Voice of the CFO: Niche Banking Solutions Needed for Small Businesses that Face Same Old Problems

When the oven in a pizza shop goes out, the owner must replace it immediately. They can’t wait until their revenues add up to where they can make the purchase.

That’s one of the ways in which the financial needs of small business owners, self-employed workers and freelancers differ from salaried workers.

“These small businesses — especially if you look at the constituency that we serve — their biggest challenge in general is managing cash flows,” Deepesh Jain, chief financial officer (CFO) and chief operating officer at Lili, told PYMNTS. “They have expenses at a certain time, and their revenues come in at a different time.”

Lili serves that constituency with an all-in-one banking app designed for them. Jain joined the company in May with over 20 years of experience in banking and FinTech. In addition to handling the company’s day-to-day financial operations and management, Jain is tasked with leading Lili’s growth into lending and payments.

Small Businesses, Big Pain Points

Speaking as part of PYMNTS’ “Day in the Life of a CFO” series, Jain said that while consumers and medium- to large-sized corporations are well-served by banks and FinTechs, small businesses have some unique pain points that are not solved by those organizations.

For example, a traditional bank would give a small business a bank account but would not give them the opportunity to generate an invoice. So, the business would have to buy an invoice-generation tool. They then would have to figure out how to input their bank account details, how to transfer money between accounts and how to keep track of everything.

Another example of how small businesses are underserved has to do with expenses, Jain said. They can use their debit card at a traditional bank, but the bank will not give them a detailed worksheet that they can use to file their taxes and figure out which expenses are taxable and which are not. Here, too, the small business owner must use other software to transfer their transactions from the bank to the software.

A third example relates to cash flow issues like those faced by the pizza shop owner. Traditional banks charge fees if the customer fails to maintain a minimum balance or has an overdraft.

“As I mentioned before, these small businesses have cash flow issues because of the different timing mismatch,” Jain said. “So, they don’t want to have a minimum balance, they don’t want to pay for the account — they want to have some flexibility about how to manage their overdraft and not pay $29 each time.”

Serving a Growing Demand for Solutions

Lili brings together in one app the ability for small business owners to manage their accounts payable (AP) and accounts receivable (AR). That way, they don’t have to use different tools to do different things, get those tools to talk to each other and move data from here to there.

“We think on average we help small businesses save up to 60 hours and over $1,500 a year in just transitioning from their regular processes to using our app,” Jain said.

Lili also offers a feature that deposits a certain percentage of the small business owner’s revenue into a savings account so that it earns interest. Another, similar feature saves money for the tax returns small businesses must file on a quarterly basis.

“A vast majority of them don’t know that they have to do that if they’re a freelancer or a small business,” Jain said. “So, we have a feature that allows you to automatically set aside a percentage of your incoming revenue as a tax payment, and it goes into a tax bucket that is hidden from you so that you don’t spend it.”

Jain said Lili expects to see growing demand for solutions for small business owners, self-employed workers and freelancers. Jain said by 2028 there will be 90 million freelancers — of which 30 million will be true small business owners who run their lives as a business.