There’s a difference between managing your business’s cash flow, and having it manage you.
That difference is something small to medium-sized businesses (SMBs) know well, particularly those that find themselves facing working capital issues that pose challenges to their operational stability and potential growth.
Navigating the complexities of cash flow management and working capital can be daunting amid economic uncertainty. That’s why, in today’s rapidly evolving business landscape, the integration of digital payments and automation has become a crucial driver of efficiency, growth and resilience for businesses.
But integrating the right digital payments solution isn’t as easy or straightforward for many businesses.
“Small business owners are using a variety of solutions. They may have seven-plus business apps in their back office, and they’re looking for a simpler and more efficient solution,” American Express Vice President of Marketing, Business Blueprint and Small Business Banking Brett Sussman told PYMNTS.
A recent joint American Express and PYMNTS Intelligence survey revealed that 43% of small business owners prioritize simplicity in their financial tools, while 36% look for affordability. Additionally, over 70% of respondents expressed a desire to consolidate their financial solutions into a single platform.
Still, many SMBs still rely on manual, analog-era cash management tools and processes.
“If you look back all the way to 2010, 67% of small business payments were made on cash or check or wire. You fast forward to 2022 and that number is 33% of payments. So really, the digitization of payments has taken off. But I would argue there is plenty of progress that still needs to be made,” Sussman said.
“When we look at the small business segment particularly, their AR [accounts receivable] and their AP [accounts payable] processes are very manual,” he added.
Small-business owners want real-time insights into their financial health that provide a seamless, 24/7 view of their cash position, encompassing money coming in and out of their business.
But a surprising finding from the American Express and PYMNTS Intelligence survey showed that only 5% of small business owners, or 1 in 20, have fully automated their AR and AP processes, despite the fact that doing so can provide them with the insights and growth opportunities they seek.
Even among mid-sized companies, a third still rely on manual or paper-based processes.
The primary barriers to automation include concerns over the investment of time and cost, Sussman said.
“Businesses are worried about the investment in terms of time and resources,” he said, noting that at the same time, the ongoing use of manual processes themselves increasingly incur hidden costs, such as increased time spent by AR and AP departments and a higher likelihood of errors, which can disrupt real-time cash flow visibility.
As highlighted by Sussman, American Express has responded to these needs with Business Blueprint, a comprehensive digital cash flow management hub.
While the adoption of digital payment solutions varies more by business size, the benefits are universally recognized.
Small business owners, in particular, appreciate the ability to get paid quicker and take advantage of early payment discounts, which can be challenging with traditional paper processes. These advantages not only improve cash flow but also strengthen relationships with key suppliers, which are vital for small business operations.
The integration of digital payment solutions into existing business processes is a critical step toward modernization.
Sussman emphasized the importance of embedded payments, where payment solutions are incorporated into the business planning, financial planning or inventory management software that businesses already use. This approach minimizes disruption and maximizes efficiency, enabling businesses to add functionality without having to switch providers or learn new systems.
Looking ahead, the next major driver of B2B digitization and payments modernization will be the further integration of financial services with other business solutions, Sussman said.
He added that companies like American Express are investing heavily in creating partnerships with procurement providers, enterprise resource planning systems, travel and expense management solutions and virtual card providers. These integrated solutions aim to streamline payments and cash flow management, ensuring that money flows smoothly to the right place, at the right time, for the right amount.
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