Small Businesses Push Tech-Driven Expense Management to Help Cash Flow

Chris Trainor, head of product at Paymentus, said that as they battle macro headwinds, small business owners are feeling the pain of inefficient expense management.

As he observed to PYMNTS, many small businesses are run by individuals who are consumers themselves — but managing a company introduces levels of complexity that transcend simply managing the household budget.

“The average small business owner does not have complete control over their finances and expenses,” Trainor said, “which leads to negative situations related to cash flow and profitability.” That’s especially true with seasonal businesses, such as construction and landscaping firms, where expenses and revenues can be uneven or project-based.

He added that small business owners are not accounting experts, bookkeepers, or software specialists, and they may not be getting the most out of the technological tools. Many smaller firms rely on manual, paper-based processes and make/receive payments with paper too, chiefly in the form of checks.

At times they may rely on personal funds (credit cards included) to pay expenses or may co-mingle their accounts with business accounts.

It’s imperative, Trainor said, to bifurcate and ensure a clear distinction between personal and business expenses.

Juggling Receipts and Reimbursement

There are other pain points in the mix, especially when employees are out in the field buying supplies or incurring other expenses — often laying out their own cash and then seeking reimbursement later. It can take days or weeks to reconcile receipts and finally clear the way for funds to be disbursed (assuming there are no errors).

Trainor pointed out that automation can take the burden of expense management away from smaller operators. Receipt management is a tedious and time-consuming task for employers, especially those with employees who make purchases for specific projects.

But by allocating funds to specific projects, tracking expenses in real-time, and even issuing cards with controls in place, SMBs can ensure that employees stay within budget and avoid overspending.

“What we try to do at Paymentus is to make sure that small businesses are able to go into the Home Depot and purchase a good using a debit card with preapproved amounts based on users,” Trainor said. “All of that gets systematically or automatically tracked and allocated back to a project, so that you have complete visibility at a project level, and at a macro level.”

The functionality is there for managers and small business owners to take pictures of receipts, for the receipt level data to be systematically uploaded into back-office systems and for funds to be allocated automatically. The positive ripple effects are significant, he said.

“If businesses knew what they were receiving, and why, very clearly and concisely, and what they were spending and for what reason, or which employee was spending and how much … that would go a long way to helping them improve their cash flow,” he said.

Modernizing accounts receivable processes can help quicken the pace of incoming payments, Trainor said, as automation can clearly present invoices and payment requests.

Trainor said that offering customers various payment methods (and real-time confirmation of payments) can help build trust and loyalty with those vendors. The same applies to accounts payable activities, as all firms must pay their employees and operating expenses such as utilities. Offering a range of payment options — through ACH, digital wallets and even PayPal — can streamline the payables side of cash flow management.

“Every business, just like every consumer, could benefit from automating financial management and making sure that you know what is coming and what is going out,” he said.