Imagine being the owner of a small independent retail store. A majority of your revenue stems from holiday sales each year, but to prepare for the rush, you must order additional inventory and hire extra staff weeks before Halloween. Meanwhile, most of that revenue will not arrive until December or even January.
Managing such a variance in cash flow can be a challenge and if not managed properly, it can prove fatal for a small business. In fact, failure to pay attention to and manage cash flow is the second most common reason small businesses flop, according to research firm CB Insights.
While cash management tools are nothing new, most of these tools are very expensive and sophisticated and geared toward large corporations. The prohibitive costs coupled with the lag in business banking technology has led many small business owners to make do with a regular retail account, which still does not meet their financial needs. For credit unions to best serve these members, they must close the gap between consumer and corporate financial offerings and deliver the appropriate level of cash management services.
First and foremost, business members should be able to manage their cash flow from any location and from their preferred device. Members on the consumer side have enjoyed the ability to manage their finances using smartphones and tablets for several years, so today’s business owners expect a similar experience. Beyond a more familiar and consistent member experience, offering digital banking capabilities for businesses provides these members with more control over the disbursement of payments. Members should have the ability to transact payments electronically, which allows businesses to hold their cash longer because they can determine when the funds will be withdrawn from the account.
For small business owners, receiving payments consistently and on time is essential to success. Offering an electronic invoicing option is one way to help ensure timely payments. With electronic billing, members can personalize business invoices and schedule payment reminder emails as well as past-due notifications.
Business remote deposit capture is another tool that can help small business owners optimize cash flow. This enables members to deposit multiple checks without spending time commuting to and from the branch while eliminating the accumulation of fees for several checks. Credit unions can also offer later deposit cutoff times with remote deposit capture, another convenience for small business owners who are often strapped for time throughout the day.
Additionally, providing more flexibility for account management can help small business owners exercise control over their finances with greater efficiency. Account management controls allow members to delegate appropriate account access to their employees. For instance, an owner can grant access to one employee to view information on a specific account while the business’ accountant may have permission to view all accounts and transact bill payments. As a result, the business owner can securely maximize operational efficiencies while maintaining control of their company’s finances.
Most importantly, credit unions must make it easier for small business owners to understand their cash position. Reporting tools that visualize data can help members quickly gain insight into their accounts, including balances, posted transactions and disbursements. This ability to review the current cash position of the business and identify cash flow trends over a period of time empowers small business owners to make the best possible decision for their business and its bottom line. For credit unions, cash flow reporting tools house valuable data that can be analyzed to identify new opportunities to deepen the credit union’s relationship with the business member. For example, reporting metrics may reveal a small business is generating substantial revenue, which may signal the business owner is looking to expand and is a good prospect for a small business loan. Such tools not only benefit the member, they also benefit the credit union by helping identify ways to drive wallet share.
Technology will continue to shape business members’ expectations and credit unions must keep up, especially as younger generations begin launching and running their own businesses. In fact, 54% of millennials would quit their job today and start a business within the next six months if given the right resources, according to America’s Small Business Development Center.
This is a massive opportunity that credit unions should capitalize on sooner rather than later. By providing the right tools to help today’s small business owners manage their finances and grow their business, credit unions can position themselves as the ideal partner for these members.
Murthy Veeraghanta is CEO of VSoft Corporation. He can be reached at 770-840-0097 or marketing@vsoftcorp.com.
