TAILORING CASH MANAGEMENT SOLUTIONS FOR SMALL BUSINESSES (Jan 2017)

Cash Flow, Account Management, and Information Reporting

Traditional and Online Products

Unmet Needs and Issues

Key Finding from a Previous Phoenix SYNERGISTICS Research Survey:

Findings in Phoenix SYNERGISTICS 2016 survey, Optimizing Small Business Checking, revealed that less than a majority of small business checking holders handle cash management activities online by PC.  Are there opportunities for expansion in this area?

  F249 Prop Graphic

Highlights of the Study

This study examines small businesses’ usage of cash management services for activities such as account management, information reporting, and cash flow, as well as their unmet needs in these areas.  Traditional and online methods of handling these activities are also assessed.

National Internet Survey – 600 small business owners/executives – 150 in the following sales volume categories – $50K-$99.9K, $100K-$499.9K, $500K-$999.9K, and $1M-$5M.  Industry categories include manufacturing, wholesale, retail, and services.

Key Dates

October 28, 2016 – Charter fee/Intro pricing ends.

October 28, 2016 – Final acceptance of comments on questionnaire.

January 2017 – Project Report available.

Strategic Questions

  • What attitudinal or perceptual factors exist among small business owners or executives related to aspects of cash management – such as cash flow, payments, and collections? What problems or issues do small businesses experience in terms of their payment and collection activities?  Is the term “cash management” associated with certain activities or functions?
  • Do small businesses place a priority on projecting cash flow? Is this done as a formal process, on an ad hoc basis, or at all?  To what extent are automated processes a part of this?
  • How extensive is usage of specific cash management services among small businesses – such as merchant processing, lock box services, balance reporting, and automated tax payments? Are there gaps that represent an opportunity for providers?  Are these services part of formal cash management programs or used on an individual basis?  Is cash management an element of the main checking provider relationship or are third-party providers involved in this?
  • What are the delivery channel implications of providing cash management services to small businesses? To what extent do small businesses initiate these activities themselves using online banking or software versus relying on business bankers or bank staff?  What devices are used and for what activities?  Do small businesses use or desire mobile access for cash management?
  • What is the current usage of and potential for services or devices to improve collections or manage payments for small businesses – including remote deposit capture, mobile card readers, accounts receivable conversion, and Positive Pay?
  • What are the benefits or advantages of cash management that can be promoted to broaden and increase usage of these services? What perceived disadvantages or concerns exist that may represent barriers to overcome?  Do many small businesses see this as only appropriate for larger companies?
  • Are there small business identifiers or descriptors – such as annual sales volume, business sector, or number of employees – that are useful in developing strategies and tactics for expanding usage of cash management services?

Research Issues

  • The ability to successfully manage cash flow can make or break a small business.  Increasingly, small business banks are recognizing this need and developing solutions to assist their customers with this important aspect of operating a business.  Under the cash management umbrella, banks can include a host of tools and services such as account management and information, deposits, payables and collections, electronic invoicing, and merchant services. Remote deposit capture systems are promoted to small businesses to encourage faster deposits without having to go to the branch.
  • Cash management products and services need to be specially tailored to the needs of small businesses rather than being just a do-over of those for middle market and larger corporations. A number of providers are offering a suite of online tools that are compatible with a business’s accounting software.  Cash management products and services are often provided through the relationship manager or business banker who is familiar with the small business.
  • In order to develop cash management solutions, providers need to understand the issues and unmet needs that should be addressed. It is valuable to examine what components small businesses need as part of a cash management solution and how they relate to other business operations.  Reaction to pricing also needs to be measured. With this information, providers will be able to develop and promote cash management products and services for small businesses, which can help strengthen the overall relationship. [F249]