Disbursements

How Pilot Is Innovating Corporate Taxes For Millennial-Run Businesses

Slow tax disbursements via paper checks can put a financial strain on U.S. consumers, but are especially damaging to millennial small-business owners, who view paper checks as antique payment relic. In the latest Disbursements Tracker, PYMNTS spoke with Waseem Daher, founder and CEO of corporate tax and bookkeeping firm Pilot, on how faster tax disbursements can ease tax frustrations.

Tax season frustrations can blossom into real financial problems, especially when refunds are paper checks sent through postal mail.

Younger consumers are often unenthused about the lengthy wait times attached to their personal or professional tax refunds, and as millennials increasingly operate small- to medium-sized businesses (SMBs) with small teams or work as one-person companies, the status quo tends to be even less forgiving, as such individuals may rely on these funds for proper cash flows.

Recent research finds that 67 percent of millennial business owners operate independent companies rather than franchises. Millennial business owners are also 14 percent more likely to struggle with money problems than those who are baby boomers. Tax struggles and unanswered questions can exacerbate these issues, especially considering that approximately 31 percent of millennials reported anxieties over owing tax money or receiving lower-than-expected refunds.

The U.S. tax code changes passed in 2017 did not soothe these frictions, either, as they shifted income brackets and altered rates, affecting consumers’ refunds and earnings. The adjusted rules also affected businesses of different sizes in numerous ways, which could have sparked questions from SMB owners unsure whether the changes applied to their operations.

Millennial SMB owners are facing these and other concerns in filing their professional taxes, generating a need to eliminate checks from the corporate tax disbursements process, Waseem Daher, founder and CEO of corporate tax and bookkeeping firm Pilot, noted in a recent interview with PYMNTS.

“We actually only do digital disbursements,” Daher explained. “In other words, we are 100 percent digital, 100 percent electronic. There is no option with us to either pay or be paid via check or a physical mechanism like that.”

Pilot offers business clients — including eCommerce companies and technology startups — bookkeeping, corporate payment and tax services, he added. The 4-year-old firm has always eschewed checks and provides SMB owners with 24-hour access to speedier disbursements through ACH and professional support.

Proper tax education is critical to any business’s future, Daher said. Millennial owners need to be fully aware of how tax code shifts could affect both their personal and professional taxes, and they must acquire the support they need throughout the filing process. Digital disbursements may prove essential for both.

How a Generation’s Preferences Can Change Taxes

Millennial business owners may appreciate tax support and quicker disbursements more than others for a few reasons. Speedy, digital disbursements are standard in many industries, exacerbating frustrations when business owners come up against paper check-heavy tax season.

Most millennials have used checks but are adept with digital technologies and often no longer use legacy payment methods, meaning they do not expect or prefer to use them in their professional lives, either. They carry their payment innovation expectations into the business world.

“If you look at the landscape of business centers across America [and around] the world, you will find that the business lives of many owners are definitely intertwined with [their] personal lives … especially when it is an LLC or something like that,” Daher said.

Millennials tend to blur personal and professional lines a bit more than older generations, retaining security and speed expectations when starting or operating SMBs. Pilot thus opted to offer digital tax disbursements only through ACH, bringing convenience to an often outdated and lengthy process.

“What is interesting about our customer base is that many of them literally do not even have checkbooks,” Daher said. “This is actually sometimes a problem … and it is not uncommon for us to get pushback from these customers saying, ‘I do not have checks. Is there not any other way I can do this?’ So, our demographic and our customer base very much [appreciate] these electronic payments, and I think the big reason for it is just … convenience and speed and accuracy.”

Tax and disbursement providers must reconsider businesses’ and consumers’ payment needs as digital payments grow more diverse. Tools like mobile wallets are already popular among the latter, although they have yet to become standard for transactions between firms. Millennial business owners are not requesting those specific mobile payment solutions, Daher clarified, but rather they are desiring those that help them more easily manage their cash flows, invoicing needs or other business payments. Providers should consider innovations that fulfill those requirements.

Digital Disbursements’ Cash Flow Benefits

It is difficult to forecast how these innovations will look, especially as several factors, such as changes to federal regulations or a rise in ACH as the payment method of choice for more areas of business, could mean millennial business owners have radically different payment or tax needs in the coming years.

Pilot does not have plans to add disbursement methods like mobile wallets to its platform, Daher said, noting ACH appears to be satisfactory for now. Digital payment solutions have made the technology more attractive to business owners, as ACH cuts down on transaction times and adds security.

“Time delays with ACH have been basically acceptable to our customer base,” he said. “The bigger pain point is less about the three days or however long it takes the payment to settle and more about the workflows surrounding the payment. … At least in our customer base, the biggest pain points are really around the experience itself. So, the more digital, the more online, the more electronic the experiences, the happier they are.”

Later generations of business owners may be just as unsatisfied with ACH or other digital disbursements as current millennial SMB operators are with checks. Those from Gen Z may be more inclined to manage payments through mobile wallets, for example, although the technology is currently in its early days. One cannot predict which payment type will outlive the others even for existing business owners, let alone future generations.

Checks will continue their decline as a disbursement reception method, however. Millennial business owners are certainly frustrated with them, and tax disbursement services will need to work closely to satisfy such entrepreneurs.

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NEW PYMNTS STUDY: LEVERAGING THE DIGITAL BANKING SHIFT – SEPTEMBER 2020  

The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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