27th Feb 2020

Are you ever too small to adopt payments automation?

Across the UK, automation is creeping into all aspects of commercial activity. In sectors such as manufacturing and call centres, automation is as commonplace as coffee machines and photocopiers. Even in sectors where automation is less pervasive, it usually exists in some capacity, relieving workers of mundane, repetitive and low-value tasks.

However, when it comes to corporate accounting and treasury departments – an area it has been shown to produce dramatic benefits – automation continues to face some resistance. Much of this resistance comes from SMEs believing that their size precludes them from realising the full potential of digitising their payments infrastructures.

In this piece, we explain why that belief, in the vast majority of cases, is very much wrong.

The smaller the revenue, the narrower the margin for error

With generally less available capital and thus reduced tolerance for error compared with larger corporations, SMEs must manage their cash flows with added diligence. However, inefficient invoice processing and manual accounts payable processes cause many to lose money, often on a monthly basis.

Losses, due to human error during manual data entry, can accumulate and mislaid invoices or lengthy approvals mean bills are often paid late, or not at all. The upshot is damaged supplier relationships, missing out on early payment discounts and even the amassing of late payment charges.

Of course, propping up this maelstrom of paperwork and frantic data entry, is the sheer amount of time needed to retain some semblance of order. Employees can waste hours each week filing invoices, matching them with purchase order numbers, chasing payments and locking down management to acquire proper signoffs. Hours that could be spent on real, value-adding activity.

This outlay of precious time, coupled with the tangible costs of late payment charges and missed discounts, amounts to a cash value that would make many SME leaders shudder upon learning.

The benefits of payments automation for SMEs

The benefits to SMEs of payments automation are no different to those bigger organisations and can be broadly categorised three ways:

 Cost savings

  • Enhanced speed of processing means it becomes possible to leverage early-payment discounts on invoices
  • The ability to access payment patterns and reports means the most cost-effective suppliers can be identified and better deals negotiated
  • Elimination of human error – inevitable with manual processes – slashes the risk of duplicated and late payments

Operational improvements

  • Employees are freed to focus on value-adding activities rather than manual data entry and chasing down paper-based invoices
  • Invoices and their current status can be tracked at any time
  • Office space can be saved by storing invoices electronically
  • Integration with existing finance systems is simple and no system changes are necessary

Competitive advantage

  • Customers can be provided with an enhanced experience, for example by accepting payments from any location via a mobile device
  • Insights into payment patterns allow for better decision-making and more informed strategy building
  • An enhanced ability to access overseas markets provides further opportunity for growth

Why do some SMEs think they’re “too small” to adopt a payments automation solution?

When the benefits to adopting a payments automation solution are presented in such stark terms, it begs the question why any business would posit their size as justification for persisting with out-of-date, manual processes.

Predictably, a key objection to adoption surrounds cost. Many SMEs regard the prospect of investing in a payments automation solution too daunting to justify the initial expenditure. Knowledge, or lack thereof, of how to manage a solution once integrated is also a concern.

It often comes as a surprise to SMEs to learn that not only are payments automation solutions more affordable than they had perhaps realised, but they also require only a basic competency to secure big savings and strategic boons.

SMEs regarding themselves as “too small” to adopt a payments automation solution must remember that in business, everything is relative. An SME with 10 employees faces the same core challenges a much larger organisation with a workforce numbering 300+. Staff wages and suppliers still need to be paid on time, customer payments still need to be processed efficiently, banking relationships still need to be consolidated and cash positions still need to be visible at all times. The size of the business makes little difference to how critical it is to get these functions right.

Though some may disingenuously claim otherwise, there is such thing as being too small. A person who works from home making bunting for weddings and birthday parties and servicing only the local area can manage without a payments automation platform. Where such a business migrates from the living room into commercial premises and begins to employ others, that’s when it becomes a compelling proposition.

SMEs in this type of situation need to look out for niche providers offering solutions that specifically address their payment needs and deliver an overall ‘value add’ that suits their business model. Providers with a track record and clear understanding of the needs of SMEs are obviously a starting point but the trend now is towards all providers designing bespoke solutions.

So, while it’s true that home-based, self-employed individuals would likely not feel the full power of an integrated payments automation platform, most businesses larger than this, very much would. For those unsure or unconvinced, the road to clarity begins with a simple email or phone call.

It could be the most important query you’ve made in a long time…