Small and Medium Businesses (SMBs) form the backbone of economies worldwide. In India, the SMB sector is a lifeline for the economy, driving employment and innovation in sectors such as trade and manufacturing.
Today, as per statistics, India boasts 3.3 lakh small businesses and 0.05 lakh medium-sized enterprises. When combined with micro-enterprises, these businesses collectively contribute approximately 30% of India’s GDP.
As SMBs scale their enterprises, cash flow management will play an important role in their success trajectory. Managing cash flows efficiently can help SMBs achieve financial stability and accelerate growth at a sustainable pace.
In this blog, we outline key strategies and solutions that help drive superior cash flow management for SMBs.
What is cash flow management for SMBs?
Cash flow management for SMBs is a business function that tracks and optimizes how money flows in and out of small or medium-sized businesses. Optimizing cash flow management ensures that the business has enough capital to manage its daily operations by maintaining a balance between expenses and debt.
Unlike large corporations, small and medium enterprises have limited resources, such as liquid capital and assets. They also run with lean teams and are more reliant on credit with higher interest rates to expand the business.
Hence, small and medium-sized businesses need unique strategies to grow revenues, build a sustainable business, and increase profitability.
5 Cash flow tools and strategies for SMBs
Today, SMBs can build resilience and be prepared for all market conditions by leveraging the right cash flow tools and strategies.
For instance, adopting an AI-powered payment gateway enables businesses to deliver a seamless, secure, and instant payment experience to consumers. It can also help SMBs transform their cash flows and manage them efficiently.
Here are five ways to leverage the benefits of such a tool and boost cash flow management for SMBs:
1. Enhance budgeting techniques
Maintaining operational budgets is an important pillar of cash flow management. One of the top budgeting techniques is using real-time payment-related data to understand monthly and annual cash inflow patterns. In turn, businesses can set realistic monthly and annual operational budgets and stay within the allocated limits.
2. Leverage financial forecasting
Businesses must cultivate the practice of harnessing financial forecasting to balance cash flows effectively.
AI has transformed the basic Data Analytics function.
For instance, by adopting the in-built Predictive Data Analytics engine in cash flow tools, businesses engage in financial forecasting for a spectrum of market conditions. Thus, they can be better prepared to navigate events such as market downturns, recessions, and seasonal phases when business is down.
3. Automate payment scheduling
Making timely payments to vendors, employees, tax authorities, and other stakeholders is equally important for cash flow management. Payment schedules can ensure that SMBs make payouts on time and without errors.
In turn, SMBs can avoid delays, errors, fines, and penalties, which helps improve positive cash flow.
4. Strengthen payment strategies
Offering a user-friendly, trust-inducing payment experience is emerging as one of the top priorities for customers today. A poor payment experience turns customers away from making purchases, which has a domino effect on sales and cash flows.
SMBs can gain a competitive edge by integrating a superior payment gateway with their websites and online platforms. The solution unlocks over 100 payment options, such as point-of-sale EMIs, Buy Now Pay Later, payment links, and UPI autopay.
5. Automate instant refunds
When customers cancel an order, they expect an instant refund. Thus, businesses must nurture a culture of instant refunds to seed customer trust.
Once a customer’s money is refunded, they are more likely to make a fresh purchase. Automating the process ensures that customers always receive their refunds on time.
Platforms that build a reputation for making instant refunds are more likely to retain customers and attract new ones. From a financial standpoint, enterprises can also avoid a reverse cash flow scenario by instituting this best practice.
Benefits of efficient cash flow management for SMBs
Here are the five top advantages of superior cash flow management for SMBs:
1. Nurture customer trust and retention
A business that follows cash flow management is more likely to nurture customer trust. This is because positive cash flows reflect in the overall engagement of the business with customers. In a competitive market, customer trust helps drive retention, and also increases the Customer Lifetime Value (CLV).
2. Ensure a strong supply chain
Maintaining positive cash flows and scheduling payments helps businesses ensure that vendor payouts are made on time and with limited errors. This approach lays the foundation for building strong vendor partnerships, which in turn help strengthen and secure the supply chain.
3. Avoid penalties and fines
Efficient cash flow management by SMBs ensures that they have enough capital to clear payouts to authorities such as tax regulators and vendors in a timely manner. By following this best practice, SMBs can avoid having to pay fines that come at a significant financial cost and penalties that result in temporarily or permanently disrupted operations.
4. Build a financially, stable sustainable business
Positive cash flow management translates to higher operational stability. Businesses can continue engaging with their customers, employees, vendors, and other stakeholders without any disruptions. They can build a high-trust reputation and credibility and boost brand equity in a competitive market.
5. Drive revenues and profitability
Stable cash flows enable small teams to focus on the business of driving sales and profitability. They can leverage allocated budgets to be creative with marketing activities, improve the user experience, and optimize revenues using a data-driven.
The conclusion
SMBs must take adequate measures to strengthen cash flows, especially as they scale. Enhancing budgeting techniques, leveraging financial forecasting, automating payment scheduling, strengthening payment strategies, and automating instant refunds are the five key pillars of superior cash flow management for SMBs.
By doing so, they can effectively address common cash flow challenges. They can also retain customers, bring stability to their business, and drive revenues. Early investments in the right technology can help SMBs achieve these goals much faster.
Plural by Pine Labs offers Plural Gateway, a payment solution to help SMBs revolutionize their operations. This Gateway comes with over 100 payment modes, an inclusive EMI framework, the ability to accept payments via multiple channels to payment links, UPI Autopay for subscription services, and inclusive credit access options such as Buy Now Pay Later.
Reach out to us about your needs and start a conversation today.
