How Cash Flow Forecasting is both an essential tool for SMBs and an opportunity for Banks?

Cash flow is the backbone of Small Businesses

Most small businesses struggle to manage cash flow, the backbone of their success. Like many other businesses, small business owners need to pay their suppliers, employees, and all their operating expenses on time each month, but they often struggle to get paid themselves. There is usually no automatic process for accounts receivable, and even though it takes an average of 27 days to receive payment, some customers are very sporadic with making payments, sometimes even delaying them for months on end. In these situations, not only do small business owners not receive the money they need to pay all their expenses, but they also waste a lot of time searching for it. 

Low cash flow is a hindrance to business development and makes it difficult to manage the unexpected.

Covid has recently been the most prominent example of how sensitive SMBs are to the market and the economy. Many suffered from a lack of activity, as only 31% have up to two months of working capital to play with, while 58% have only three to five months.

In addition to this, most ERPs are designed mainly for medium-sized and large businesses, leaving really only a small number of tools available that suit the needs of a smaller business. Small business owners are often on the road, or very busy in their stores, so only simple, easy-to-use software that can be managed from anywhere, at any time, will really make their lives easier. Instead, they are faced with solutions that have complex synchronization processes resulting in a lack of accuracy in their data. As a result, they often end up managing their cash flow manually, instead of benefiting from a true cash flow forecast that can really make a difference when it comes to making the right decision at the right time. 

Foresight is key. Without an accurate cash flow forecast, you can't predict when your money will be in surplus or deficit, and therefore it's difficult to know when the best time to spend, invest or take out a loan might be.

Many small businesses do, in fact, run out of cash and have to quickly apply for a loan even when they are sometimes already in trouble. As a result, they lack the time to make the right decisions at the right time. By the time the loan is in place, it's often too late as the health of the organization may have already been significantly affected.

According to the Small Business Finance Institute, lenders generally require a debt coverage ratio of at least 1:25. In other words, for every dollar of debt, the company requires an additional 25% cash flow to serve as a cushion. The debt service coverage ratio is an important metric that lenders consider when evaluating a commercial loan.

Banks are facing great challenges without a solid understanding of each customer, as this is the basis for providing a premium service

With poor knowledge of their customers, banks clearly lack foresight. Banks are often too late to realize they could have helped their customers before they found out they could no longer reach their loan criteria and had already been red-flagged. To gain an in-depth knowledge of each customer, banks either need the required time and teams to focus on each customer's business so they can help each one of them individually, or they need to have the right tools in place to automatically detect their needs. Both are key to success in Business Banking, but let's face it, banks don't have the time or resources to manage their customers in such a sophisticated way. Banks do not anticipate their customers’ needs and realities well enough and this has a direct impact on their revenue as well as the small business’s financial health. In addition to this, the race against time to process loan applications in a rush is increased by the lack of anticipation, which can further weaken the Business Banking customer service.

To accurately and efficiently assess the risks associated with lending small businesses money, the banks need effective systems and seamless practices in place, most of which they don't currently have. The challenges generally fall into two categories: poor data and complex processes. The entire loan process is too complicated and time-consuming, yet sometimes, it’s got to be done in a rush for the business to survive.

All this translates into a massive amount of missed opportunities for SMBs to be supported or sometimes, even saved , but also for banks to generate more revenue. Not being able to sell the right financial service to the right customer at the right time, represents a big loss of business potential and a failure in customer service. Banks need to be able to monitor their customers more closely behind the scenes, and if they don't have the time and teams to do so, they should focus on acquiring the right technology to track their customers' needs. 

 An accurate Cash Flow Forecasting with OneUp Business Assistant™ AI gives more visibility to SMBs and creates opportunities for banks

SMBs and Banks can better anticipate the future with OneUp's Business Assistant™.

SMBs simply have to log in to their online bank account from any device to access their Cash Flow Forecasting thanks to an AI ranked #1 by Forbes that works behind the scenes and categorizes their transactions automatically. Business owners are granted an accurate and instant overview of their finances, so they can anticipate their needs. They win in flexibility and reactivity and this is crucial when running a business. Indeed, handling expenses and incomes with a long-sighted view simplifies and improves the business life of every business owner. 

The Business Assistant™ can even suggest a loan if needed. 

A strong and unwavering link created between Business and Banking inside the online banking portal increases the customer's confidence in his own financial institution. As the quality of customer communications improves, the volume of services and advice sold also improves/increases. OneUp Business Assistant strengthens the customers’ relationship with their bank, increasing usage and retention. 

With an increase in finer data for each customer, especially regarding their Cash Flow Forecast, banks know their customers in-depth and are able to anticipate their needs. As a result, banks become able to provide the right financial service at the right time. They can provide customers with financial services such as loans or BNPL directly through their online portal experience. 

“With OneUp—a mini-ERP for small businesses (accounting, invoicing, inventory management, purchasing, CRM)—BNP Paribas has now a 360-degree view of a customer business activity which allows it to upsell value-added banking services as well as non-banking products (insurance, leases, real estate…) at preferential terms—which could represent a huge new revenue opportunity for banks”, Jeb Su, 2019, Forbes. 

By unifying Business and Banking, OneUp helps banks meet customer needs and realities to support their growth, and significantly increases the volume of loans they generate from their Business Banking marketing segment.