Better Data Access Delivers Profit, Spending Controls for Small Business

Consolidation is critical when it comes to improving spend management.

In a recent On the Agenda, Bessemer Venture Partners Operating Partner Jeff Epstein; Airbase Founder and CEO Thejo Kote; and Silicon Valley Bank Head of Global Payments Kathleen Pierce-Gilmore said visibility is a critical component of cash flow management for firms of all sizes, but especially middle-market firms. They urged finance teams to break down their traditional silos to get a single, unified view of the entire payments process.

PYMNTS’ own data show that reconciliation remains the largest accounts concern related to accounts receivable (AR) for U.S. businesses.

As Kote noted to the panel: “The name of the game, especially in the small and mid-market segments and enterprises, has been silos and fragmented systems.”

All manner of firms across all manner of verticals are finding that reconciliation remains a challenge, he said. There are any number of far-flung systems operating independently of one another — running the gamut from corporate card systems to payments to expense reimbursement. The same fragmentation exists with money coming into the company, depending on collection and invoicing processes.

As a result, he said, “finance and accounting teams are really struggling with the process of determining exactly how much money is coming in or out of the firm. Huge amounts of time and money are being spent on manual reconciliation.”

Epstein contended that while each system may work fine on its own, especially within a large organization, the problem arises when they must function in tandem and communicate with one another. And small problems can easily become bigger ones.

“So many companies put in multiple systems, and then they have manual processes to get the data out of one and to another,” remarked Epstein — especially for anti-fraud measures. But the manual efforts are far too unwieldy.

The panelists noted that technical infrastructure has improved enough over the past few years to allow firms to bring together a wide range of payment methods that have traditionally traveled different rails. Increasingly, as Pierce-Gilmore said, enterprises are turning to financial service providers like Silicon Valley Bank to address their needs for digitizing and modernizing operations.

With a nod toward payables modernization, she said Silicon Valley Bank enables client firms, including Airbase, to embed payments and virtual card solutions into their own ecosystems, using application programming interfaces (APIs) — breaking down the silos.

“Treasurers and CFOs are looking for those solutions because their internal teams are asking for things to be easier,” Pierce-Gilmore said.

New Expectations

Epstein said finance departments should make the back-office functions of moving, receiving and reconciling money as intuitive as the consumer-centric experience of, say, making a transaction with one’s personal bank. Firms like Airbase give enterprises the software to do so.

Airbase’s Kote stated that in approaching and seeking to streamline spend management, firms need a better understanding of how internal workflows affect collaboration and decision making. At present, Airbase’s client base skews more to knowledge economy companies (such as investment management and other financial services).

Pierce-Gilmore offered some insight into some of the complexities knowledge economy firms face. She pointed toward a small venture capital firm, where questions may revolve around entitlements and who is authorized to initiate transactions to pay day-to-day bills.

Embracing automation can free everyone at such firms from finance and accounting to the C-suite to focus on higher-value work, instead of the repetitive manual tasks that failed tools force them to use, he said.

And better technology has positive ripple effects. It trains a spotlight on reconciliation issues that might otherwise prove to be nasty surprises when closing the books at the end of the month or quarter.

Epstein said that within finance teams themselves, individuals are typically involved in at least one area: transaction processing, decision-making/analytics or the control/audit side of the firm. Spending less time on the transactions themselves frees up resources to efficiently tackle the 10% of payments that are exceptions and need further examination.

With platforms, APIs and a fully modernized AR workflow, said Kote, “You have that visibility into what you actually are spending versus what’s budgeted.”