Small businesses face tough challenges with managing money they owe (AP) and money owed to them (AR). These tasks are key for keeping a steady cash flow, staying liquid, and keeping good relationships with suppliers and customers. But, handling AP and AR, especially the old-fashioned way or with outdated tools, really stretches a business’s resources thin.
Common Pain Points in Accounts Payable and Receivable
Accounts Payable Challenges
- Inconsistent Invoice Formats and Approvals: 54% of SMEs regularly pay their bills late, partly due to inconsistent invoice formats and the cumbersome process of chasing approvals. This inefficiency is reflected in 47% of invoice approvals running late, leading to strained relationships with suppliers and additional costs
- Financial Impacts: The average cost per processed invoice is estimated at $15, contributing to excessive handling costs. Moreover, 82% of SMEs miss out on early payment discounts, impacting profitability. The lack of visibility into outstanding liabilities (experienced by 34% of businesses) leads to missed payments, late fees, and poor cash flow management.
Accounts Receivable challenges
- Delayed Payments: A staggering 87% of businesses report being paid after their invoice due date, with sectors like marketing, advertising, and construction experiencing significant delays. The delay can extend up to 30 days beyond the invoice due date for larger businesses.
- Cost and Time of Chasing Payments: Businesses spend considerable resources on payment follow-up tasks, with over half dedicating 4 hours or more each week. This not only represents a financial burden but also a significant opportunity cost, diverting time from revenue-generating activities.
These challenges highlight the need for small businesses to streamline their financial operations. Using technology to automate and integrate AP and AR can help improve efficiency, cut costs, and better manage finances.
Why AP and AR Are Not Solved With Current Solutions
Even with tools like Bill.com and Tipalti, small businesses still find AP and AR tough. These systems might be too complex for small teams without a finance expert. Also, small businesses often can’t afford these solutions, don’t know how to use them, or don’t want to change their current methods. As a result, they end up using Excel and emails to manage finances, chase payments, and get approvals, which isn’t efficient.
How Fintech and SaaS Platforms Should Be Addressing SMB’s Needs
Fintech and SaaS platforms, including Neobanks, should tailor their offerings specifically for small businesses by integrating financial tools directly into the workflows these companies already use. This would eliminate the need for additional training or resources to manage accounts payable and receivable processes.
By automating invoicing, payments, and providing real-time financial insights, these platforms can offer significant value. Small businesses are not necessarily looking to purchase new solutions but are open to investing more in their core SaaS tools if these provide additional value and streamline their financial operations.
Why solving AP and AR challenges leads to automated B2B payments
Solving AP and AR challenges is essential for unlocking automated B2B payments. The real value in B2B transactions isn’t just in transferring funds but in streamlining the entire process that leads up to the payment. This includes managing invoices, approvals, and other preparatory steps efficiently. By focusing on these workflows, businesses can significantly improve efficiency and accuracy in their financial operations, leading to a more automated and seamless B2B payment process. This approach not only addresses the immediate challenges but also paves the way for innovative payment solutions tailored to the unique needs of businesses.
Real-World Applications: Success Stories from leaders in specific verticals
Leaders in niche verticals, like ServiceTitan and Jobber, showcase real-world success stories in addressing AP and AR challenges. ServiceTitan, leveraging digital transformation and private equity interest, reported $577M in revenue in 2023 by offering comprehensive solutions for trades. Jobber, targeting a similar market with a more affordable CRM, achieved $150M in revenue. These successes highlight the impact of tailored fintech solutions in streamlining financial operations for small businesses, demonstrating the potential for efficiency gains and cost savings in specialized markets.
Summary: The Problems Are Huge and an opportunity for B2B platforms
The struggle with AP and AR management poses both a significant challenge and a golden opportunity for B2B platforms. Yet, the evolving landscape of fintech and vertical SaaS is offering solutions, notably through Monite’s Accounts Payable and Accounts Receivable infrastructure.
Monite’s infrastructure helps B2B platforms speed up the building of Invoicing and Bill pay workflows. Since our platform is API first, our ready made modules such as accounting integrations and multi-payment rails are flexible. You can choose to add them and connect through our API or choose to implement your own solutions.