Small and medium-sized businesses (SMBs) face a number of challenges in managing their finances effectively. One of the most critical challenges is maintaining good Cash Visibility.
Without clear and accurate information about their cash positions, SMBs are at risk of running into Cash Flow problems, which can lead to missed payments, financial penalties, and even bankruptcy.
There are a number of factors that can make it difficult for SMBs to achieve good cash visibility.
Many SMBs rely on manual processes to gather and consolidate account balance data. This can lead to delays in getting accurate information about cash positions, which can make it difficult to make informed financial decisions.
If an SMB has operations in multiple countries, it can be difficult to track the impact of currency fluctuations on cash positions. This can lead to unexpected shortfalls or surpluses, which can disrupt Cash Flow planning.
It can be difficult for SMBs to identify the main drivers of their Cash Flow. This can make it difficult to predict future cash needs and optimize cash management strategies.
Banks can play a valuable role in helping SMBs improve their Cash Visibility. By providing a range of solutions, banks can help SMBs to track their cash positions more effectively, identify the drivers of their cash flow, and plan for future cash needs.
Some of the ways that banks can help SMBs with cash visibility include:
A clear dashboard that provides real-time data on all of an SMBs account balances can help businesses to track their cash positions more effectively. This dashboard can be customized to show the specific information that is most important to each SMB. For example, a dashboard for a manufacturing business might show the balance of each bank account, as well as the amount of inventory on hand and the number of outstanding invoices.
Open Banking allows banks to share account balance data with other financial institutions. This can help SMBs to get a consolidated view of their cash positions across multiple banks. This can be a valuable tool for businesses that have multiple bank accounts, as it can help them to see how their cash is flowing across all of their accounts.
Tools for scenario planning can help SMBs to see how different events, such as currency fluctuations or changes in customer demand, could impact their Cash Flow. This can help businesses to make more informed decisions about their financial planning. For example, a business could use a scenario planning tool to see how a change in interest rates would impact their debt payments.
Categorizing transactions can help SMBs to understand the drivers of their cash flow. This can help businesses to identify areas where they can improve their cash management strategies. For example, a business could categorize transactions by type (e.g., sales, expenses, or payments), by the customer, or by-product.
In addition to helping SMBs manage their finances more effectively, banks can also benefit from offering cash visibility solutions.
SMBs that have good Cash Visibility are more likely to prefer your bank for their banking needs. This can help you to attract and retain new SMB clients. By offering cash visibility solutions, you can differentiate your bank from the competition and attract new business.
SMBs with good Cash Visibility are more likely to have good credit ratings. This can make it easier for them to get loans and other financial products, which can benefit your bank. By helping SMBs improve their cash visibility, you can help them to improve their credit ratings, which can make them more attractive to lenders.
If SMBs use your bank to manage their currency exposure, you can generate more FX flow. This can be a profitable source of revenue for your bank. By offering cash visibility solutions, you can cross-sell SMBs other financial management products and services, such as FX hedging.
Conclusion
Cash Visibility is essential for SMBs to manage their finances effectively. By offering cash visibility solutions to SMBs, you can help them to improve their financial performance and attract new business.
In addition to the benefits mentioned above, offering cash visibility solutions can also help banks to improve their customer satisfaction and loyalty. SMBs that have good cash visibility are more likely to be satisfied with their banking relationship, and they are more likely to recommend your bank to their peers.
If you are interested in learning more about how your bank can offer Cash Visibility solutions to SMBs, please contact us here.