B2B Payments

For SMBs, Using Spend Management Tech To Plug Costly Expense Leaks

To keep the bottom line buoyant, healthy and in the black:

Plug the expense leaks.

In an interview with Karen Webster, Farhan Ahmad, founder and CEO at B2B payments solution provider Bento for Business, took note of the fact that half of all small to medium-sized businesses (SMBs) cite cash flow management as their biggest challenge.

 

The key problem, according to Ahmad, is that business owners know how much money is coming in, and can rattle off to the penny the latest sales and margin data — but all too often they have no real handle on the cash that’s leaving the firm.

“Everybody is always focused on the growth side of the house,” he told Webster, and as a result a disproportionate amount of time may be spent mulling new product development and how to beat the competition. “But almost nobody’s really watching how the money is going out,” he added.

That one-sided thinking may be coming to an end: The business expense management software market is poised to be worth as much as $6.6 billion by 2025, as noted in a recent PYMNTS/Bento for Business collaboration, the Workforce Spend Playbook.

In a series of examples, Ahmad illustrated to Webster how lack of insight into day-to-day management spend can sink a firm, can cut margins drastically, can even mask malfeasance.

Consider, to name just one example, the small construction management firm that may have had a busy year, but finds take-home pay has dwindled compared to last year (which was relatively quieter).

This is no isolated case. The lack of visibility is compounded by the fact that many owners still are tied to cash and checks, to ledgers, to checking the bank statement, which presents a linear picture of transactions, but does not give a clear picture of where cost centers have been taking critical mass.

“You might have no idea where the money went,” he told Webster, noting that “you just see that you withdrew $500 in cash from the ATM … if you don’t immediately write down what it is for, it’s gone, and it’s unaccounted for money.”

Simply put, he said, most small businesses do not have robust processes in place and may be reliant on spreadsheets or paper receipts to track what’s spent. Reconciliation at the end of the day, the week or the month can be an hours-long process, which itself can drain money (and time, which as the proverb says, is worth money).

The opacity can snowball. It can hide, for instance, the work crew that ran up $5,000 a month in bar tabs, when they should have been on the job.

True story — as related by Ahmad, and one fixed only after the firm shifted to a Bento offering from a large bank credit card.

Digitizing expense management — tracking cash and check payments, along with gaining granular detail on travel and expense (T&E) and other expenses — can make all the difference. As Ahmad told Webster, the improved visibility from a robust data flow can help managers budget, track how they are performing against their budgets, and adjust spending on the fly.

With Visibility Comes Discipline

Ahmad told Webster that digital virtual cards (such as those on offer from Bento for Business), in tandem with a web app dashboard, can track exactly how much money is being spent by a company day to day — and with control settings can prevent unauthorized or unintended purchases.

To put a few numbers on the effort: He said the company has helped customers save $125 million of expense leaks. Ahmad said that “on average, we wind up preventing about 18 percent to 20 percent of your expenses which are going to be leaks via unauthorized expenses.”

Digitization begets visibility. Visibility begets control. Control begets a benefit to the bottom line.

There’s another benefit to control with virtual corporate offerings such as Bento’s cards, said Ahmad — one that simply stops misuse or unintended use of funds in its tracks. Ahmad noted that “small business owners generally are optimists” and are also very trusting. “They do not like to have awkward conversations with their employees.” Setting expense controls can short-circuit such issues — isolated right down to an employee level or type of transaction — as the charges simply don’t go through.

In other words, the technology itself does the talking, with finality.

He said, too, that spend management improved through analytics and digitization can pinpoint systemic problems — such as recurring subscriptions an SMB may be paying for various online services that are perhaps not needed. Even in the event of a dreaded breach, a card can be turned off instantly, before real damage is done to a company’s coffers or reputation.

Looking into 2020, he said Bento’s platform approach has yielded Bento Pay, which lets vendors choose payments through virtual card or ACH payments sent to firms’ checking accounts. The firm has launched a lending product, too. The focus will continue to be on employee T&E and procurement expenses.

In the end, Ahmad told Webster, better expense management means business owners can be proactive: “Not only am I aware of problems, I can block them from happening,” he said, adding that “a dollar saved goes straight to your bottom line.”

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Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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