Small Biz Cash Management Struggles Across The Globe

Between the rise of blockchain technology, the market debuts of faster payments initiatives and the advancements in virtual card capabilities, small businesses have more choice and power when it comes to their payments needs. But B2B payment habits continue to stifle suppliers’ growth plans across the globe, found the latest Working Capital Outlook Survey released by C2FO this month.

In the U.S., there is evidence that B2B payment practices are improving. Just 14 percent of U.S. SMEs told C2FO that their corporate payers are paying late, down from 20 percent last year. But the U.S. experience is not universal: In the U.K., for instance, 20 percent of suppliers reported having to deal with late payments, up from 11 percent last year.

Italy has the highest rate of late B2B payments, with 50 percent of small businesses there reporting that they have been paid late. France also has a higher rate of late payments at 27 percent, while Germany came in at 18 percent.

Globally, three-quarters of small businesses surveyed said supplier-friendly payment options that support faster payments are important to them. Again, the importance of faster supplier payment options has also increased in the U.S., from 56 percent reporting demand last year to 77 percent this year.

Diverse Financing Options

What all of this means, C2FO concluded, is that small businesses need to get creative — and diverse — when it comes to accessing working capital.

“The increasing need for liquidity is pressing SMEs to pursue a variety of funding sources,” said C2FO SVP EMEA Colin Sharp in a statement. “However, as the large majority of SMEs still finance themselves with cash flow from operations, there is a significant opportunity for businesses to optimize working capital through better relationships with customers and better use of accounts receivables.”

Indeed, 76 percent of SMEs in the U.S. and EMEA told surveyors that they access cash flow from their operations. But C2FO identified asset-backed loans and other traditional bank financing options as rising in popularity. Meanwhile, nearly a fifth turn to invoice financing solutions, and 18 percent cited peer-to-peer lending options.

According to C2FO Chairman and CEO Sandy Kemper, global economic conditions are impacting small suppliers’ cash management habits, and their diverse approaches to finding working capital reflect that.

“The aberrationally low interest rate environment is polarizing the global liquidity imbalance,” the executive noted. “Corporates are increasingly being charged to hold deposits, while banks themselves are struggling with increased regulatory burden that impedes their ability to loan to the SMEs, which are such an integral part of the global economy. It is therefore increasingly important for those SMEs to consider alternative financing options that can close this gap and kickstart economic growth.”

Plans For Growth

With late payments to deal with and with so many options to fill their financing gaps, small businesses have their sights set on growth — but are well-aware of the challenges in their way.

More than 60 percent of suppliers surveyed said they are worried about their ability to finance their long-term growth plans — with SMEs in the U.K., Germany and France reporting the highest rates of concern. If they could access affordable financing, small businesses said they would use it for long-term growth, like purchasing more inventory and equipment or investing in emerging technologies.

But cash is hard to come by. According to C2FO, the majority of SMEs surveyed said cash flow is their largest obstacle in the way of their long-term growth plans. More than 40 percent said their working capital needs have increased compared to last year.

From the U.S. elections, to Brexit, to wavering interest rates, the financial experience of small and medium-sized businesses fluctuates from market to market. But C2FO’s survey uncovered the global challenge of accessing cash in the midst of late payments and a need for growth, regardless of where that business exists.