Vendors get paid through a sequence that starts long before any money moves: the buyer collects tax and banking paperwork, the vendor sends an invoice, the buyer’s accounts payable team verifies that invoice against the original order and proof of delivery, a manager approves it, and only then do funds transfer — usually by ACH, wire, check, virtual card, or a real-time payment rail. The gap between “work delivered” and “cash in the account” is filled by that administrative work, and most payment delays trace back to a step in it that went wrong.
The Paperwork That Has to Be on File First
No U.S. business will cut a payment to a vendor it hasn’t onboarded. For a U.S.-based vendor, that means submitting IRS Form W-9, which supplies the legal name and Taxpayer Identification Number the buyer needs to report payments to the IRS later.1Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification If a vendor doesn’t provide a valid TIN, the buyer is generally required to withhold 24% of each payment and send it to the IRS as backup withholding, so the vendor sees a smaller deposit until the paperwork is fixed.2Internal Revenue Service. Topic No. 307, Backup Withholding
Foreign individuals providing services to a U.S. company submit Form W-8BEN to certify non-U.S. status and claim any applicable tax treaty benefit. Foreign entities use Form W-8BEN-E instead.3Internal Revenue Service. Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) Submitting the wrong form can delay payment or trigger incorrect withholding.
Onboarding also captures the routing and account numbers the buyer will use for electronic transfers, plus a contact on the vendor’s accounts-receivable side. Inaccurate or missing bank data is one of the most common causes of rejected electronic payments, so it’s worth confirming those digits before the first invoice goes out.
What a Payable Invoice Looks Like
Payment starts when the vendor issues an invoice. To move smoothly through the buyer’s system, that invoice needs a unique invoice number, the purchase order number if one was issued, itemized descriptions with quantities and rates, the invoice date and service period, and payment instructions restating the banking details from onboarding. Missing PO numbers and vague line items are among the most frequent reasons invoices get returned or placed on hold.
Sales tax should be handled on the face of the invoice. In most states that collect sales tax, a vendor selling taxable goods to a buyer who intends to resell them does not charge sales tax provided the buyer supplies a valid resale certificate; when the goods are for the buyer’s own use, the vendor generally must collect and remit it. The invoice should say clearly whether tax was charged and, if not, the basis for the exemption.
When the Payment Is Actually Due
The contract dictates when payment has to arrive. The most common structure is “Net” terms: Net 30 means payment is due within 30 days of the invoice date, and Net 60 or Net 90 stretch that window for industries where buyers need time for approvals or need to sell inventory before paying suppliers.
Other common arrangements include Due Upon Receipt, where processing should begin as soon as the invoice arrives; Cash on Delivery, where payment happens at the moment goods change hands; and early payment discounts such as “2/10 Net 30,” which lets the buyer take a 2% discount for paying within 10 days instead of 30. Vendors offer those discounts to accelerate cash flow.
Terms are negotiated based on the buyer’s creditworthiness and the length of the relationship. New vendors often start on shorter terms or COD and move to Net 30 or Net 60 as trust builds. Contracts typically specify late fees or interest for missed deadlines, subject to state caps on commercial interest that vary widely.
What the Buyer Does Before Releasing Funds
Before any transfer goes out, the buyer’s accounts payable team runs the invoice through a three-way match. That means comparing the vendor’s invoice against the original purchase order and the receiving report or proof of delivery. If quantities, descriptions, and prices agree across all three, the invoice moves forward for managerial approval. If they don’t, the invoice is flagged and someone has to reconcile it — often by calling the vendor.
Only after a manager with budget authority signs off does AP release the payment for processing. This is where invoices most often stall: an unmatched PO, a receiving record that never got entered, or an approver who is out of the office can hold payment for days or weeks even after Net 30 has technically expired.
How the Money Moves
Once an invoice clears approval, the buyer sends funds through one of several channels. The choice depends on the buyer’s policies, the payment size, and how urgently the money needs to land.
ACH
The Automated Clearing House network is the workhorse for domestic B2B payments, moving funds electronically between bank accounts through a nationwide network operated by the Federal Reserve and a private operator.4Federal Reserve Board. Automated Clearinghouse Services Standard ACH credits settle within one to two banking days by rule, and most settle in a single banking day.5Nacha. The Significant Majority of ACH Payments Settle in One Business Day or Less Same Day ACH is also available for payments up to $1 million per transaction, with three settlement windows each banking day.6Nacha. Same Day ACH Transaction costs are low, which is why ACH dominates recurring vendor payments.
Wire Transfer
For urgent or high-value payments, businesses use wire transfers through the Federal Reserve’s Fedwire Funds Service. Fedwire provides real-time gross settlement, meaning funds are final and irrevocable once processed.7Board of Governors of the Federal Reserve System. Fedwire Funds Services Domestic outgoing wire fees typically run $25 to $30 per transaction, and international wires can exceed $50, so wires tend to be reserved for payments where speed and certainty justify the cost.
Check
Paper checks still exist. They’re mailed to the vendor and deposited manually or through a mobile app. Adoption is declining because of slow postal delivery and mail-fraud exposure, but checks remain common in industries with older payment infrastructure.
Virtual Card
A virtual card is a one-time-use credit card number generated by the buyer’s bank or payment platform, tied to a specific dollar amount. The vendor charges that number and the transaction is done. Buyers get detailed tracking and often cash-back rebates; vendors get paid quickly but may absorb card-processing fees.
FedNow and Real-Time Payments
The Federal Reserve’s FedNow Service settles transactions between banks instantly, 24 hours a day, every day of the year, and supports B2B use cases including bill pay and corporate disbursements.8FedNow Service. FedNow Service Product Sheet Both sides get immediate confirmation the funds have arrived. Availability depends on whether the vendor’s and buyer’s banks are connected to the network, and adoption is still expanding.
The Tax Reporting That Follows
Buyers that pay a vendor $600 or more during the tax year for services performed by a nonemployee must report those payments to the IRS on Form 1099-NEC.9Office of the Law Revision Counsel. 26 USC 6041 – Information at Source The threshold applies per vendor, per year. Payments to most C corporations are generally exempt from 1099 reporting, but payments to attorneys are reported regardless of the payee’s corporate structure.10Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
For tax year 2025, both the vendor’s copy and the IRS filing of Form 1099-NEC are due January 31, 2026.10Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC The W-9 collected at onboarding is what makes accurate 1099 filing possible. Without a correct TIN and legal name, the buyer cannot complete the form and may fall back on 24% backup withholding on future payments to that vendor, which the vendor will see as a smaller deposit until the paperwork is corrected.2Internal Revenue Service. Topic No. 307, Backup Withholding
Fraud Controls That Can Delay or Redirect a Payment
Business email compromise is one of the most costly fraud schemes targeting B2B payments. A scammer impersonates a vendor or executive through a spoofed or hacked email account and requests a change to banking details, redirecting a legitimate payment to a fraudulent account. The FBI recommends verifying any request to change payment information by calling the vendor at a phone number already on file, not one supplied in the suspicious message.11Federal Bureau of Investigation. Business Email Compromise For vendors, this is worth knowing on both sides: if you email your buyer new banking details and don’t hear back for a few days, the AP team is almost certainly waiting on a callback confirmation before releasing your next payment.
Buyers layer other controls on top. Positive Pay is a bank service that compares each outgoing check or ACH debit against a pre-approved list of payees, amounts, and check numbers and flags mismatches. Dual authorization requires two people to sign off on payments above a threshold. Segregation of duties keeps the person who enters vendor banking details separate from the person who approves payments. Any request that pressures AP to skip these steps is treated as a red flag.11Federal Bureau of Investigation. Business Email Compromise