Small Businesses’ Focus Turns to Improving Cash Flow

Lingering inflation and supply chain issues could leave small businesses in a cost-cutting scramble this year.

PYMNTS’ study, “Main Street Health Q3 2022: SMBs Battle Inflation,” revealed that only 54% of domestic SMBs expected revenues to increase last year, down from 64% in November 2021. Even more concerning, 12% of surveyed firms believe they may not last to see 2024.

Inflation has been a driving factor in affecting small businesses’ cash flow, with nearly four in 10 citing it as their greatest challenge last year. Surveyed small businesses noted product prices rose 11% and business costs were up 12% during the same period.

Although digital tools for consumer-facing payments continues to innovate at a rapid pace, B2B payments often remain frozen in legacy systems, including manual practices.

Small businesses particularly need easier payment experiences and help with cash management. However, their path to this goal may be challenging, especially for small businesses who have previously relied on ACH or paper checks. One solution may lie in using a single AR/AP automated solution to manage payables and receivables.

These all-in-one payments platforms can be valuable for SMBs aiming to simplify financial operations management, with PYMNTS’ research finding 52% report that utilizing one of these solutions led to easier cash flow management. Forty-one percent of SMBs said that all-in-one payment platforms simplify receivables tracking, and 32% using the technology led to improvements in working capital.

Many small businesses, however, are reluctant to adopt all-in-one platforms. Fifty-seven percent of SMBs were uninterested in such tools as an alternative to their current setups because of concerns about complicating their AR/AP processes. Only 18% of SMBs were very or extremely interested in trying an all-in-one payments platform to receive payments, with similar concerns about complicating their payments processes.

These concerns about complexity may be why the right third-party B2B payments partner is an important consideration. In an interview with PYMNTS’ Karen Webster, Plastiq CEO Eliot Buchanan explains why small businesses might find partnering with a third party to be a more streamlined process than an SMB’s legacy system. “SMB owners are control freaks and they want to touch and control all aspects of their operations…but as they scale, they can’t take it all on.”

When partnering with a third-party offering an advanced automated single payments platform, businesses can accelerate customer payments and reduce the administrative overhead associated with invoice delivery. For small businesses seeking cost-cutting strategies to carry them into 2024, an automated payments system could be a seamless solution.