Cash flow is that thing that can keep a business owner or executive up at night — and night after night, after night. Cash flow is that thing that can ruin a cocktail hour with thoughts of missing payroll, or make minds drift while watching a baseball game with worries about how to afford vital supplies. Cash flow is that thing that, if handled poorly, can kill a business, with the dangers usually higher for smaller operations.
It’s a problem — Bill Sheley, senior vice president and global head of Visa Direct, and Rishav Chopra, head of strategy, operations and revenue optimization for Intuit (owner of QuickBooks), recently told Karen Webster during a PYMNTS interview — that digital technology is making big strides to help overcome. Indeed, PYMNTS caught up with Sheley and Chopra in advance of the Wednesday (Oct. 9) launch of Instant Deposit — a service that enables business owners who use QuickBooks, and have eligible debit cards, to instantly access their money earned from the sales of goods and services, and do so via the Visa Direct real-time push payment rails.
SMB Financial Health
“Cash flow is the number-one consideration, and the number-two consideration, and the number-three consideration for small businesses [SMBs],” Sheley told Webster. Chopra added his own take, saying that four of five new businesses fail because of cash flow issues. Indeed, cash flow can impact all areas of business, from the supply chain to payroll to hiring to other operations — to say nothing of the emotional state of business owners. Forty-three percent of SMBs said cash flow is their largest business challenge today, recent KeyBank research revealed. That’s followed by 24 percent that pointed to operating costs, and 14 percent that said financial control, are their biggest concerns.
“Cash flow is very closely tied to financial health,” Chopra said.
That’s the massive and ongoing problem. The solution, at least from the Visa-Intuit point of view, is to integrate Visa Direct into the QuickBooks Payments system to enable such payments. QuickBooks Payments users can access their cash pretty much instantly — well, after no more than 30 minutes at most — by entering their eligible debit card numbers into their QuickBooks accounts. According to Sheley, some 98 percent of debit cards are eligible, though Chopra indicated that the service will not be fully rolled out until the end of the year.
Giving SMBs Their Own Sweep Accounts
“There are a ton of different applications for this,” Sheley said. The service gives the participant choice and transparency into cash flow, he explained. “You collect money in exchange for goods and services, filling up your till all day long. [The service says] ‘here’s what your till looks like,’ and if you want immediate access to cash, ‘how do you want to get paid?’ You enter your debit card and move [those funds] into your liquidity account.” Users pay a 1 percent fee per Instant Deposit transaction.
As Webster pointed out, the new service basically amounts to a sweep account for smaller businesses. Chopra agreed with that assessment.
The Instant Deposit service comes with a $50,000 per-transaction limit, but is otherwise available to even the smallest businesses that use QuickBooks Payments. “We don’t put any qualifying criteria on it,” Chopra said.
There is little question that many small businesses will find such digital services useful — not only now, but in the coming years. After all, according to ScaleFactor, 43 percent of SMBs with between 20 and 99 employees said credit cards are their top funding sources — another sign of broken down cash flows. That said, 42 percent of the small businesses polled don’t currently use a back-office accounting software solution — a possible hiccup when it comes to adoption of such instant deposit tools. Of the rest that do, business owners pointed to time saved and fewer errors as their top benefits to the technology.
Cash flow will always be a top concern for businesses, and one can bet that more digital innovations will be coming down the pike as possible solutions for that basic problem.