Small-business owners recently received a big gift from Bank of America: potential help with the onerous task of paperwork.
Administrative chores that happen behind the scenes of any company, like payroll and bill payment, are especially hard on small businesses that often have no dedicated person or established infrastructure for such tasks.
Bank of America's new online tool, Business 24/7, is designed to address those needs, giving it a "first mover" advantage in the small-business niche, according to bank officials and analysts.
The bank declined to provide specifics on just how much business this product suite has generated since its introduction to the market in August, but the payroll function is the centerpiece, says Percy Simpson, the bank's executive for small business development sales and service execution. Business 24/7 will be especially appealing to microbusinesses, most of which spend 200 hours a year on in-house payroll tasks, he says. The tool is aimed at firms with fewer that 20 employees and $2.5 million in revenue.
Those 200 hours could be better spent on running the business, notes Andy Fiol, the bank's svp of e-commerce small-business solutions. "Business owners have told us, 'We have passion for our business-and then there's everything else,'" he says. And that "everything else" entails details like managing cash and paying vendors.
Despite the banking industry's oft-repeated commitment to small business customers, the vast majority of banks haven't addressed the specific needs of this niche, says Dan Schatt, a senior analyst in the banking group at Celent.
The most common approach from banks has been to take an existing product from either the corporate side or the retail side and shoehorn it into a place where it does not really fit, says Schatt. Banks still seem to ask themselves, "Do you dumb down the corporate side or raise the bar on the retail side?" he says.
Bank of America's Business 24/7 is one option, but not the only one. Wells Fargo introduced a tool in April aimed at small-business owners that offers many of the same functions. Dubbed Employer Direct Pay, it helps small businesses manage their payroll online and offers direct deposit to employees, provided the employees have a personal account at Wells.
Financial Insights senior research analyst Karen Massey says these types of services are likely to become commoditized, and not offer banks a big source of profits within a few years. But even then, there will always be value-added services for which banks can charge a premium, such as tools that calculate payroll taxes and complete associated tax forms.
Remote-deposit capture is another tool that will become a major lure for small businesses, says Gordon Goetzmann, managing vp at First Manhattan Consulting Group. Banks will likely make funds available sooner for companies using remote deposit. He says that small and mid-sized banks, in particular, already are easing their funds-availability polices for small businesses. Another service he expects to increase is check-guarantee, where a business agrees to accept slightly less than the face value of a check in return for the guarantee that it will be honored at the bank, even if the person who wrote the check doesn't have the funds in his account.
Bank of America officials are fond of the old accounting phrase, "money in, money out," when describing Business 24/7, implying that the online product will help businesses save time and money. For example, Fiol notes that paper invoices cost small businesses about $10 each.
Simpson says this tool will save some small businesses money in other ways, too. More than 30 percent of small companies annually spend up to $1,300 in IRS fines, due to tax mistakes, he says, pointing out that Business 24/7 has built-in tax data, complete with updates. BofA is confident enough that it guarantees the accuracy of withholding calculations, Simpson says. Another piece of the product helps with another perennial headache: employee healthcare coverage. It aggregates data on potential healthcare plans and implements the plans internally.
Schatt says Business 24/7 is BofA's latest warning to community banks, which claim small businesses as bread-and-butter customers, that they need to step up service. Why? "[This] allows a small business to act like a big business," says Simpson.
