Vendors get paid through a repeatable cycle: you complete tax and banking paperwork with the buyer, you send an invoice for the work or goods delivered, the buyer’s accounts payable team matches that invoice against what they authorized and received, and the payment goes out by ACH, wire, virtual card, or paper check on whatever terms the contract sets. That’s the shape of how vendors get paid across almost every industry. The details that determine how fast the money actually lands, and how much of it you keep after taxes, are where most of the useful knowledge lives.
What the Buyer Needs Before Any Money Moves
No payment goes out until you’re set up in the buyer’s system. The centerpiece is IRS Form W-9, which collects your taxpayer identification number (a Social Security Number or Employer Identification Number), your legal business name as it appears on your tax returns, and your federal tax classification.1Internal Revenue Service. Form W-9, Request for Taxpayer Identification Number and Certification The buyer needs it to report what they paid you at year-end.
For 2026, businesses must file Form 1099-NEC for any vendor who received $2,000 or more in non-employee compensation during the calendar year. That threshold rose from $600 starting with tax years after 2025, and it will adjust for inflation annually beginning in 2027.2Internal Revenue Service. General Instructions for Certain Information Returns – 2026 Most companies collect a W-9 from every vendor at onboarding anyway, because payment totals aren’t always predictable.
Skipping the W-9 or providing a bad taxpayer ID has two consequences. The payer may be required to withhold 24% of every payment and send it to the IRS as backup withholding.3Internal Revenue Service. Backup Withholding You can also face a $50 penalty per failure for not complying with information reporting requirements, capped at $100,000 per calendar year.4Office of the Law Revision Counsel. 26 USC 6723 – Failure To Comply With Other Information Reporting Requirements
Alongside the W-9, accounts payable will ask for your banking details for electronic payment: a nine-digit ABA routing number and your account number.5American Bankers Association. ABA Routing Number Many buyers also require a certificate of insurance, especially for on-site work or professional services. General liability coverage is the most common ask; the required limits depend on the scope of work.
Submitting an Invoice That Actually Gets Paid
Once you’re in the system, your invoice is what triggers payment. Errors on the invoice are the single most common reason payments get delayed. Every invoice needs a unique invoice number, the issue date, your contact information matching what you provided during onboarding, and the buyer’s billing address routed to the correct department.6FDIC. Appendix D – Legal Invoice Validation Criteria
Each line item should describe what was delivered, the quantity, the unit price, and the line total. The math has to add up to the invoice total exactly. Put taxes and discounts on their own lines so the buyer’s team can categorize them correctly. If the buyer issued a purchase order number to authorize the work, include it prominently. Many accounts payable departments will reject an invoice outright if they can’t match it to a pre-approved PO.
Larger organizations and government agencies often require electronic invoicing through a specific portal or in a structured format with fields for currency codes, tax categories, and electronic addresses for both parties. Following those instructions exactly keeps your invoice from stalling in a processing queue.
How the Money Actually Arrives
The method the buyer uses affects both how quickly the money reaches you and who absorbs which fees. Four options cover almost all vendor payments.
ACH Transfers
Automated Clearing House transfers are the workhorse of business-to-business payments. The ACH network, governed by Nacha, processes transactions in batches rather than one at a time, which keeps costs low. Standard ACH payments settle on the next business day.7Nacha. Same Day ACH Moving Payments Faster Phase 1 Same Day ACH is also available for payments up to $1 million per transaction, with two submission windows that settle the same afternoon.8Federal Reserve Financial Services. Same Day ACH Resource Center Fees are minimal, which is why routine vendor payments usually run on ACH.
Wire Transfers
Wires use real-time settlement networks: Fedwire (operated by the Federal Reserve) for domestic transfers and CHIPS for large-value international transactions.9Federal Reserve Board. Fedwire Funds Services10The Clearing House. CHIPS Funds are final and irrevocable once processed. Banks typically charge $15 to $30 for domestic wires and $30 to $50 for international ones. Most companies reserve wires for payments where speed or certainty outweighs the fee.
Virtual Credit Cards
The buyer generates a single-use card number tied to a specific invoice amount, and the vendor processes it like any other card transaction. Payment happens as soon as you run the card, and the remittance data attached to the transaction includes line-item detail that makes reconciliation easier. The catch is card processing fees, typically 2% to 3%, which come out of your side.
Paper Checks
Some buyers still mail checks. This is the slowest option: postal transit plus deposit and clearing time. Checks can also be lost in the mail. From the buyer’s side, checks stretch out days payable outstanding, which some companies treat as a cash flow benefit. If you have any say in the method, electronic payment gets money into your account faster.
Payment Terms, Discounts, and Late Fees
Payment terms set the deadline for the buyer’s obligation. Net 30, Net 60, and Net 90 mean the full amount is due within 30, 60, or 90 calendar days of the invoice date. “Due on receipt” means the obligation starts when the invoice lands. End of Month terms start the clock at month-end: an invoice dated March 15 under Net 30 EOM isn’t due until April 30.
Early payment discounts are common. “2/10 Net 30” gives the buyer a 2% discount for paying within 10 days, with the full amount otherwise due in 30. On a $50,000 invoice, that’s $1,000 off. From the vendor’s side, you’re trading a small revenue cut for materially faster cash flow, and whether it’s worth it depends on how much you need the money now versus later.
When payments run late, the contract controls. Private commercial agreements usually name a specific late payment interest rate, and 1% to 1.5% per month is common. If the contract says nothing, the default falls back to state law, which varies widely. The federal Prompt Payment Act comes up in this context, but it only covers payments by federal government agencies to their vendors.11Office of the Law Revision Counsel. 31 USC Chapter 39 – Prompt Payment It requires agencies to pay interest when they miss deadlines, calculated using a Treasury-published rate.12eCFR. 5 CFR Part 1315 – Prompt Payment If you’re selling to a private company, that statute doesn’t apply to you.
What Happens Between Invoice and Payment
After your invoice arrives, it doesn’t turn into cash right away. The accounts payable team runs a three-way match: your invoice against the original purchase order (which authorized the spending) and the receiving report (which confirms the goods or services were delivered). All three have to agree on quantities, prices, and descriptions before the payment gets approved. Discrepancies here are the second most common reason for payment delays, right behind invoice errors.
Once the match clears, the buyer authorizes disbursement through whatever method was set up during onboarding. You should receive a remittance advice, either as a separate document or embedded in the payment notification, showing which invoices the payment covers and how much was applied to each. Keep it for your own reconciliation, especially when a buyer pays multiple invoices at once.
The gap between authorization and money in your account is the float period. Wires typically settle in hours. Standard ACH settles the next business day. Paper checks can take a week or more from the day the buyer authorizes payment. If a payment feels overdue, comparing the elapsed time against the expected float tells you whether to wait or to ask.
Taxes on What You’re Paid
Getting paid as a vendor comes with tax responsibilities that look nothing like being an employee. No one withholds income tax or payroll tax from your payments. That’s on you.
Self-Employment Tax
If you operate as a sole proprietor, single-member LLC, or partnership, you owe self-employment tax on your net earnings. The rate is 15.3%, split between 12.4% for Social Security and 2.9% for Medicare.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only to the first $184,500 of combined wages and self-employment income in 2026.14Social Security Administration. Contribution and Benefit Base The Medicare portion has no cap, and an additional 0.9% Medicare tax kicks in on self-employment income above $200,000 ($250,000 if married filing jointly).15Internal Revenue Service. Topic No. 560, Additional Medicare Tax
Quarterly Estimated Payments
Because nothing is withheld from your vendor payments, the IRS expects quarterly estimated tax payments covering both income tax and self-employment tax. For 2026, those payments are due April 15, June 15, September 15, and January 15, 2027.16Internal Revenue Service. When Are Quarterly Estimated Tax Payments Due Deadlines that fall on a weekend or holiday shift to the next business day.
Missing these payments triggers an underpayment penalty on the shortfall for each quarter. You avoid the penalty if your total tax owed comes in under $1,000, or if you paid at least 90% of the current year’s tax liability or 100% of last year’s (110% if your adjusted gross income exceeded $150,000).17Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty First-year vendors who’ve never owed tax before get a pass, but the safe harbor percentages are worth memorizing after that.
When Payment Doesn’t Arrive
Late payment is an occupational hazard, and the first move is the obvious one. A polite email to the accounts payable contact referencing the invoice number and due date clears most delays, especially when the cause is a processing backlog or a missing PO number rather than a decision not to pay.
If follow-up doesn’t work, a formal demand letter sent by certified mail creates a written record that you notified the buyer of the overdue amount. The letter should state the invoice details, the original due date, any contractual late fees that have accrued, and a deadline for payment. This documentation is what you’ll need if the dispute escalates.
For smaller unpaid balances, small claims court is fast and inexpensive and doesn’t require a lawyer. Maximum claim amounts vary by state, generally ranging from $2,500 to $25,000. For larger amounts, you may need to file in a higher court or hire a collections agency, which typically takes a percentage of whatever they recover. Mediation is another option when preserving the business relationship matters. Whatever route you take, organized records of your contract, invoices, delivery confirmations, and correspondence make every option easier.
Watch Out for Banking-Change Fraud
Vendor payment fraud is one of the most expensive cybercrime categories, and the common scheme is simple. A fraudster compromises or spoofs a vendor’s email and sends the buyer a message requesting that future payments go to a new bank account. The buyer updates their records, and the next payment lands with the criminal. The FBI calls this business email compromise, and the spoofed email often differs from the real one by a single character.18Federal Bureau of Investigation. Business Email Compromise
If you’re the vendor, expect any email you send requesting a bank change to trigger a verification call. Don’t be offended when it happens. If you’re the buyer, never update vendor banking details from an email alone. Call the vendor’s accounting department at a phone number you obtained independently, not from the email itself, and confirm the account details verbally before making any changes. Unusual urgency, invoices from regular vendors with slightly different formatting, and requests to change payment methods without a clear business reason all deserve a second look. Multi-factor authentication on email and accounting systems costs nothing and blocks a large share of account takeover attempts.