Integrating Payments To Help SMBs Find Success

Small and medium-sized businesses (SMBs) have a problem.

While SMB owners may be expert bakers, carpenters or designers, managing the back office activities that keep the business on an even keel is typically not their forte. That’s especially true when it comes to getting paid for their work, a process that can drag between getting invoices out and getting payments in. In fact, it often ties SMB cash flow into knots.

The payment problem is an issue that a growing number of software platforms are working to address, often through independent point solutions that solve particular problems: invoicing, bill payments, time and record keeping, integration into accounting systems, payments processing and many more.

As effective as those point solutions may be, making them work together as seamless parts of the SMB business takes work. Accepting digital payments and integrating them into the billing flow requires SMBs to do the heavy lifting of obtaining a merchant account. They then need to manage the integration with payment gateways, and all of these require time and money — two things often in short supply with SMBs.

It’s not surprising that checks remain how most of those businesses are paid, particularly those in the services sector. Across the board, even when digital payments options are offered to their customers, the choices remain limited.

These are the frictions that SMB invoice and accounting software provider FreshBooks seeks to solve, chief commercial officer Mark Girvan told PYMNTS in a recent interview. The company’s goal is to be the one-stop-shop for SMBs who need help managing the lifeblood of their businesses — cash flow through a portfolio of billing, cash management and recordkeeping options — and making digital payments an embedded part of the billing process.

Solving SMB payment problems

When FreshBooks debuted its first software solution in 2002, digital payments were a relative novelty, Girvan explained. They’ve since grown to be a necessity for business survival.

“A few years ago, if one of our merchants had turned on the ability to accept digital payments, maybe only a quarter of their clients might have wanted to pay that way,” he said. “That pendulum has swung quite aggressively the other way.”

Digital payments give many SMBs access to a tool previously unavailable to them: data. It helps them more accurately monitor which services are most popular, then use that information to unlock new customers. This also helps them learn which of their customers make repeat purchases and which most frequently pay on time. That data can then be turned into real-world business insights, allowing SMBs to create new features and ultimately grow.

But the real key is packaging all these features together, giving SMB owners the one-stop-shop they crave while enabling them to cut themselves a bigger piece of the revenue pie, Girvan said.

Entrepreneurs are hungry for solutions that can take overhead off their plates and save them some time, while also helping them get paid faster. Today, this often means offering features like invoicing, accounting, web and storefront development.

Embedding payments into invoices

But Girvan also noted that simply giving SMBs the chance to synch up their merchant accounts with accounting platforms doesn’t solve the root of their digital payments problem. Giving SMBs the ability to accept digital payments that were embedded into their invoices could solve many of them, however.

SMBs can use the company’s payments engine platform, Payments by FreshBooks, to send bills or invoices for services they provide to customers. The invoices come integrated with payment acceptance capabilities, allowing clients to pay what they owe quickly and simply — and all via credit cards.

Accepting digital payments often isn’t enough, though. Small businesses also want to be able to easily manage these payments.

As a result, Girvan said FreshBooks felt it was essential to offer features that go beyond basic payments acceptance. So far, those capabilities include cash flow management tools and features or services to reduce the time sunk on billing reminders, thus encouraging faster receipt of money.

“Before you’d bill your client on a monthly basis,” Girvan said. “They’d take two weeks to pay — typically by check, because using credit card was expensive and merchants didn’t want to lose to all those fees. We’ve now built all kinds of feature functionalities that can take that invoice, and manage it for you, more quickly and do everything automatically.”

FreshBooks has partnered with integrated payments provider WePay to integrate these payment acceptance and management features. The firm’s application program interface (API)-based solution offers an integrated payment experience, and is designed to enable users to interact with its platform instead of a payments processor. It also gives platforms like FreshBooks the flexibility to choose which payment functions they want to own and which they want to let their payment service providers handle — all while keeping up with growing number of payment methods.

Keeping it simple

But SMBs also crave simple solutions they can learn to master, and without wasting valuable time, energy or other resources. For FreshBooks, that has meant offering a training and onboarding program designed to help clients learn and adapt to its integrated payments offering.

“SMBs say ease of use is their number one defining need,” Girvan said. “They want to be able to self-discover. They want to be able to set up their systems without a tremendous amount of overhead. That’s where we spend most of our development dollars — in helping companies onboard with us successfully.”

But being able to seamlessly receive payments only solves one side of the equation.

SMBs’ customers have long been accustomed to using physical methods such as cash or checks to make a payment. What’s more, many aren’t particularly savvy with the new digital ways to pay those who have provided services to them.

“Their customers don’t think [about the fact that] they’re interacting with technology,” Girvan said. “It needs to be as simple as, ‘I open my mobile phone, and I pay a bill.’”

Paying invoices needs to be simple and straightforward to help avoid delayed payments, he added.

Invoices and bills generated using FreshBooks enable the customers who receive them to make a payment with just one click while viewing the invoice. This removes unnecessary steps that create friction for customers and keep them from making a payment. The platform also sends automated reminders to ensure SMB clients don’t forget about their invoices, which can obviously cause a delay.

Such delays can be disastrous for SMBs, Girvan noted, because many of them receive large payments just once or twice a month. They then need to make those payments last until a new job comes in, but even businesses that lack such cash flow complications don’t want payment delays.

Even if they aren’t financial experts, without efficient and on-time payments, no baker, carpenter, designer or any small business can survive without getting paid.

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About the Tracker

The PYMNTS Payments Powering Platforms Tracker™, powered by WePay, serves as a monthly framework for the space, providing coverage of the most recent news and trends along with a provider directory highlighting the key players contributing across the payments-integrated platform ecosystem.