Digital Payments Keep Suppliers Happy, Give Main Street Businesses Cash Flow Flexibility

More choice, more flexibility — and the Main Street economy can thrive.

Matan Bar, co-founder and CEO of B2B payments firm Melio, told PYMNTS’ Karen Webster that though we’re living in uncertain times stoked by inflationary fears, there are still opportunities for small businesses.

The conversation came against the backdrop where PYMNTS’ Q1 2022 Main Street Index, which measures small- to medium-sized business (SMB) health, was 19% above its lowest point logged in the darkest days of COVID-19.

Read more: Data Point: Indexing 19% Above the 2020 Crater, Main Street SMBs Roar Back in Q1 2022

The improvement has come with the digital methods and efficiencies that modernization brings — and though we may not be there yet, there’s hope that these SMBs will be logging the top-line growth seen before the pandemic sooner rather than later.

“Digitization has really improved the ability of these small businesses to generate revenue efficiently, and grow more efficiently too,” he told Webster.

No More Running to the Bank 

Though the rebound from COVID-induced nadirs is undeniable, there’s still some friction in the mix. Data shows that 50% of Main Street SMB owners say economic uncertainty could hurt their performance this year.

Thus, cash flow remains top of mind. We see a continued shift away from paper checks, noted Bar, and a continued embrace of digital payments solutions from providers such as Melio. That shift has been spurred by the fact that during the pandemic — with businesses and banks closed — it became impossible to get to the office to cut checks, send them, receive them and deposit them.

With digitization becoming more firmly entrenched, businesses find positive ripple effects in the form of time saved (no more going to the post office to mail checks) and cash flow flexibility.

“Being digital means you have more payments choice,” said Bar, “and having more choice means you are able to manage you cash flow in ways that can smooth financial volatility.”

Traditionally, he told Webster, Main Street SMBs have not been as well served by traditional financial institutions (FIs) relative to their larger brethren. Bar added that mid-sized or larger enterprises have dedicated finance teams in place, with accounts payables and receivables executives and a level of financial expertise that SMBs may find elusive.

But partnering with financial services firms (Melio among them) can level the playing field a bit, said Bar, as these providers can leverage the data needed to help SMBs make smarter and timelier decisions.

As he observed, “There’s no reason that a vendor payment should be more difficult than paying a friend with Venmo.”

See also: With Innovation, Main Street SMBs Poised to Outperform Broader US Economy

Getting to that ease of use and intuitive payment experience, he said, means that firms must embrace centralized tech solutions and platforms, integrated with a range of back-office systems that help them eliminate the check.

In turn, that means SMBs can bypass the guesswork involved with deposits and settlements that can take days — and business owners can take comfort in the certainty that comes with knowing when funds will hit their accounts.

Having greater visibility into cash flow — and greater flexibility — means SMBs can hold onto their funds and pay bills “later” (though not late) to more closely align spending with income. He pointed to the recent agreement where Melio partnered with Capital One to enable enterprises to pay their vendors from the issuer’s payment portal.

Reflecting on the current situation confronting SMBs, Bar said that consumer spending is still strong, but everyone is aware of a potential recession. Businesses have proved flexible through the past few years, and they will have to keep being flexible as they navigate the present and future challenges wrought by macro pressures.

“There are many reasons to be optimistic about being a small business owner,” Bar said, adding that “having a clear understanding of incoming payments and outgoing payments is the foundation to making good financial decisions.”

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