How Platforms Can Leverage Embedded Finance to Help SMEs Overcome Cash Flow Challenges

Insight Report - A Guide for Platforms Serving SMBs and Enterprise Customers

4 Mistakes Small to Medium Enterprisess Make that Result in Cash Flow Problems

Cash flow limitations are the stuff of nightmares for many small-and-medium size businesses. The challenges of poor payments, fraud, refunds, card fees, and chargebacks translate into difficulties meeting payroll, paying vendors….and achieving overall peace of mind.

Unfortunately, the nightmares don’t end when morning comes. Late payments, poor payment practices, limited cash flow, and fraud seriously inhibit SME stability and growth. According to The Institute of Chartered Accounts in England and Wales, half of the invoices issued by small businesses are paid late, with the average payment nearly a week late. The cost to business owners is £684 million a year. Worse, according to another report by the National Federation of Self-Employed and Small Businesses, nearly 440,000 companies could be forced to close down thanks to poor payment practices and cash flow management.

Causes of Cash Flow Problems for Small to Medium Enterprises

How can your business avoid the cash flow difficulties that are so prevalent in today’s tough economic times? Here are four mistakes SMEs make:

  1. Neglecting customers: Maintaining robust and healthy customer relationships is critical at this time, especially for SMEs that operate in fractured and under-pressure markets, such as retail and tourism, where uncertainty is having the most significant impact right now. SMEs must cement customer relationships and create solid foundations to ride out the oncoming economic storms.

  2. Tolerating late payments: According to a recent survey undertaken by Barclays, late payments hurt a company’s income as they can directly limit the company’s ability to hire new people, explore new business opportunities, invest back into the business, cover bills and mandatory expenses, and maintain a level of liquidity in the event of uncertainty. A business cash flow throttled by late payments can ultimately force a company to close its doors.

  3. Overlooking international opportunities: Many SMEs struggle to be noticed by customers outside their local environments. This is often due to poor marketing, limited promotional tools, a lack of expertise in growing globally, and limited payment options. With the growth of globally-accessible marketplaces, companies can tout their wares to customers worldwide.

  4. Cash flow trapped in receivable: SMEs must regularly check their sales against their accounts to ensure there are no discrepancies and that payments are on time. SMEs with a solid grasp of their accounts receivable are more likely to find and rapidly address potential cash flow issues before they become problematic. 

An All-inclusive Digital Solution

How can you find more time to build customer relationships, make it easier for customers to pay their invoices on time, attract more global customers, and ensure efficient payment reconciliation? Click here to access “Insight Report - Leveraging Embedded Finance to Transform Payments for Small to Medium Enterprises.” The Insight Report introduces the increasingly flexible and innovative digital solution of embedded finance for SMEs, and explores how digital, embedded, and real-time business support tools and payment systems can open up new distribution channels that allow SMEs to better connect with their customers while enhancing payments and solving cash flow problems.