Article | March 3, 2020
In the 2019 Global SME Pulse, small and medium businesses around the globe said they anticipated slower revenue and profit growth, but 74 percent were still willing to take big risks to ensure their success. No surprise there. For small business owners, their work—and their success—is personal, and small business employees are often equally invested. Together they innovate, push boundaries, and take risks; they’re willing to try new ways of getting things done as they grow and protect what they’ve worked so hard to build. These same qualities apply to how small businesses embrace and use technology. It’s not something they think about constantly, but it is another valuable tool to help drive their business.
Article | March 3, 2020
Treasury management or more generally Supply Chain Finance management is still a neglected topic at many SMEs.
While large international corporations make the investment into expensive treasury management solutions (often part of their ERP solution) and even setup their own In-House Banks, this is considerably more difficult for the mid-corp segment and even more so for the smaller segment of the SMEs. Often SMEs lack the funding, time and expertise to deploy those platforms and often those platforms lack the flexibility required by an SME.
Nonetheless in this globalized competitive market with fast moving cash, even SMEs are in need of an effective treasury management. Every SME has its own specific challenges, due to its specific payment cycles and cash reserves. Nonetheless most SMEs (estimated to about three-quarters) still do their treasury management via (complex) Excel sheets, requiring a lot of manual effort. This gap forms a big opportunity (in Europe SMEs account for more than half of all gross value added) for incumbent banks and Fintechs to offer easy and user-friendly tooling for this. In recent years, more and more Fintech players try indeed to provide an answer to this gap, often via SaaS platforms, which connect easily to the customer’s banks (via Open Banking APIs) and for which the setup cost is limited.
The gains for an SME in optimizing their treasury processes can be very substantial. A good treasury management can reduce costs in multiple ways:
Reduce working capital by reducing the time to collect money from customers, by reducing inventory and/or by paying suppliers only at the payment due dates.
Reduce unpaid invoices by a better follow-up and good debt collection techniques
Reduce penalties (such as administration costs or late-payment interests) due to late payments and indirectly also improve the relationship with suppliers.
Reduce effort (resource workload) for financial management, like the follow-up of payments of incoming and outgoing invoices, automated generation of payment instructions for incoming invoices…
Optimized cash management allowing to keep on your current account only the required cash amount to run your business, thus allowing to invest excess cash, but also to avoid requiring short-term debt when too much cash is invested (and blocked in medium- to long-term assets)
Reduce foreign currency costs and exposure risks by keeping the right reserves of foreign currencies, applying hedging (like swaps or options) techniques, correctly taking forex rate fluctuations into account in future cash flow predictions…
Reduce transaction commissions for bank transactions, by selecting the right banking products, but also by using the right banking partner(s) (especially for international foreign currency payments big price differences exist between different banking parties)
Reduce cost of fraud by improving control, transparency and accountability via a pro-active, automated monitoring of all cash flows, allowing to detect anomalies as soon as possible
This can be achieved in multiple ways:
Setup and optimize the processes and tooling with the help of specialized services companies (like e.g. the offering of BelPay)
Setup or acquire software solutions (often in the form of SaaS offerings, i.e. Treasury in a Box) for cash & liquidity management, like invoice generation and follow-up (including invoice and payment matching), debt collection, incoming invoice processing (including payment), cash pooling, cash forecasting/capital planning… These software tools allow a more pro-active treasury management and reduce manual effort by automating certain steps in these processes. Examples of such platforms are HighRadius, Gtreasury, CashForce, Kyriba, Nomentia, Monite, Pair Finance, AiVidens… But there are also more specialized tools, offering only a specific service, like debt collection (e.g. Virteo, recovr, Pair Finance, TrueAccord, CollectAI, CollectionHub, inDebted, Attunely…), digitalization (through OCR) of paper invoices (e.g. Tangentia, Contract.fit, Metamaze, Klippa, SimpleOCR…), expense management (e.g. Payhawk, Rydoo, Expensify, Spendesk, Pleo, Circula…), account aggregation and payment initiation (e.g. Isabel 6/Ponto)…
Capture revenue by allowing customers to pay for products or services in a way that is most efficient for them and for the SME, allowing to increase sales, but also to ensure the best possible payment ratio. This includes solutions like digital onboarding and management of Direct Debits (e.g. via Twikey or DigiTeal), including a Pay button (e.g. via Twikey or POM) in invoices which allows to pay the invoice with a pre-filled credit transfer, card payment or other payment option, integration with PSPs (like Adyen, Mollie, MultiSafePay, Ingenico, Stripe…) for online payments, digital invoicing allowing to combine invoicing and payment (e.g. PEPPOL platform or offering invoices with immediate payment option via UnifiedPost, ZoomIt or Doccle), "Buy Now, Pay Later" solutions (like Klarna or AfterPay) or new solutions like PSD2 Payment Initiation or the upcoming new scheme of SEPA Request to Pay (SRTP).
Improve integration between accountancy software (and/or accountant) and the cash management solutions and associated bank accounts. Solutions like Silverfin, TOCO, Yuki, OkiOki, Billit, Furoo, Clearfacts, Billtobox, sevDesk, Candis… can provide (a part of) a solution to this.
Usage of solutions for cash management (e.g. international cashpooling, sweep accounts…) and more general treasury management services offered by banks to their customers. These can be incumbent banks or new Fintechs, which specialize in the niche of serving SME customers. Examples are Tide, Qonto, Azlo, Arival, Fyrst…
Reducing costs of international payments and forex transactions via new Fintech offers, like XE.com, TransferWise, CurrencyTransfer.com, WorldFirst, iBanFirst, Ebury…, but also via specialized software tools, like Kantox, FiREapps, Money Mover, Acumatica…
Get cheaper financing via specialized credit institutions and banks (e.g. OakNorth, CapitalBox…), by issuing commercial paper (short-term paper) or long-term debt, via crowdfunding and peer-to-peer lending (e.g. Funding Circle, Auxmoney, LendingCrowd, Iwoca, Look&Fin, Crowdcube…), via Credit Lombard loans or inventory-based loans (e.g. Finventory) or via invoice factoring (e.g. Edebex, Previse, Optimum Finance, GapCap, BlueVine, BillFront, Crowdz…). There are also more and more marketplaces and comparators assisting SMEs to find the best financing option, e.g. Funding Options, BusinessComparison, Crowdz…
Improve risk management (like currency risk, interest-rate risk, market risk, credit risk, counterparty risk…) via trade finance, like bank guarantees (cfr. Ebury), via better authorization and fraud detection mechanisms (detecting patterns and anomalies) or by better assessing counterparty risk (e.g. DueDil, InsideView, PitchBook…)
Apply tax optimizations, by optimizing for different tax regimes worldwide and also optimizing for tax deductions (like e.g. generate revenue on entities which have collected losses in the past)
Clearly the Fintech market for SMEs is in full evolution, but still quite immature. As a result dozens of offers exist, making it very difficult for SMEs (which was one of the reasons in the first place they work with Excel) to select the best and right offering(s) for their company. As such there is a big market for consultancy and other services firms, specialized in helping SMEs to improve their treasury management processes.
Article | March 3, 2020
An entrepreneur who opens a coffee shop or launches a FinTech startup isn’t in business to crunch numbers and file taxes. Yet, the burden of financial management, from tedious data entry to compliance challenges, is a nonnegotiable part of starting a small business (SMB). Waseem Daher, CEO of Pilot.com, recently told PYMNTS that this burden was felt acutely within two previous businesses he had founded, leading to a wake-up call. “In our very first company, we were totally bootstrapped — and because of that, we had to be very frugal, so we did our own bookkeeping,” he said. “In retrospect, it was a big mistake. It’s not a high-level use of any founder’s time, but it opened our eyes to the problem.”
Article | March 3, 2020
Small businesses are the backbone of the US economy, generating local jobs and innovation while encouraging entrepreneurship among minorities, women, veterans, and other community segments.
As stated by Florida tax monitor data, small companies employ 48% of all Americans and generate 43.5 percent of the country's gross domestic product (GDP). At the speed of light, the corporate environment is continuously moving to new digital technologies. However, many small company owners are unable to keep up with this small business digital transformation.
In the opinion of recent Google-commissioned small company research, 80% of small businesses in the United States are not fully utilizing digital technologies. A few more reasons at play prevent small firms from adopting digital technology and falling behind on digital transformation trends.
Ignoring digital benefits or refusing to adjust is a surefire way to fail in a constantly evolving digital world.
"At least 40% of all businesses will die in the next ten years… if they don't figure out how to change their entire company to accommodate new technologies."
— John Chambers, Cisco
Factors Contributing to the Lag in Digital Transformation Race
Keeping up with New Technologies Is Tough
Numerous small business owners are unable to keep up with emerging digital transformation trends. Various digital opportunities for small businesses exist to employ in their operations. However, companies lack the will to leverage digital capabilities and so fall short of their full potential. In addition, limited resources create an impediment to digital adoption inside. Employee experience and digital skills are other significant impediments to SMBs adopting digital technologies.
Small businesses need to overcome their fear of change to capitalize on the digital dividend, accelerate growth, and scale effectively.
Change in Customers Behavior and Persona
Changes in customer behavior and knowledge of SMB consumer personas are critical components of small business digital transformation and are the primary issue confronting small business owners. The most significant change that small companies anticipate in the next five years is a shift in consumer expectations and personas.
Owners believe they understand their businesses since they are small or medium-sized business owners. Still, customers have a different perspective more than 70% of the time due to social and digital transformation trends. For the next five years, the top three consumer trends are expected to increase product or service customization, increased emphasis on customer experience, and higher expectations of quality or value for money.
"Clients are going to expect a lot of personalization in their businesses; consumers are going to expect the same. To avoid data silos, having an emphasis on driving real-time information from customer data and sources is core for any company to become digitally native."
– Bibhakar Pandey, Vice President & Leader of Customer Experience, Marketing Services, Capgemini.
Need Assistance for Right Decisions
Making technological decisions is challenging for small firms. Additionally, many business decisions are made by small business owners. Therefore, they must have the appropriate knowledge and help when making digital decisions involving various conflicting obligations.
Because the costs of digital technologies are so high, it is critical for small businesses to have sufficient information about the value of sales, service, and marketing technologies to select the appropriate digital systems, upgrade digital skills, and provide adequate protection and security. In addition, the small owners need timely assistance to cope up with small business digital transformation.
Small firms have several digital gaps in various areas, including internal skills gaps, financial gaps, and digital infrastructure shortages. Due to the utilization of high-speed internet connections and cloud-based technologies, these disparities are more significant for small businesses than large enterprises.
The owners need to cope up with different stages of digital transformation in small businesses. However, there is no denying the link between digital and productivity, which is critical for productivity.
Digital Transformation Approaches:
Adoption and Upgradation to CRMs
To evaluate client behavior, it is critical to implement and improve your customer relationship management system (CRM). In addition, businesses should leverage cloud-based solutions to strengthen their relationships with their consumers.
According to Deloitte, SMBS that use CRM generate 44 percent more income than those who do not have a system or only have a rudimentary system. However, numerous CRM features, such as omnichannel customer care, marketing automation, social tools, and predictive analytics with automation are not part of the classic CRM model.
"Right from the start, based on our ICP, we focus on what level of personalization and automation needs to be built out and what touchpoints like overlays, retargeting, and remarketing are to be done to convert the customer in the end and take them to the SQL stage."
– Amitabh Ramani, Global Marketing Director, Jade Global.
Adoption and up-gradation of CRMs will open new digital opportunities for small businesses.
Improvement in Digital Infrastructure
To fill the digital gap and be a part of digital transformation trends, small businesses must embrace high-speed broadband for small business digital transformation. In addition, adopt digital technologies in the workplace to enhance SMB productivity and connectedness.
By incorporating innovation and technology, small firms may increase their competitiveness.
Below are few actions that can be taken for more digitally engaged small businesses:
Raising awareness of digital opportunities
SME training and upskilling programs
Promoting business innovation and the provision of new digital solutions
Implementation of Sales and Marketing Tools
In today's competitive corporate climate, the focus is firmly placed on the sales and marketing aspects of the enterprise. As a result, small businesses strive to capitalize on possibilities for personalized marketing based on prior interactions or sales and engage clients through customized marketing.
Amaysim is an example of a company that focuses on customized marketing using a cloud-based marketing platform; they ensure timely marketing communication and connect with clients in real-time via SMS.
Only one in every five small businesses uses digital tools or social media platforms to acquire new consumers or connect with existing clients. Incorporate artificial intelligence into different business processes, such as predictive analytics, automated product recommendations, and upgrade suggestions based on consumer behavior.
Shift to Online Interactions
Face-to-face transactions have decreased as a percentage of total sales, and the line between physical and digital is becoming increasingly blurred, resulting in behavioral adjustments.
The purchase is moving due to internet channels, or you might say that more consumers favor online purchases over in-person transactions. With the increase in online sales, small companies also need to enhance their delivery services to keep up with the demand. In addition, the shift in communication channels to emails, social media platforms, and websites have altered consumer behavior about enquires and complaints. As a result, implementing CRM software for service interactions has become a necessity of the hour to ensure a fast response.
Shift to online interactions of sales or any business operation is an escalating demand for small business digital transformation.
With the evolution of digital trends in small businesses, owners can leverage small business digital transformation benefits by using the techniques as mentioned above. Regular use of digital tools may help small businesses enhance their performance and adapt to dynamic business conditions and changing consumer expectations and the surrounding environment. Engage small companies in new digital prospects for success and business growth, resulting in a greater return on investment (ROI).
Why is digital transformation important for small businesses?
Digital transformation enables small businesses to ease out their operations, increases efficiency, automates workflow, helps to improve customer relationships. Adopting digital transformation enables to fulfill changing behaviors and needs of customers.
What are the most significant trends of digital transformation?
Here are few significant trends of digital transformation in the coming year 2022 that will impact the work culture of businesses.
Improved connectivity (5G)
Multi-cloud and APIs
What are key areas of digital transformation?
The key areas of digital transformation are as follows:
Business process transformation
Business model transformation
"name": "Why is digital transformation important for small businesses?",
"text": "Digital transformation enables small businesses to ease out their operations, increases efficiency, automates workflow, helps to improve customer relationships. Adopting digital transformation enables to fulfill changing behaviors and needs of customers."
"name": "What are the most significant trends of digital transformation?",
"text": "Here are few significant trends of digital transformation in the coming year 2022 that will impact the work culture of businesses.
Improved connectivity (5G)
Multi-cloud and APIs"
"name": "What are key areas of digital transformation?",
"text": "The key areas of digital transformation are as follows:
Business process transformation
Business model transformation