In today’s fast-paced financial world, financial institutions (FIs) have a golden opportunity to help small and medium-sized businesses (SMBs) manage their cashflow effectively.
SMBs make up more than 90% of businesses worldwide. They’re the driving force behind economic growth and job creation. And yet, 61% of SMBs feel so underserved by their bank that they need to have multiple banking relationships just to gain access to all the tools they need.
“You know the expression around kids—that it takes a village to raise them? Well, for a small business, it takes an ecosystem to support it. And that ecosystem should involve its bank,” shares Steve Robert, CEO of accounting software, Autobooks. “That’s because the most important thing to an SMB is cashflow. If cash is king, cashflow is the oxygen SMBs breathe. Without it, they struggle to survive. Banks play a key role here.”
By becoming a trusted partner and advisor to your SMB clients, your FI can tap into this massive market and boost the growth of those small businesses and its own profits.
Enter: open finance—an under-used tool that can revolutionize how FIs serve their SMB clients. By integrating open finance platforms, FIs can access real-time financial data, gain a 360-degree view of their clients’ operations, and provide personalized guidance on cashflow management.
But how can your FI unlock this market potential? The answer lies in embracing transformative strategies and leveraging cutting-edge technologies.
So, in this article, we’ll explore six game-changing tips for FIs to make the most of open finance and empower their SMB clients with top-notch cashflow management strategies. By jumping on the open finance bandwagon, FIs can build stronger relationships with SMBs, offer tailored solutions that cater to their unique needs, and open doors to expanding their product offerings and boosting their revenue streams.
Understanding Cash Inflows and Outflows
Richard Branson, the renowned business magnate, wisely said, “Never take your eyes off the cash flow because it’s the lifeblood of business.”
A strong foundation in cash flow management begins with a thorough understanding of cash inflows and outflows. As an FI, guiding in tracking and categorizing these essential financial transactions is crucial. But how can you take it a step further with the transformative power of open finance?
By harnessing the power of open finance APIs, your FI can automate data collection from various sources like bank accounts, payment processors, and accounting software. This automation revolutionizes the way SMBs monitor their cash flow.
With open finance, SMBs access accurate and timely insights into their cash flow patterns. They can identify trends, make informed decisions, and pre-empt potential challenges. This level of visibility and control empowers SMBs to navigate the business landscape and seize growth opportunities confidently.
Cash Flow Forecasting
According to a survey by the Association of Financial Professionals, 72% of organizations consider cash flow forecasting a top priority. This statistic highlights the widespread recognition of the importance of cash flow forecasting in financial planning and decision-making for businesses of all sizes.
Your FI can play a pivotal role in coaching SMB clients on the art of cash flow projection.
By leveraging historical data, factoring in upcoming expenses, and considering revenue expectations, SMBs can generate accurate cash flow forecasts. Open finance APIs enable SMBs to access real-time financial data, ensuring precise and up-to-date forecasting.
With reliable cash flow projections, SMBs can make proactive decisions and adjust their strategies accordingly.
Monitoring and Tracking
Mastering the art of cash flow monitoring is like gaining a superpower for SMBs. And your FI can be part of that superhero origin story!
The spider that bit Peter Parker, if you will.
By implementing tech tools and harnessing open finance APIs, you can equip SMBs to track their cash flows in real-time, providing them with a comprehensive view of their financial health.
Ask your SMB clients to imagine having a crystal-clear window into every dollar flowing in and out of their business, with the ability to spot potential gaps and challenges before they become major headaches. They’d salivate at the thought.
With the right monitoring system in place, they can swiftly identify any hiccups in their cash flow and take immediate action.
But it’s not just about tracking the numbers on a spreadsheet. It’s about empowering SMBs to make proactive decisions, fine-tuning their operations, and securing financial resilience. By leveraging the power of open finance, your FI can help SMBs implement smart cash flow monitoring practices that lead to long-term success.
Budgeting and Expense Control
Let’s say your client has a bakery businesses. As its FI partner, you have the opportunity to assist them in identifying areas where they can reduce unnecessary expenses. By leveraging your expertise, you can guide them in sourcing ingredients from more affordable suppliers or optimizing their staffing schedules to align with peak sales hours. This collaborative effort aims to help SMBs make every dollar count, resulting in improved financial health.
But that’s not all. By introducing budgeting best practices and harnessing the power of open finance APIs, you can empower SMB owners to automate expense tracking and gain real-time insights into their cash flow. With these valuable tools, business owners can confidently allocate resources, gain greater financial visibility, and make informed decisions.
Helping SMBs develop strong budgeting skills enables them to manage their finances more effectively, ultimately fostering their growth. As these businesses thrive, they bring in more revenue, which also benefits the FI. So, by investing in the financial success of small bakery businesses, you not only support their growth but also create a mutually beneficial partnership that fuels the growth of your own institution.
Cash Flow Optimization
Your FI can coach its SMB clients on effective strategies for maximizing cash flow efficiency and becoming empowered business owners. This may include:
- negotiating favorable payment terms with suppliers and customers,
- adopting efficient inventory management systems, and
- exploring alternative financing options.
With open finance APIs, SMBs can unlock valuable insights into payment trends, identify opportunities for cash flow optimization, and make data-driven decisions to enhance their financial performance.
Regular Financial Analysis
Picture this: Regular financial analysis is like having a trusty compass that guides SMBs through the ever-changing terrain of cash flow management. Your FI can be their expert navigator, leading the way to financial success!
Together, you and your SMB clients embark on a journey of comprehensive financial reviews. You dive deep into their financial data, uncovering hidden gems of opportunity and shining a light on areas that need improvement. It’s like uncovering buried treasure!
But here’s where the adventure gets really exciting. With the power of open finance APIs at your fingertips, SMBs gain access to real-time and accurate financial data. This real-time data not only empowers SMBs with accurate and up-to-date information but also fuels data-driven analysis, enabling them to make informed strategic decisions that shape their future. It’s a tremendous benefit for SMBs, and equally important to highlight the advantages the FI can gain from this valuable resource.
So, gear up for the thrilling expedition of regular financial analysis. Let your FI be the guide that helps SMBs navigate the twists and turns of cash flow management. With the power of open finance APIs, you can unlock the hidden treasures of financial insights, empowering SMBs to chart a course to financial success and conquer any challenges that come their way.
Harnessing the Power of Cashflow Management: Unlocking Financial Stability and Growth
By implementing these six essential strategies, your FIs can provide invaluable coaching on cash flow management.
Combining these six learnings equips SMBs with the financial agility necessary for success. As a trusted partner, your FI supports these small businesses on their journey toward sustainable financial stability and growth.
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