With traditional sources of funding proving hard to come by during the height of the pandemic, small and medium-sized businesses (SMBs) responded by investing into digital payment solutions in an effort to speed up their access to capital.
According to PYMNTS’ report on the Digital Transformation of Main Street SMBs, those investments have paid off extremely well, with two-thirds of SMBs reporting revenue increases as a direct result of those innovations.
“Digitizing operations and having more flexible payment options and choices for customers has been a huge innovation for SMBs,” said TreviPay Chief Executive Brandon Spear in an interview with PYMNTS. “It’s helped them garner more business and a larger share of wallet.”
Digitization has proven advantageous for SMBs in many ways, Spear explained. He talked about the simple matter of invoicing, and how beneficial it can be for everyone if an SMB can convince its suppliers to use a centralized invoice portal. Not only does it clear up the complexity of dealing with masses of PDFs and emails coming from different directions, it also has benefits for the supplier too.
“For the small business, if you can convince them to load their invoice through your customer invoice portal, they’re able to see quickly and in real-time when their invoice has been approved,” he said. “So then they can see when it is going to be paid. And the probability of that invoice being paid on time also becomes that much higher.”
He added, “It’s an interesting way of using a carrot to say, if you load your invoice into my portal, there will be more visibility on when I’m going to pay you, so you can plan your cash flow and manage your business more efficiently.”
It should be a priority for SMBs because freeing up capital can only ever benefit them, Spear said. He told PYMNTS the most interesting place for any SMB to try and make improvements to cash flow is with its accounts receivable. Their focus, he said, needs to be on finding a way to compress that.
“So if you’re at 33 days and you can bring that down to 30 or 29 days, or if you can work with other partners and maybe even take that down to just two or three days, you can free up a tremendous amount of working capital,” he said. “Having a more efficient receivables process is really crucial for smaller businesses.”
With any luck, digitization will play a big role in that efficiency, and perhaps one day it may even help to bring waiting times down to as little as a few hours. Spear said TreviPay is already seeing real-time payments take shape in Europe and he believes North America is headed that way too.
“There’s going to be a situation very shortly where, if you trigger a payment, it’ll be in your bank account in minutes or hours, not necessarily days like it is today,” he said.
When that happens SMBs will inevitably be able to put a lot more focus and emphasis on eliminating the barriers to getting an invoice approved quickly. Spear pointed out that once an invoice has been approved, the real-time nature of today’s payments infrastructure means the money should really be able to flow without any delay. If and when that happens, we may finally realize the long-awaited consumerization of business-to-business, in which B2B commerce finally replicates the rapid pace of consumer transactions.
Spear said there’s still a bit of complexity to solve for that to happen, but he is optimistic that it’s realistic goal for the near future.
“When you’re the consumer there’s one decision maker at that point in time — you,” he said. “In the B2B world it’s different, there’s the person who owns the budget, the person who actually does the buying, and the person who does the payments. There’s a multitude of decision makers. The consumerization of that process is a challenge and it’s one we’re all working on solving.”