Visa Finds Small Businesses Want Greater Cash Management Efficiencies; Survey notes small businesses are like large corporations when it comes to cash flow, recognize increased efficiency in payment cards

Business Wire, May 11, 2005

SAN FRANCISCO -- Small business owners' attitudes and opinions toward cash management and cash flow indicates a desire for greater efficiency throughout the entire process, according to a new Visa USA survey. These small business priorities mirror the attitudes of larger companies, including the recognition that payment cards are a cash management solution that can assist both the purchaser and seller of goods and services.

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.

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.