position of strength – rather than from financial panic.

Going forward, I’d reexamine your payment processes.

Is there a way to ask clients for a deposit up front so you don’t have to finance every project? It sounds like that’s what you are doing now.

If you’re charging a retainer, ask if it is possible for clients to automate your payments. If you can’t find clients who will pay you up front, make sure you are invoicing the first day a project is completed, so if they pay on a 30-day cycle, you’re truly only waiting 30 days and not 45 because you waited 15 days to invoice.

The more predictable your cash flow is, the lower your stress levels and the better you’ll be able to serve your customers.

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