81% of Small Businesses Get Paid via Ad Hoc Payments

Eight in 10 small- to medium-sized businesses (SMBs) get paid via ad hoc payments for the goods and services they provide to larger organizations.

The PYMNTS Intelligence’s study “How Instant Ad Hoc Payment Costs Impact Small SMBs” drew from a survey of 200 U.S. enterprises (those generating at least $50 million annually). It found that, for them, ad hoc transactions represent only a fraction of the payments they make to their vendors and consumers.

But for most SMBs, these irregular, nonrecurring payments have become a central part of their typical revenue stream. Ad hoc payments now make up nearly three-quarters of SMBs’ accounts receivable (AR) volume in dollars, which is up from 65% last quarter.

However, for those SMBs collecting the funds, the process of receiving ad hoc payments from enterprises can be cumbersome, often resulting in delays, which can trigger cash shortfalls for SMBs.

SMBs receive ad hoc payments for a variety of reasons, with 81% receiving ad hoc payments in exchange for both products and services in a typical year. The portion of SMBs receiving ad hoc payments in exchange for products or services has grown by 5% since September.

There is a growing popularity for ad hoc payments among SMBs. That popularity is highest among the smallest receivers, representing 79% of the AR volume in dollars for companies generating less than $100,000 per year. The average monthly volume in dollars of ad hoc payments is $210,900 for SMB receivers, while recurring payments only average $82,600.

Most SMBs report that ad hoc payments are larger than, or similarly sized to, the recurring payments they receive. On average, PYMNTS Intelligence found that ad hoc payments are 25% larger than the recurring payments SMBs receive.

Because SMBs like what they see in ad hoc payments, it’s on them to streamline their AR process and reduce payment friction. This could be done if more SMBs embraced instant payment methods. Instant payments can provide recipients with quick access to those funds that are essential in running a business, especially to those smaller- and micro-SMBs that are highly dependent on a quick and steady cash flow.

Because ad hoc payments are important, quick and easy access to good funds is critical. To improve cash flows and remain competitive, SMBs of all sizes should turn to instant payment solutions to better facilitate ad hoc payments.