Digital cash flow management helps SMEs

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They say time heals. How long? Does 24 months seem fair to you?

It’s been how long since the public health emergency was declared in the United States in 2020, and the world as we knew it has changed. Now he wants to go back, at least to reclaim the best parts of pre-pandemic life, and 2022 looks like the real deal after a series of false starts.

As we watch this unfold in the months ahead, the restaurant sector will act as a particularly sensitive barometer of the success or failure of the retail recovery. Even if we rely on e-commerce, the health of Main Street’s small and medium-sized enterprises (SMEs) will have more of an impact.

Speaking to PYMNTS, Prashant Gandhi, commercial director of Melio, and Adam Dunn, owner of beloved Cape Cod restaurant, The Pheasant in Dennis, Massachusetts, highlighted the cash flow urgency for Main Street businesses. during the pivotal summer season that is fast approaching.

Dunn said reservations were full for Memorial Day weekend and beyond. But since some costs have increased by 400%, he has to pass the price increases on to customers. A larger cash cushion could prevent this difficult choice, and that’s where Melio comes in.

“We know the demand is there,” Dunn said. “The question is going to be to keep this money. We are a seasonal place, so things are slowing down. It’s about managing that money and making smart investments that pay off. We don’t know what next season will look like.

This is a problem that many SMEs are currently facing. In “The Main Street Economic Health Survey: Navigating Economic Uncertainty”, a collaboration between PYMNTS and Melio, 18% of SMEs surveyed were cashless in January 2022. This is a shocking finding that calls for action .

“We were also quite surprised by this statistic,” Gandhi said.

“Our customers tell us they like having 30 days of cash [on hand]. Seeing 18% say they have no cash was disconcerting.

He added that “on one level it’s not entirely surprising because inflation at 8% effectively means that over the past 12 months we’ve had the same amount of prize money [increase] as we have done for the past four years.

And that number increases by almost 24% for businesses that have been open for a year or less, showing the extent of the cash crunch that threatens the return of SMEs to Main Street.

Gandhi said this reveals that too few new SMEs are incorporating cash flow into planning, and Dunn’s calculations tell us this is definitely not the right year to put cash flow on the back burner.

“A dishwasher that was making $16 an hour is now making $20 to $24 an hour due to demand and rising wages,” Dunn said. “If we were to pass these prices directly on to customers, I think there would be such shock that we would really struggle.”

Get the study: Main Street Economic Health Survey: Navigating Economic Uncertainty

separate from paper

In a large 250-year-old colonial farmhouse heated with propane and charmed by the light of wood-burning fireplaces, The Pheasant was also burning through the money too fast. Dunn needed a solution. Describing his back-office life before the platform, he recited the all-too-familiar paper litany.

“I handle all of our payments, bills, processing, everything. Prior to [Melio] I was printing checks, I was messing up checks, I had to reprint them, I ran out of checks, I had to order new checks, I had to go get stamps, I ran out of stamps, I opened the box of envelopes, they are all stuck together, now I have to go back and get more envelopes.

He started using the Melio platform, which he says is “a game-changer for us”.

For starters, The Pheasant no longer needs a general manager. Dunn and his wife handle all back-office tasks themselves, using Melio’s integration with Intuit accounting software.

“Now I can go on vacation when we’re closed in the winter and still write checks and have them processed for vendors,” Dunn said.

“That’s been a huge plus for me, especially as we consolidate and try to deliver customer services and experiences, but that means getting leaner in other places, [like] streamline operations in the back-end.

This is what it can look like when an SME goes digital in time for peak season.

Gandhi said this is happening across all verticals as SMEs grasp the new criticality of cash flow.

“Our customers are consistently looking for investment to cope with the fact that the back-office self-service world is here,” Gandhi said. “You don’t have the luxury of having too many staff. That’s true for Adam’s business, and I think it’s true for many other types of small businesses.

The Main Street Economic Health Survey also found that 41% of all SMEs intend to invest in equipment and systems in 2022.

Gandhi pointed to a variation between online and offline businesses in this finding, saying, “47% of those who sell online are looking to make investments, [compared to] 32% of those are largely physical. This tells us that there is even more optimism for our small businesses that have turned to online channels, as they see it as a source of continued growth.

Get the study: Main Street Economic Health Survey: Navigating Economic Uncertainty

Target profitable growth

The Zen master said “we’ll see” when it comes to anything in the future, but small businesses can’t count on that. They invest during a very volatile economic period.

While Dunn feels his cash management is in good shape, and if peak season lives up to its name, he plans to renovate, lose propane and try new ideas that require less staff.

“We pushed a lot into wine, doing a boutique wine program hosted here at the restaurant,” he said. “The demand has been crazy, so we think there is a natural extension by creating a wine shop. But he is an employee. It’s a very simple concept that we can execute with minimal staff. The idea of ​​another restaurant with 20-50 employees is a little terrifying.

Citing another statistic from the Main Street Economic Health Survey, Gandhi noted that 57% of Main Street businesses expect 2022 to be a year of growth. It depends on a few factors.

Saying that “profitability is key,” he said Melio’s four-part advice to customers, prospects, and SMEs in general is: “Keep differentiating the experience. Embrace cash management tools. Adopt practical workflow tools. Also work on your creditworthiness. Credit will be an important lever for the proper functioning of businesses.

As for Dunn, he sees a more bifurcated restaurant world emerging, dominated by fast-casual, on-site experiential restaurants.

“We are evolving in this [experiential] direction, and it’s a shame because we have friends, regulars, people who live around here who are inevitably going to be overpriced or won’t be able to join us at the frequency that they used to,” Dunn said. “There’s just no way to do it.”

Get the study: Main Street Economic Health Survey: Navigating Economic Uncertainty

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NEW PYMNTS DATA: THE FUTURE OF BUSINESS SUPPLIER INNOVATION STUDY – APRIL 2022

Plastiq - The Future Of Business Payables Innovation: How New B2B Payment Options Can Transform The SMB Back Office - April 2022 - Find out how all-in-one payment solutions can help businesses streamline B2B transactions and eliminate transaction friction. AP and AR management

On: While more than half of SMBs believe an all-in-one payment platform can save them time and improve cash flow visibility, 56% believe the solution could be difficult to integrate with AP systems and existing ARs. The Future Of Business Payables innovation report, a collaboration between PYMNTS and Plastiq, surveyed 500 SMBs with revenues between $500,000 and $100 million to explore how all-in-one solutions can exceed customer expectations. SMEs and help sustain their activities.

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