The survey of several hundred small business owners and individuals with financial authority within a small business found broad cash flow trends and challenges, even though specific attitudes vary based on the size of the business.
“These findings indicate that small businesses have similar goals as their large-market counterparts - efficiency, integration and information handling - in their cash flow management”
According to respondents, the cash management issue most challenging for small businesses, regardless of size, is receiving and collecting payments (50 percent). Small business owners' ability to manage and move funds is the second highest ranked issue at 22 percent, followed by their concern around making payments.
"These findings indicate that small businesses have similar goals as their large-market counterparts - efficiency, integration and information handling - in their cash flow management," said David Cramer, senior vice president, commercial solutions, Visa USA. "Like larger enterprises, many of these smaller businesses are still accepting and making payments using what they readily admit are inefficient payment methods, like checks. Migrating to payment cards helps business owners better predict the timing of payments and manage their cash position."
The largest factor driving small business owners' cash management issues is sluggish cash flow, particularly not being able to always accurately estimate the timing of payables and receivables (36 percent). Another 26 percent noted that the cash management process is labor intensive work, followed by observations of a cumbersome administrative process (14 percent).
Efficiency is Key Area for Improvement
Improving efficiency was identified as a top priority for all respondents. Nearly half (48 percent) expressed a desire to improve payments efficiency, particularly receiving and collecting payments, while 42 percent seek to reduce administrative work.
"Historically, many small businesses have generated paper invoices for goods or services performed, taking 30, 60, 90 days or more to collect payment," said Cramer. "Accepting payment cards accelerates receivables by eliminating the time and costs associated with preparing and sending an invoice to a customer. Using cards to make payment eliminates the time and costs associated with writing checks. So, instead of pushing paper all day, small business owners can now maximize their time, energy and financial resources to focus their efforts on growing their business and delighting their customers."
Respondents recognized that payment cards are a strong solution to help improve the cash management process. Nearly 29 percent noted that card-based payments provide greater efficiency in receiving and collecting payments. Additionally, 26 percent found these products offer greater ease in making payments, as well as managing and moving funds.
Visa has designed a suite of products and services to meet these needs and help maximize efficiencies through the electronification of payments and the delivery of detailed online reports so small business owners can better manage their cash flow process through greater visibility into business spending.
Maximizing the Use of Electronic Payments
Small businesses owners have consistent ideas about payment cards. Nearly half of the respondents (49 percent) stated they would make all of their company's payments on a payment card, if all of their vendors and suppliers accepted electronic payments.
Currently, more mid-sized small businesses (61 percent) say they use business credit cards as a type of payment than any other category of small business, although a majority of all respondents (56 percent) use business payment cards to make a percentage of their payments.
Of those respondents who use payment cards, a significant number enjoyed improvements in efficiency and reduction in administrative time, illustrating the opportunity presented by card-based payments. More mid-sized small businesses recognized improved efficiency from payment cards than any other group.
Growth Opportunities for Payment Cards
The Visa Commercial Consumption Expenditure(TM)index, which tracks business-to-business spending, identified areas in which small business spending occurs. Tracking results of the survey against spending identified by CCE indicates continued opportunity for credit and debit cards.
The largest share of small business expenditures (34 percent) is comprised of core business services, such as legal, accounting, insurance, and shipping and mailing. Of all respondents, nearly 30 percent report using business debit cards for these core services, and 20 percent report using business credit cards. Other opportunities include:
-- Travel and entertainment expenditures. Most businesses (82 percent use credit cards; 53 percent use debit cards) report using business payment cards for these costs, which represent nearly $100 billion of small business expenditures.
-- Maintenance and operating supplies. In 2005, small businesses will spend $1.1 trillion, or 23 percent of all small business expenditures, on maintenance and operating supplies, such as utilities, telecommunications services, computers and data processing, and office supplies. Nearly 40 percent of those surveyed reported making these payments on business credit cards and 42 percent reported using business debit cards.
-- Raw materials. These represent 18 percent of small business expenditures, or $800 billion in 2005; 30 percent reported using business credit cards and 37 percent reported using business debit cards to make such payments.
"Considering that the Visa Commercial Consumption Expenditure analysis projects non-payroll spending by U.S. small businesses will increase to $4.7 trillion this year, there is a tremendous opportunity to help small businesses maximize every dollar by educating them about the overall benefits of using and accepting payment cards, including business credit and debit cards," Cramer said.
About the Survey
The Visa Small Business Cash Management Survey was conducted by Survey.com in March 2005 and involved the responses of 458 small business owners or individuals with financial authority within a small business. Of the respondents, 33.6 percent had annual sales of less than $1 million ("small" small businesses), 33.2 percent had annual sales of $1 million to less than $10 million ("mid-sized" small businesses), and 33.2 percent had annual sales of $10 million to less than $25 million ("large" small businesses). Visa defines the small business segment as companies with less than $25 million in annual sales and the self-employed.
About Visa Commercial Solutions
Visa offers small businesses, middle market companies, large corporations and government agencies trusted, reliable solutions that meet their many commercial payment needs - for virtually any purchase type, any situation or any business process. These capabilities help businesses and government agencies streamline operations, reduce overall costs and improve cash flow for better management of their payment processes. Visa's commercial solutions offer a great way for businesses and the public sector to pay and be paid. For more information about Visa Business products and services, please visit www.visa.com/smallbusiness.
About Visa
Visa USA is the nation's leading payment brand and largest payment system, enabling banks to provide their consumers and business customers with a wide variety of payment alternatives tailored to meet their evolving needs. Jointly owned by nearly 14,000 financial institutions, Visa USA is committed to increasing the choice, convenience, acceptance, and security of Visa payments for all stakeholders in the payments systems - Members, cardholders and merchants. Through its Members, more than 458 million Visa-branded cards have been issued to cardholders in the United States, which are accepted at over 5.7 million locations within the United States. Each year, U.S.-based financial institutions rely on Visa's processing system, VisaNet, to facilitate $1.3 trillion in transactions with virtually 100 percent reliability.
Worldwide, cardholders in over 150 countries carry more than 1 billion Visa-branded cards, accepted at nearly 22 million locations, accounting for $3 trillion in annual transaction volume.
Visa offers a trusted, reliable and convenient way to access and mobilize financial resources - anytime, anywhere, anyway.
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