Just about every small business will face at least one moment in its lifespan in which working capital is running low. A mom-and-pop shop on Main Street has plenty of options to access funds, from alternative lenders to banks.
But often, the quickest route to working capital is through customers. Making it as easy to pay as possible is the first step, but accelerating the availability of funds in the business bank account and using payments data to drive valuable insights are key to a robust working capital strategy.
Doron Friedman, co-founder and head of product at SpotOn, recently spoke with PYMNTS about the importance of financial analysis to not only improve transparency into cash flows but to actually increase those flows through more strategic customer interactions. Plus, he explored the implications of easier payments acceptance, including the opportunity for small to medium-sized businesses (SMBs) to dip their toes into the world of cryptocurrency.
Unlocking Financial Insights
With consumers continuing to dramatically accelerate electronic payments adoption, small businesses now have the opportunity to access troves of valuable transaction data straight from the point of sale. Financial reporting technology that can access that transaction data in near real time allows small business owners to obtain the most up-to-date picture of their current financial positions.
Friedman said SMBs must take a twofold approach to financial analysis.
“If you combine a B2C payment solution with great reporting, what you are showing small businesses is a bit of [a] better picture of their business, so they can see how well they’re doing and what their trends are,” he said.
For instance, analytics technology integrated into a POS terminal can put this transaction data in front of a small business owner and unlock insights that can help that business owner understand how cash flows today compared to the same time last month or last year.
But this kind of financial reporting can go a step further by integrating into other data sources about the customer, noted Friedman. Technology that can unlock insight into customer profiles and buying information can also yield more effective strategies at increasing revenues and strengthening cash flow.
“If you have a marketing campaign that you want to send out or you have a mobile app where customers can go ahead and click on that marketing app and buy something right away, you’re basically a marketing campaign and a click away from cash flow,” he said.
Crypto Enters The Fold
Making it as easy as possible for customers to make payments is critical to accelerating the availability of those funds and driving revenue. But lowering barriers to payment acceptance is also pushing SMBs into more complex cash flow management territory.
Among the most dramatic examples of this trend is a rise in cryptocurrency adoption. Friedman noted that there are several potential benefits for small businesses that embrace crypto, including fostering a more positive customer payment experience and the ability for small businesses that accept crypto to make their own crypto-denominated payments as well.
Today, he said, there are two types of cryptocurrency users: the “enthusiasts” and those that would prefer to gradually dip their toes into the water. Cryptocurrency payment acceptance can be beneficial to both categories.
“I think the future of blockchain and crypto is really giving the enthusiast the ability to buy merchandise with crypto,” said Friedman, noting that this applies to both the consumer and small business.
Allowing small businesses to accept payment in one method, like cash, but receive those funds in crypto is another value-added opportunity for small business payment service providers, he added. Conversely, small businesses that may be more timid with cryptocurrency may want to support crypto acceptance but receive payouts in fiat.
For all small businesses, this has significant implications for cash flow management strategy. Friedman also pointed to large conglomerates like Tesla, which are procuring cryptocurrency to hedge against inflation — signaling another opportunity for smaller businesses to take advantage of crypto in the same way. SpotOn is now looking to help its SMB clients wade into the crypto waters with the addition of Austin Trombley as its new executive vice president of alternative payments,
Regardless of if and how deeply small businesses jump into the cryptocurrency world, payment acceptance strategies must be future-proofed. For a solid cash flow management strategy, Friedman said SMBs must be able to lower barriers for customer payments, regardless of how they wish to pay. Doing so means greater access to valuable transaction data that can then be turned around to support more effective strategies at driving revenue and bolstering cash flow.
“That’s really where the power of payments, data and reporting actually comes together,” Friedman said.
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