What FedNow Means to Bookkeepers and SMBs

For accounting professionals, bookkeepers in particular working with small business clients, cash flow issues may see a significant reduction in the future and you have the Fed to thank.

The promise of “instant payments” for small businesses has not quite been delivered. Our banking system is too varied and flawed and the best one can hope for is an ACH payment or some direct connection with a payment app. Even then, as we know, the promise of “getting paid faster” is still not as fast as you or your clients would like. And even with ACH, plenty of businesses just don’t feel comfortable setting that up to pay you so, the payee is stuck dealing with paper checks, waiting for them to clear, etc.

And as we know, domestic payments can take a day or two or more depending on an individual bank’s waiting period (aka unknown business days). And if your client has multiple vendors to deal with, cash flow issues can pile up. Even when you see that “you’ve been paid” in the app, chances are it has not hit the necessary bank account. Once again, cash flow headaches ensue.

Well, late last week the U.S. Federal Reserve officially launched FedNow, a service designed to modernize the country’s payment system by eventually allowing everyone, from individuals to businesses, to send and receive funds in seconds. In other words, the panic over AR will be minimized as payments from one bank to another will happen mere seconds. Not hours, or days or more.

According to a Reuters report, FedNow is being used by 41 banks and 15 service providers certified to use the service, including community banks and large lenders like JPMorgan Chase, Bank of New York Mellon, and US Bancorp, but the Fed plans to onboard more banks and credit unions throughout the year.

The report continued to note that “unlike peer-to-peer payments services like Venmo or PayPal, which act as intermediaries between banks, payments made via FedNow will settle directly in central bank accounts. The Fed also operates a real-time payments system called FedWire, but that’s reserved for large-scale, mostly corporate payments and is only operational during business hours.”

To the best of my knowledge, as of this writing the only AR service for SMBs and accountants that uses FedNow is the Forwardly app by ForwardAI. Trust that I will continue to dig in to this as, again, bookkeepers know all too well what shortening the payment cycle can mean for clients.

Now, I know what some of you may be thinking. Yes, that sounds great, to be able to be paid in that short of a time but what about clients on the accounts payable side who maybe need more time or aren’t able to pay that quickly? Many businesses have even come to rely on this “float” period. Now is a chance for the accounting professional to step in and do some real cash flow forecasting and budgeting work. But think of it, if the payor’s AR issues are reduced by FedNow, wouldn’t that also improve their AP time? Float would be reduced or eliminated.

There are still some questions, for certain. Overall, I can’t see how FedNow finally being accepted by community banks and credit unions all the way up to larger banking institutions will be a bad thing for small business and accountants alike that work with them.


  1. Sweden has had a system similar to this called “Swish” for years. Glad to see the U.S. is starting to catch up.

    1. Yes Jody! For much of the world, this is nothing new. The US has SO many banks of varying sizes and an antiquated system that simply has not benefitted small business or promoted quick and easy payment. That changes with FedNow. They may need to do some PR around privacy concerns though but this vastly improves the timing for payments to be paid and received.

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