BILL Sees Tailwinds From Growing Convergence of Payments and Software

Small businesses are having big problems in today’s economy.

Business bankruptcy rates jumped 30% between September 2022 and September 2023, as macro factors like record high interest rates and the end of pandemic relief increasingly challenged the rosiness of small businesses’ prospects.

And as PYMNTS reported, small businesses are “ very pessimistic ” about their prospects this year, although PYMNTS Intelligence data coming into the new year found that Main Street small and mid-size businesses (SMBs) that rely heavily on eCommerce are more optimistic about top-line prospects.

But the ongoing challenges facing its main customer base haven’t stopped BILL, a payments and billing software maker for SMBs, from increasing its total revenue 22% year over year.

On BILL’s second quarter 2024 earnings call Thursday (Feb. 8) René Lacerte, BILL CEO and founder, told investors, “We delivered strong growth during the quarter as we automated financial operations for more than 470,000 businesses.

“We continue to drive innovation and sharpen our focus on the most impactful initiatives to create value for our customers, partners, and shareholders. With our powerful platform, expanding ecosystem, and increasing scale, we are uniquely positioned to be the essential financial operations platform for millions of SMBs,” Lacerte added.

“Our financial performance in the second quarter highlights the strength of our business model and our commitment to deliver balanced growth and profitability,” said John Rettig, BILL president and CFO.

“Customers and suppliers are more focused on cost and more selective based on cost,” Rettig noted.

Over the last two years, BILL has beaten EPS estimates 100% of the time and has beaten revenue estimates 100% of the time by an average of 8.4%

Read more: Billing Software Firm BILL to Reduce Workforce by 15% Amid Restructuring

SMB Back-Office Efficiency

“There are millions of SMBs transacting trillions of dollars of payments using legacy methods,” Lacerte told investors, explaining that despite the fact 473,500 businesses used BILL’s solutions as of the end of the second quarter, the platform’s total addressable market (TAM) is a very scalable opportunity.

Using digital to manage financial workflows, including payables, receivables, and spend and expense management, is just one way that small businesses can replace historical and inefficient paper-based processes that may be holding them back.

That’s because disparate and antiquated systems create both a lack of visibility into cash flow and real-time financial status, making informed decisions difficult, as well as silo workflows and stick SMBs with an inability to scale their financial operations without growing headcount, which can be time- and cost-intensive.

“We went through one of the most volatile macro environments … and I think many [SMBs] are now starting to think about going on the offensive,” Charles Zhu , vice president of product at Enigma , told PYMNTS in an interview posted in December.

Per BILL’s financial presentation , the company processed $75 billion in total payment volume in the second quarter, an increase of 11% year over year, across 26 million transactions during the second quarter, an increase of 23% year over year.

“We are seeing the convergence of payments and software,” BILL executives said. “We want to create embedded solutions everywhere when it comes to financial opportunities.”

Read more: Mid-Sized Firms Are Lagging in AP and AR Automation

“Things like invoice financing and card spend are important to small businesses,” BILL’s CEO told investors.

And automating away legacy bottlenecks is also crucial to growth.

But according to recent research in “ Accounts Payable and Receivable Trends: What’s Next in Automation ,” a PYMNTS Intelligence research study in collaboration with American Express , around 80% of SMBs of non-retail sectors have not automated any AP process, and 60% did not automated any AR task yet.

High processing cost and fees of implementing these automation systems and operative issues are among the main reasons behind this deficiency, particularly as minimizing costs is increasingly prioritized by SMBs.