BlueVine On How Holistic Spend Management Can Keep SMBs’ Cash Flow On The Move

The year 2020 was exemplified by rapid change for most businesses, which had to rethink not only their customer and vendor relationships but also the way in which they conducted previously routine tasks, such as collecting payments or tracking invoices and expenses.

Small- to medium-sized businesses (SMBs) in particular needed to work swiftly to stay on top of their spending while also seeking out alternative sources of capital. Only 27 percent of SMBs are approved by banks for working capital, making holistic spend management a must for smaller players in today’s business world, explained Herman Man, chief product officer for lender BlueVine.

“[SMBs] need [spend management] tools because they need full visibility into how they are doing,” Man told PYMNTS in an interview. “At the end of the day, small businesses in many cases are not financial professionals, … so it is really important for a banking partner [such as] BlueVine to help them understand their financial position and provide them the tools [they need to] manage their financials effectively through[out] their life cycle.”

Traditional spend management models — in which companies implement multiple solutions from multiple providers — are rapidly becoming obsolete in a world in which successful budgeting means a business must have immediate, transparent access to all its spending data. Having both working capital and the tools to manage it all in one place could provide a crucial advantage to small businesses looking to better manage their spending and stay competitive.

Digital-First Budgeting For Digital-First SMBs

Spend management always has been a key concern for businesses, but SMBs work on lean margins that became even leaner during the pandemic. SMBs also are far less likely to receive working capital from traditional financial institutions (FIs), Man explained, noting that smaller businesses have a much higher chance of being turned down for bank loans.

Keeping the lights on required these microbusinesses not only to gain access to such funding but also to pay even closer attention to their cash flow, necessitating the use of budgeting or spending tools that allowed them to view their incoming and outgoing payments and other expenses in detail.

“At the start of the pandemic, small businesses were pushed into survival mode, to put it very bluntly,” Man said. “They could not open their doors for business, so you saw a lot of [business] models break and change … from restaurants that used to [have in-person] dining as their [only] business revenue to those that shifted to takeout … They needed to determine the best ways to keep their businesses afloat and make sure their employees and customers were with them throughout the [pandemic], so obviously their financial needs were shifted quite a bit.”

BlueVine participated in the U.S. government’s Paycheck Protection Program (PPP), which offered $8.99 billion in loans across two rounds to businesses to meet their need for capital. SMBs often lack the financial resources or expertise of their larger competitors, Man explained, and enabling them to track their spending in one place could therefore provide them with key benefits.

The entity also is keeping a close eye on how the pandemic’s influence may have changed companies’ payment needs. Businesses are stepping away from paper checks in favor of payment tools such as ACH and wires, he added, and keeping pace with these new digital-first preferences is essential for their financial partners.

“Small businesses will become more and more digital,” he predicted. “I think the online experience will be one [in which companies] are much more comfortable doing large volumes of business across [digital channels]. … We want to make sure that we are there front and center through that whole experience.”

Supporting the payment seamlessness and speed that businesses want alongside their shifting budgeting or spending needs may require the integration of emerging tools and technologies, such as automation and virtual cards, however. Such solutions can help payments move more smoothly while also enabling firms to track their money movement in greater detail.

Virtual Cards And Next-Gen Spend Management

It is unlikely businesses ever will return to pre-pandemic spending models, including how they conduct typical payments. The use of checks and their related paperwork has continued to decline in favor of digital-first methods, and interest in solutions that can tie payments directly into companies’ spend management workflows, in turn, is expanding. BlueVine is examining how virtual cards could provide businesses with key benefits as they look to navigate the post-pandemic spend management environment, although Man added that the lender does not yet offer the capability.

“I cannot provide a timeline [for our virtual card adoption] yet because we are still going through our planning process, especially as it ramps up into next year,” Man said. “What I can say is [virtual cards] will provide security and management [of] access to those cards. … Imagine a world where [cards] basically have virtual numbers tied to them so [businesses] do not have to worry about [those numbers] being leaked to other suppliers or other business partners [for them to use].”

Virtual cards offer just one way for businesses to keep better track of their spending, but having tools for real-time, holistic budgeting is becoming more of a linchpin to their success. Moving away from siloed spend management is the crucial first step for businesses that wish to remain competitive in a digital-first world.