Small Businesses Seek Better Cash Flow Tools from Their Banks: Survey

The typical small business owner is not getting the automated help with accounting and cash flow that he could be getting from his bank, a survey released Monday shows.

In small businesses, "Cash is king. You've got to stretch out payables, pull in receivables, and you can't really do that with a lot of the processes that are out there today," says Rene Lacerte, founder and CEO of bill.com, Palo Alto, Calif., the online bill payment company that sponsored the survey.

"I'm a serial entrepreneur, this is the second company I've started; I grew up in a family of entrepreneurs," he says. At his previous startup, Paycycle (which was bought by Intuit), "The problem I faced is there's a tremendous amount of juggling, all the details need to be looked after to make sure the payments have happened." On the payables side, the small business person has to figure out the terms of contracts, sign and mail checks, track approvals and so on. On the receivables side, she has to figure out what's in the customer contract, if the customer has paid a bill, if he's even seen the bill, and if he hasn't paid the bill, why not.

In the new research, the company asked 355 small-business CFOs about their financial pain points and found many. "This is an opportunity for the banking industry to look at tools that help manage that back office problem of automating cash flows, automating payables and receivables," Lacerte says. "The data we have show that things aren't that automated."

When asked to name the top three challenges faced by CFOs today, respondents cited the inability to forecast results (51.1%) and manage cash flow (47.4%) as their most pressing concerns.

"These executives are predicting cash flows with tools that are dated, such as the Excel spreadsheet," Lacerte says; 73% of CFOs use Excel to manage cash. Another 8.5% use an ERP system, 8.3% say they do the calculations in their head, and 10.3% say they don't use any tools at all, according to the survey. "The problem with a spreadsheet is it's a static document, it's not dynamic, there's no way to take action against it," he says.

Small business owners also face a challenge in understanding when their customers are going to pay (21%). "They're struggling with getting all this done and the tools aren't there," Lacerte asserts.

When asked if cloud-based tools for handling bills and predicting payments exist, 16.5% said no and 22% said they know the tools exist but their company doesn't use them. About 65.2% of survey respondents said that saving dollars and staff hours would lead them to consider such solutions.

"Why aren't the banks operating these tools for them?" Lacerte says. "Clearly the process is manual and they could use some help, yet there are no tools out there."

When asked what they think are the biggest challenges in moving to a cloud environment, 64.1% of survey respondents said integration with existing systems, 54.7% said system and network security, and 43.6% said introducing a new process.

The survey also found that 85% of CFOs say that reducing paper in accounts payable and receivable is important to them. "This is an opportunity for banks because you want those documents to be secure, and banks are in a position to make sure they are secure and market around that," he says. This would include contracts, bills, and invoices as well as notes.

To accomplish all these things, the ideal small business cash management software would let the user drill down and see terms of a contract and all the notes made about it, Lacerte says.

For reprint and licensing requests for this article, click here.
Bank technology
MORE FROM AMERICAN BANKER