Small business payment trends: how customers pay and how long firms wait

The main small business payment trends are clear: customers pay by card and increasingly by phone, cash is shrinking but not disappearing, and businesses that invoice still wait too long to be paid. The Federal Reserve's 2026 Diary of Consumer Payment Choice found consumers made an average of 47 payments a month, including 16 by credit card, 15 by debit card and 6 in cash. Cards together made up two-thirds of all payments.

On the business side, a QuickBooks survey of 2,487 U.S. small businesses in January 2025 found 56% were owed money from unpaid invoices, averaging about $17,500 per business. The Federal Reserve Banks' 2025 Small Business Credit Survey found 50% of employer firms dealt with uneven cash flow, a category the survey says includes collecting on receivables.

This report compiles the Federal Reserve's 2025 and 2026 payment diaries, the 2025 Small Business Credit Survey, QuickBooks' 2025 late payments report and Xero's small business payment data.

With cards, and preferences have shifted toward credit. In the 2026 Diary, 38% of consumers said they prefer credit cards for in-person payments (up from 24% in 2016) and 40% prefer debit. The 2025 Diary, covering 2024, reported credit cards at 35% of payments by number, debit at 30% and cash at 14%.

Phones are the fastest-growing way to pay. The 2025 Diary found consumers made 11 payments a month by mobile phone in 2024, up from 4 in 2018, and adults aged 18 to 24 used their phones for 45% of all their payments. 23% of purchases and person-to-person payments were made remotely in 2024, a share that has risen every year since 2021.

Yes, and some groups rely on it. Cash has been the third most used payment method for six years running, per the 2026 Diary. 76% of consumers carried cash in 2025, averaging $69, and 90% plan to keep using it. Households earning under $25,000 a year and adults 55 and older used cash more than other groups, and rural residents averaged nine cash payments a month compared with six for suburban and urban consumers.

For a service business, the practical takeaway is to keep cash and check acceptance simple for the clients who use them, without building your process around them. A barbershop, auto repair shop or home services company with an older or rural client base will see more cash than a med spa or a property manager collecting rent online.

About a week late on average, with a long tail of much later invoices. Xero's Small Business Insights data, published in March 2026, found U.S. small businesses using Xero were paid an average of 7.8 days late in the December 2025 quarter, the shortest figure in four years. That average hides the bigger problem QuickBooks measured: 47% of small businesses had invoices overdue by more than 30 days, and nearly 1 in 10 invoices was overdue on average.

Late payments show up in cash flow. QuickBooks found businesses with more late payments were 1.4 times as likely to report cash flow problems (50% compared with 34%), and businesses offering longer payment terms reported cash flow problems more often (60%) than those requiring immediate payment (40%). Businesses with more late payments were also more likely to have raised prices recently (30% compared with 21%).

Online payment and reminders. QuickBooks reports, from its own user data, that customers can pay online invoices up to four times faster than paper invoices. Xero reports that its customers who use online invoice payments or add a "pay now" button are paid up to twice as fast, and that automated payment reminders save small businesses about three hours a week. Both are vendor figures from their own customer bases, but they point the same way.

Shorter terms help too. QuickBooks' comparison of immediate terms with 90-day terms showed a 20-point difference in cash flow problems. For appointment-based businesses (dental, salons, physical therapy, auto repair), the simplest version is payment at the time of service with a card on file. For project or retainer work (law, accounting, event catering, home renovation), it means deposits, progress billing and invoices that include a payment link. The Federal Reserve's survey adds context: 54% of employer firms said paying operating expenses such as payroll and rent was a financial challenge in 2025, so a week or a month of waiting on receivables lands directly on payroll.

The ones that do the work before they bill. The studies here do not break late payments out by industry, but the mechanics are easy to see. A salon, dental office or fitness studio usually collects at the visit, so its exposure is mostly insurance claims, memberships and no-shows. A law firm, accounting practice, caterer, event venue, renovation company or commercial cleaning firm often delivers days or weeks of work before an invoice goes out, then waits again for the client to pay it.

Those project and retainer businesses carry the most receivables and benefit most from deposits, milestone billing and automated reminders. Property managers sit in between: rent arrives on a schedule, but owner payouts, maintenance invoices and late fees all depend on clean, timely collection. If your business does the work first, the QuickBooks finding that 47% of small firms carry invoices more than 30 days overdue is likely closer to your reality than the 7.8-day Xero average.

Your clients already pay most of their bills by card and phone. The businesses that get paid fastest match that behavior and take the chasing off the team's plate. Monvell's Operations work sets up invoicing and payments with payment links, card-on-file options and reminder sequences built into the workflow, so collections run on schedule without someone remembering to send them.

• Put a payment link in every invoice and every invoice text or email. Both QuickBooks and Xero data tie online payment to faster collection.
• Automate reminders: a friendly note a few days before the due date, on the due date and at set points after. Stop them automatically when the invoice is paid.
• Shorten terms where you can. Move appointment-based services to payment at checkout, and use deposits for larger projects and events.
• Accept the methods your clients use: credit and debit cards first, mobile wallets for younger clients, and a simple cash or check process for clients who prefer it.
• Track days to payment and the share of invoices more than 30 days overdue. They are early signals of cash flow trouble.
• Review your fee policy with an accountant before adding card surcharges, since rules vary by state and card network.

Consumer payment figures come from the Federal Reserve Financial Services' 2025 and 2026 Diary of Consumer Payment Choice findings; the diary is a nationally representative survey run each October in which participants log every payment over three days. Some measures (instrument shares, mobile and remote payments) were published only in the 2025 edition, so we label each figure with its year. Late payment figures come from Intuit QuickBooks' 2025 report (survey of 2,487 U.S. small businesses with up to 100 employees, January 2025) and Xero's March 2026 Small Business Insights post (Xero customer data). Cash flow figures come from the Federal Reserve Banks' 2025 Small Business Credit Survey of 6,525 employer firms.

QuickBooks and Xero sell invoicing software, and their speed claims come from their own users, so we treat them as directional.