More Small Businesses Using Payment Cards

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Results of the Visa Second Annual Small Business Cash Management Survey, released Tuesday, reveal that small business owners are increasingly adopting and more satisfied with the use of business payment cards as a tool for managing their businesses. Financial planning, budgeting, and meeting monthly expenses, continue to be the greatest small business concerns, with 52 percent saying receiving and collecting payments is the most challenging issue for small businesses of any size.

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Business payment cards are consistently considered to be a strong solution, helping small businesses improve their cash management process. The survey indicates that 65 percent of the small businesses responding use business credit cards, an increase of nearly 10 percent over the past year. Thirty percent of small business owners surveyed also plan to increase their reliance on business payment cards during the next 12 to 18 months.

“These findings are in line with what we have been hearing from small business cardholders for years; good management of cash position might mean the difference between the success and demise of any small business and is, therefore, their primary concern,” Raghav Lal, senior vice president of small business product, Visa USA said in the prepared statement announcing the survey report. “For this reason, through offering innovative, flexible and reliable payment solutions, Visa remains committed to helping small businesses streamline the payments process and achieve their goals of increasing efficiency and optimizing their cash position.”

Business Owners Focused on Managing the Bottom Line

Financial planning and budgeting was noted by 53 percent of respondents as being the predominant financial concern among small businesses, making it their top concern for the second consecutive year. Among the cash management challenges facing small business owners, sluggish cash flow, not being able to accurately estimate the timing of payables and receivables, was reported by 35 percent of those surveyed. Another 27 percent noted that the cash management process is labor-intensive administrative work and 18 percent reported a cumbersome operational process as challenges. Among larger small business respondents, 19 percent said reconciling bills and financial reporting was their greatest challenge, up from only 3 percent last year.

“Migrating to business payment cards helps business owners better predict the timing of payments, track the status of finances, and manage their cash position,” adds Lal. “By accepting business payment cards, small businesses can also accelerate receivables by eliminating the time and costs associated with preparing and sending an invoice to a customer. In the end, instead of pushing paper all day, small business owners can now maximize their time, energy, financial resources, and passion on pursuing their business.”

Increasing Role of Electronic Payments & Payment Card Growth Opportunities

Forty-five percent of respondents who already have business credit or debit accounts reported that they would make all their purchases using some type of business payment card. The benefits noted by this group include:

  • Greater efficiency in receiving and collecting payments (30 percent)
  • Greater efficiency in making payments and disbursing funds (28 percent)
    Greater ease in managing and moving funds (27 percent)

The majority (91 percent) of small businesses see business payment cards as an effective tool for managing travel and entertainment. Almost half (48 percent) see them as useful tools for managing personnel supply services and 42 percent for purchasing capital equipment and raw materials. Nearly 27 percent of respondents say they see card-based payments providing greater efficiency in receiving and collecting funds. One quarter of those surveyed found that the cards offer greater ease in making payments, while 21 percent report greater ease of managing and moving funds.

Based on the survey results, the categories representing opportunities for business payment cards include:

  • Raw materials and manufactured goods. The survey reports that 42 percent of respondents used business credit cards and 38 percent used business debit cards to pay for expenses in this category which represents nearly $800 billion or 17 percent of small business expenditures and is the largest portion of small business spending.
  • Professional services. This is a largely untapped segment for business payment card use, since only 10 percent of respondents used business credit cards and 6 percent used business debit cards to pay for professional services, although they account for 11 percent, or $541 billion, of small business expenditures.
  • Rent. Despite representing only 9 percent or $412 billion of small business expenditures in 2005, 42 percent of those surveyed reported using business credit cards and 38 percent reported using business debit cards to pay their rent.
  • Personnel supply services. Nearly half (48 percent) of the businesses surveyed used business credit cards and over half (56 percent) used business debit cards to pay for personnel supply services which represent nearly $404 billion in small business expenditures.

According to the Visa Commercial Consumption Expenditure Index, which tracks business-to-business spending, small business spending grew 5.4 percent in 2005 to $4.7 trillion. Growth is expected to slow to 4.3 percent, but still reach $4.9 trillion in 2006. More than half (54 percent) of small business expenditures are comprised of core business services including legal, accounting, insurance and shipping/mailing.

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