Financial processes - Growing pains or growing gains?

Vice President of Marketing Communications

It’s inevitable that the structure and breadth of activity an SMB is required to deal with grows when it increases in size and revenue.

Yet, when this growth comes, what is the corresponding impact on an SMB’s cashflow? Part two of Basware’s SMB Finance research suggests that the ‘growing pains’ associated with SMB development are largely as a result of poorly structured financial processes.

You may remember in our previous blog post  that a staggering two working days per month (16 hours and 53 minutes) are being spent on financial processes by the average SMB employee. This blog post looks further to examine the exact elements that are causing this drain on time, and how this problem may increase as SMBs look to grow.

Basware’s research also suggests that currently, a lack of understanding is causing a disconnect in expectations between business owners and employees in the invoice payment process. According to business owners, it takes European businesses 8 days and US businesses 4 days to complete a payment after receiving and processing an invoice. Yet, according to employees, it takes European businesses 10 days and US businesses 7 days to complete a payment after receiving an invoice. Left unattended, the research suggests these issues are likely to begin impacting strategic planning, with businesses uncertain about the status of their cashflow.

The research also indicates that smaller companies should look to learn from the businesses they transact with as they aim for growth. While medium-size businesses are most likely to receive an electronic invoice from their supplier (72%, compared to 56% in small and 31% in micro organizations), this type of business is also most likely to experience challenges with purchase invoices (91%, compared to 84% in small and 53% in micro organizations).

As SMBs become larger and implement more automated processes, they continue to deal with smaller organizations with manual paper processes. The research suggests that micro organizations may be able to improve supplier relations if they switch to an automated invoicing process, in order to align with other companies more successfully when transacting.

How does growth affect financial planning?

Medium sized owners’ are most concerned with financial strategy – 53% in the US are most focused on budgeting, compared to 27% in Europe. With more time spent on financial planning, medium businesses are able to plan further ahead, on average 18 months in advance, compared to 15 months among small and 10 months among micro businesses.

This greater focus on financial planning may well pay dividends for SMBs when issues arise. Similarly, if all SMBs are able to implement methods to improve the productivity of their finance function, then they will be well prepared for when that much-needed growth arrives.

Category: Accounts Payable