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Key Insights on Improving Cash Flow in Small Businesses

The battle for cash flow has been a long-fought one, and small business owners are continuing to find creative ways to make and receive payments on time.

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Credit: iStock/BrainOnAShelf

Money. Capital. Funds. Profits. No matter the term used, small business owners everywhere are performing the same payments-in-payments-out balancing act to keep business going.

The battle for cash flow has been a long-fought one, and small business owners are continuing to find creative ways to make and receive payments on time. According to research by PYMTS.com, sponsored by Sage Payment Solutions, one-third of survey respondents said their biggest concern is getting paid on time, and 14% said they were very or fairly frustrated with their invoicing system. SMBs often struggle with liquidity issues since they can’t tap into an equity market or sell corporate bonds like larger businesses can.

We surveyed 1,000 small business owners and 1,000 consumers to gauge their overall impression of different factors impacting the payments industry, such as cash flow and late payments. If you own a small business and are looking for ways to speed up cash flow, here are some ideas your peers have implemented throughout the year.

1.   Make technology upgrades

In their view, the main barriers to accelerating payments in and out of a business are internal procedures. Fifty-two percent of businesses agree that technology such as management dashboards, would help improve their view of payments in and out, speeding up the processes for paying suppliers, employees, and customer payments. Research software services that can integrate with your payments process to help with accounting. Some also feature invoice reminders to encourage customers to pay off their balances quickly. Beyond the hassle-free transactional aspect of integrated payments, this approach can also yield a trove of useful data about customers’ buying habits, sales trends, and other essential forms of business analytics.

2.   Consider funding options

Traditional banks are still the most popular funding method among small businesses, but 34% of businesses who responded to our survey feel that traditional banks have not made much effort to make business loans available for small-business owners. This has spawned a trend toward alternative financing options, such as peer-to-peer lending and crowd funding. In this survey, 62% of respondents said crowdfunding is a much easier option for funding, and 68% said they would use it again. With thorough research, both traditional and alternative funding are viable options.

3.   Offer customer convenience

The more convenience you add to your payments offerings, the more likely your customers are to pay you on time. If your customers can solicit or inquire about your services online, it’s best to allow them to pay for your services there as well. As a bonus benefit, this also elevates customer experience and increases the chances of returning and referred business.

4.   Be aware of changing payment trends

For small businesses, it seems there will always be new challenges when it comes to being paid in a timely manner. Some large consumer goods companies, for example, now have payment terms of up to six months. Businesses that supply these large companies certainly don’t appreciate being treated as, in effect, a lender; however, the bigger concern might be that smaller businesses adopt this troubling trend and try to extend their own payment windows. It’s certainly something for small businesses to keep an eye on and must determine how to respond.

Want more insights into what’s trending in payments? Interested in changes to consumer shopping habits? Download the 2017 Payments Landscape Report.

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