Embracing Change: The Era of 7-Day Payment Processing and How to Adapt
Imagine issuing a payment on a Sunday or public holiday and seeing it processed on the same day. That is no longer wishful thinking, for the banking world has undergone a radical upgrade.
As of the 26th of May 2023, banks are now processing payments to and from other banks every day, 365 days a year, including weekends and public holidays.
Clearly, it is a departure from the traditional business-day-only processing system, and it is one that will have a tremendous impact on how we do banking and manage our finances.
This blog post explores the implications and how you can adapt to this new age of banking.
Simplifying Transactions: Understanding the BECS
Thanks to Payments NZ, the organisation responsible for managing New Zealand’s core payment clearing systems, banks are no longer limited to sending and settling payments only during business days.
Instead, by utilising the Bulk Electronic Clearing System (BECS), consumers can look forward to fast and reliable electronic payments between different banking institutions, regardless of the day or time.
The BECS – a streamlined electronic payment system that governs how direct debits, automatic payments, bill payments, and direct credits are processed – represents a significant improvement over the traditional model of five business days and allows for much greater flexibility in payment processing.
And as all BECS member banks were required to implement the new payment processing system by the 26th of May 2023, this change also ensures that everyone can take advantage of the improved capabilities.
So, which banks have already switched to the updated payment processing model for day-to-day payment transactions? Committed to providing innovative and customer-centric banking through their forward-looking actions, these are the current Payments NZ participant banks that are driving the transformation of the financial landscape:
How to Adapt to and Benefit from the New Payment Processing Model?
We all know the importance of maintaining adequate funds in our bank accounts, whether as consumers or businesses. For consumers, it means being prepared for unexpected expenses and ensuring bills are payable when due. For businesses, it is vital to ensure that they hold sufficient liquidity to take advantage of new opportunities as they arise without being held back by a lack of available funds.
Without proper financial management, consumers and businesses equally share the risk of financial difficulties and foregone opportunities. Let alone the consequences of not meeting payment deadlines, which can lead to fees and penalties but also loss of revenue, affecting the bottom line and potentially the business’s reputation.
1. Key Lesson – Reassess your Payment Arrangements
As an immediate first step, consider reviewing your current payment processing to ensure it is still best suited to your financial goals and compliant with the new, improved payment processing system.
Think about short- and long-term perspectives in your payment model. Evaluating the potential impact of your measures is crucial to staying ahead of the competition and keeping up with market trends.
2. Key Lesson – Staying Ahead of the Curve: Is Your Business Model Ready for Changes?
From updating payment terms, payment advice and invoice due dates to changing or updating systems or processes related to merchant settlement payments that reflect the introduction of the 7-day payment processing model: are there measures your organisation is taking to adapt and will those need to be taken?
Ultimately, your business is unique, and the path to success is not a one-size-fits-all approach. Therefore, it is essential to address your specific objectives and priorities when deciding on your business’s long-term success.
Here are some facts you should keep in mind:
- Adjust your bank account management to account for weekend- and public holiday transaction days, covering business loan payments, term deposits and tax payments.
- Given changes to the concept of business days, you may need to amend your business’s terms and conditions, and any related policies to ensure your customers and clients are informed accordingly.
- If you are a direct debit initiator, you need to evaluate the impact of non-business days on your payments and make any necessary adjustments to your payment terms to ensure you can anticipate and manage any potential issues. Consider reviewing your terms to determine if you specify whether you allow collections on non-working days. A lack of this provision could cause potential dishonours that can also occur on non-business days, so be mindful.
- As an employer, you should likewise concern yourself with salary payments and whether to process the payroll or make payments on non-business days. Communication with employees may be required if changes to payment schedules are to be made.
3. Key Lesson – Maximising Your Business Cash Flow with a 7-Day Payment Processing Model
As a business owner, you can benefit by using the new settlement system to manage your cash flow more effectively and reduce the risk of delayed or bounced payments.
In addition, a 7-day payment processing model can help improve your business’s overall financial stability by providing faster access to your funds, allowing you to better predict and plan for future expenses, and avoid periods of cash flow shortages.
We have also published a blog post that explains why cash flow should be your primary focus over profit. Learn more about how to optimise your business’ financial performance here.
4. Key Lesson – Consult with an expert to gather further comprehensive advice
To get the most up-to-date information on 7-day payment processing, we recommend contacting your financial institution directly about their specific policies and processes, as fees or processing times may differ.
As your business grows, so do your payment processing needs, making it imperative that you stay current as the financial landscape continues to evolve.
At Accountants Plus, we understand the challenges of navigating changes in payment processing, and with our tailored business advisory services, we can help you navigate these changes seamlessly.
Let us guide you in developing a comprehensive payment processing strategy that meets the needs of your business and its stakeholders.
Call us today or visit our website to learn more about how we can help you with your Accounting and Taxation needs and with specialist business services.
Accountants Plus: Your trusted partner in igniting business success.