Small Businesses Embrace Simplicity as Managing Cash Flow Becomes More Complex

The tariffs were on, then they were paused, and at the moment, the United States trade war is focused on China.

Although some business owners are girding for a recession, any such scenario may be relatively shallow, as the Federal Reserve can cut rates from still-high levels.

Priority CEO Tom Priore told Karen Webster that no matter the economic environment, small- to medium-sized businesses (SMBs) that power the GDP navigate seas of complexity. Construction firms have multiple projects going at any one time, yet 60% of these companies have fewer than five employees. Restaurants must juggle several suppliers and distributors to keep inventory on hand and customers fed. Managing payroll and keeping these vendors loyal underscore the fact that cash flow is king, especially if inflation remains lofty.

“From the SMB standpoint, the exposure to tariffs at the supply chain level may actually be pretty small … but the main concern and the damage to small business lies with consumer uncertainty,” Priore said.

PYMNTS Intelligence found that nearly 80% of consumers are pulling back on at least some purchases due to this uncertainty, as they seek to pad savings or wait to see what comes next.

“Where the rubber’s going to meet the road is what the consumer decisions are,” he said, adding that “if consumer spending does slow, it’s going to affect all businesses.”

Against that backdrop, small business owners are looking to be predictive and proactive about how to manage their businesses, he said, and the top-of-mind questions crystallize into, “How am I managing cash flow? How can I optimize working capital?” Many small businesses rely on the personal credit cards of their owners (which may already be stretched as they’ve had to use those cards to manage their own essential expenses).

“What we’re seeing, not just on the small business front but also with larger companies, is the utilization of credit products to extend working capital,” Priore said.

These solutions can also include bill payment offerings that allow expenses to be satisfied with card payments to help regulate cash flow.

“We’re also seeing a real pickup in bundled financial services with an uptick in [Priority] customers that want to have banking that’s more connected to their merchant services, where funds can settle faster and they have better visibility into cash flow,” he said.

Better visibility into cash flow and opening secured lines of credit (secured by forward sales) means that they can strike better deals with their suppliers, which improves efficiencies along the supply chain.

“These non-traditional lines of credit will be more broadly used by small businesses to optimize spending on their suppliers and buy items they might need in bulk or purchase large-ticket items,” Priore said.

Bundled financial offerings give SMBs the tools they need to manage their business in a personalized way, “a choose your own adventure” approach to managing cash, he said.

“You can use our products for accounts receivable, which is merchant acquiring, or card or ACH, and it’s all in one place,” he said. “Even if you need to do a lockbox, you can do that, getting all your money into a bank ‘container’ that’s FDIC insured. Or [a firm] could use an embedded card that’s attached to a bank account to pay bills… All of this is embedded into the experience, and it’s a unified commerce experience.”

Looking ahead, he said, key signs to watch for the health of small businesses include whether they are retaining employees or letting them go, and monitoring the levels of card delinquencies, which indicate a stretched consumer who might cut back drastically.

The mindset of what Priore termed “American optimism” will prevail, and that optimism is embedded in the business landscape.

“The uncertainty today will be reconciled and cleaned up,” he told Webster, adding that “our mission is to provide that flexible financial tool set … it doesn’t matter what environment you’re in. Accelerating cash flow and optimizing working capital are always good things.”

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