All organizations, particularly small-to-medium-sized businesses (SMBs), are striving to better serve their customers and to grow. In doing so, there is a whole set of back-office requirements, such as writing checks, managing credit card accounts and overseeing the books, which are necessary but not strategic enablers to that growth.
All too many SMB owners and managers shoulder that burden, even as their organizations have grown in size and complexity.
SMBs and their accounting partners increasingly understand digital solutions can help them automate and digitize their back office, so they can focus on serving customers and generating more revenue. However, many SMBs are stuck in the status quo, using legacy technology to process everyday payments.
The following are hurdles SMBs must clear and how innovative payments technology can help them turn these challenges into opportunities to save both time and money.
Old habits die hard
Unfortunately, some SMBs’ invoicing and payments methods are behind the times, with many using paper checks as their top payment choice, followed by credit and debit cards, according to a recent FLEETCOR SMB Survey.
Consider the laborious paper check process, which includes receiving a bill, getting physical approval signatures by one or more people, writing out and mailing a check, reconciling it was cashed, then updating the accounting system.
This time-consuming, manual process is likely why nearly one-third of small business respondents said they want to digitize and automate accounts receivable and invoicing processes.
Despite the benefits of accounts payable (AP) automation, SMBs largely forgo modernization because they think it is too costly, incompatible with their needs and lacking in security. But these concerns are unsubstantiated.
In fact, Deloitte found electronic invoicing saves SMBs $20, on average, per statement, and automation ranks as the No. 1 method for improving cybersecurity among finance professionals.
Further, Goldman Sachs estimates labor costs associated with AP staff manually processing a single invoice amounted to $16 for medium-size businesses and $22.26 for small ones. In an automated system, these numbers dropped by 60%-70%.
Cash flow challenges persist
Although going digital fuels business growth, many companies struggle to transform. But during a time of sky-high inflation, SMBs should look to emerging fintech solutions to cut costs and improve cash flow, particularly as the cost of doing business is rising.
Managing expenses should become a priority, especially since invoicing and accounts payable are considerable pain points. The "FLEETCOR SMB Survey" found small businesses are most interested in investing in increased cash reserves, digital invoices and AP automation software.
Small-to mid-market enterprises (SMEs) are far more likely to have fully manual AP processes than larger companies. At the same time, smaller businesses often have less available cash than larger companies, which is a major challenge, particularly since 82% of small business failures stem from cash-flow problems.
Money doesn’t grow on trees
Because of such money-related challenges, SMBs are trying to transform, but often lack the resources or staff to innovate, with cost and security concerns listed in the "FLEETCOR SMB Survey" as the top barriers to digitizing the payment process.
While going digital can fuel small business growth, many struggle to adapt to rapid transformation and are not as quick as they would like to be. However, fintechs can help mitigate risks tied to spreading themselves too thin and help smaller organizations grow into midsize ones.
Despite the benefits of accounts payable (AP) automation, SMBs largely forgo modernization because they think it is too costly, incompatible with their needs and lacking in security. But these concerns are unsubstantiated.
During the pandemic, 82% of SMBs said they were changing how they process and receive B2B payments – opting for digital innovations like virtual, digital cards. Further, since deploying AP automation technology, 58.7% of companies have seen fewer invoice processing-related errors.
PwC anticipates a continued shift toward digital payments and a cashless society. In fact, cashless payments are set to increase by more than 80% from 2020 to 2025. "PwC’s Payment 2025 & Beyond" report found digital wallets were one of the key trends driving the transformation, with the use of such transactions growing by 7% in 2020.
Further, 86% of financial industry respondents predict traditional payments providers will collaborate with fintechs and technology providers to innovate and meet consumers’ and business’ wants and demands.
Save time, streamline processes and free up cash flow
Manual invoicing and payments processes are inefficient and time-consuming. However, fintech solutions can help streamline and simplify such laborious processes.
For example, some providers offer solutions with no subscription fees or other out-of-pocket costs, are easy to implement, and provide a “one-stop, plug-and-play shop” that integrates with familiar software like QuickBooks. This simplifies accounting and enables cleaner books in real time.
So, if you are a small business or one of its accounting partners, look to fintech solutions to turn those pesky payments challenges into opportunities for saving time and therefore money. Doing so can help SMBs grow and thrive, despite today’s inflation-related tough times.
Danny Martucci is President and General Manager of Corpay One.
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