B2B Payments

ZipBooks Takes On Age Old SME Growing Pains

While a great deal in the realm of business has changed in the past few years — disruptive tech startups, a proliferation of sales models and channels, the digitization of what seems like everything — some things remain the same.

Despite how different things may appear, there are some steadfast truths that hold for new SMEs, especially as they cast an eye toward growth.

Perhaps the most enduring pain point throughout the history of maturing business is cash flow management and visibility, said Jaren Nichols, COO of accounting software startup ZipBooks.

“They’ve always had to make tough decisions on collections or payments or capital-raising in general,” Nichols said. “It’s something that’s true today and something that was true hundreds of years ago.”

Today, the accounting and cash flow management solutions markets have largely filled these needs for larger and more established businesses, Nichols said. But the SME and maturing business markets are still underserved.

Another common and long-running quality of new small businesses, said Nichols, is a lack of financially focused expertise.

“By nature of being an SME, you’re likely extremely good at your product, service or specialty,” Nichols said, whether it be design work, electrical or software programming.

But burgeoning businesses can struggle if they haven’t yet reached a point where they can scale to bring on experts in other areas necessary to grow a business — sophisticated marketers, salespeople, operations managers or accountants.

“We see it with many companies — growing and not growing, lifestyle-based, individual run, successful businesses — many still have a significant blind spot when it comes to the finer points of accounting for running an enterprise,” said Nichols.

Accounting expertise is the one thing that all SMEs need to grow, fortunately or unfortunately, said Nichols. This is true both as a means to navigate the tax system but also to enable them to understand the health of their company.

“If you don’t have an understanding of accounting, you may not be able to see the signs as quickly from your income statement and your balance sheet until it hits your cash,” Nichols said.

These age-old pain points lead to a catch-22 for SMEs eyeing growth. To grow a business can require cash flow management support and accounting solutions or expertise not largely provided by the market until after hitting certain growth milestones.

While these problems have been tough to solve for growing businesses in the past, Nichols noted that growing SMEs can leverage opportunities for automation and data insight afforded by advances in predictive analytics.

The proliferation of these technologies could be the key to changing the ways growing SMEs go about managing their finances, and how accounting is done in general.

“It’s, of course, going to significantly impact a number of industries,” Nichols said, “and predictive analytics is going to impact traditional accounting and understanding how to do your books.”

For their part, ZipBooks has aimed to address these pain points with their accounting software by recently rolling out an update that focuses on leveraging predictive analytics and prioritizes future growth. Their objective is to have an accounting software behave, in a sense, like a financial and business advisor.

“The goal is to minimize the amount of manual labor you have to put into tracking your books and accounting for it properly,” Nichols said. “We want to help [businesses] make smart decisions around things that they aren’t yet experts in — and we want to offer our expertise.”

On top of performing the functions of traditional accounting software, ZipBooks leverages user data to compile a set of best accounting (and other business) practices, which it then in turn distributes back into the ecosystem.

“It may be something as simple as indicating that they’re overpaying for [their] payroll service,” Nichols said, “or something more complex, like advising them to leverage a high NPS score on their social presence.”

Some other best practices ZipBooks has found by leveraging user data include the fact that customers are more likely to leave higher reviews when businesses write ‘thank you’ on invoices. Small companies with a logo also tend to have a higher rate of customer retention, Nichols noted.

“Maybe it’s because you’re more memorable,” he said, “or maybe it’s because you seem more professional. But we see that correlation, and we’re able to pass that along.”


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

Click to comment