Startup Gives Small Businesses a Cash Flow Crystal Ball

Small businesses, which are often neglected by banks' digital tools, are capturing attention from software companies trying to quicken their awareness and execution of money matters.

Small Business Payments Company is one of them, and the new subsidiary of Canada's Acxsys Corp. wants to partner with banks and other companies to distribute its goods. Small Business Workbench, the startup's first online and mobile product announced in late October, comes with software that forecasts companies' cash flow, which to them is oxygen. Banks could white label Workbench to cross-sale their products and services as well as pitch users on relevant third-party services and products.

"Our mission is to make the bank or non-bank more important to, or sticky with, their important small business customers while, at the same time, improving the banks' and non-banks' per-customer revenue and profitability," says Dave Kurrasch, vice president and general manager of Small Business Payments Company and a former Wells Fargo executive.

To do that, Workbench is meant to be iTunes-esque in that it lets users — or partners — decide which working capital-related apps to run. Currently, Workbench offers three apps. It plans to introduce two more in early 2014 and it welcomes third-party apps. "We want to be agnostic," Kurrasch says. The crown jewel app is and will be one that offers owners forecasts of their cash flow. Data from other apps used will feed into the forecast.

The user coughs up transaction data such as upcoming payrolls and capital purchases to model out what the company's financial future will look like in the weeks, months, and years to come. The more data provided by the person, the better the model will work.

The forecast, which can be viewed in graphical or numerical form, will also predict an owner's transactions, which he can edit or delete. Users can also run what-if scenarios, for instance, modeling the outcome of trimming inventory costs by 3%. All the while, the software spits out suggestions to fix cash-flow problems based on the anticipated outcomes. Owners, in theory, can use Workbench to help remind them that if they fail to collect receivables in 14 days, they will lack the funds needed to pay staff on the 30th. And therein lies the benefit to banks: If the model shows a future cash flow shortfall, the financial institution could advertise a line of credit, for example.

Beyond better targeting offers to small business owners, the data-driven tools could give banks what they most seek: customers who will never let go because they, much like online bill pay customers, prefer to avoid reentering data.

"The great thing (for banks) is that once a business sets up all the inputs to the cash flow tool, and begins relying on it, they will never want to leave the company that provides them," says Jim Bruene, editor and founder of The Finovate Group and the Netbanker blog.

To be sure, modeling is a guess, and the longer a model looks out, the more uncertain the prediction.

The product is also meant to do away with manual processes many small business owners do in an ad hoc way, such as mental math, notes on napkins and Excel modeling.

The user experience — and how much data the user must provide (often a barrier to usage) — will hinge on how the Workbench apps are distributed. The experience to collect the information would broadly look something like this: the software prompts the owner to answer questions about receivables and inventory as well as scan in a bank statement and determine things like whether a purchase is reoccurring. Kurrash says the startup seeks to partner with online banking vendors and other companies that would tighten data integration.

Already, Workbench comes with inventory and e-invoice apps and is readying a payroll app and an app from AmeriMerchant. Kurrasch has also charged his team to introduce one app related to working capital every month in 2014. There is a mobile alert component, too.

The small business category, by and large, has a lot of growing up to do. A Celent report published in 2012 urged banks to invest in building tailored digital service suites for small businesses.

"The fact is small businesses have fallen through the cracks at banks," says Jacob Jegher, a senior analyst at Celent. "It's a huge area of opportunity."

One challenge for banks is that they struggle to even identify who their small business customers are.

There are exceptions. Mercantile Bank in Michigan, for example, has white-labeled Bill.com to offer small business customers online billing services while Capital One and Bank of America sell mobile payment dongles that come with data-driven tools designed to help owners run their businesses.

"Where bankers and CPAs can play an important role is bundling and integrating these tools into the various systems, accounting platforms, and payment networks that maximize their value," says John Schulte, chief information officer of Mercantile Bank. "Any bank looking to enhance their business relationships, add value to the customer, find revenue opportunities, or just plain stay relevant should consider solutions like these."

The key for anything that involves projecting cash flow, however, is for the models to tie into how the company processes/reconciles inbound and outbound payments, with as close to real time access as possible, adds Schulte.

Meanwhile, Intuit's QuickBook comes with a cash flow projector, Yodlee is readying a forecasting tool for next year, and a young company, InDinero, designs digital tools for the segment.

The need for intuitive tools is there.

"Cash flow forecasting is a killer app for small business," says Netbanker's Bruene. "Every owner has the 'meeting payroll' concern somewhere in their minds 24x7. This is absolutely the type of tool that should be delivered digitally: ideally mobile and online.

"You just need the flag: hey, you are in the danger zone."

Tools that let users link in multiple accounts and make the experience simple to use would have great utility to the small business owner, says Bruene. "I don't want to spend any time in it," he says.

Looking ahead, Kurrasch envisions customizing Workbench for professional verticals, and his grander vision includes nothing short of letting small businesses click a button to package up their data to apply for a loan.