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5 Finance Inefficiencies Slowing Down Your Small Business

4 Mins read

Strong financial performance is essential for any business to remain competitive in today’s fast-paced environment. Whether you’re an small business owner or finance leader, finding ways to build more efficiency and productivity into your business is a great unlock for more growth and even a happier workplace. But still too many small and midsize businesses (SMBs) face financial inefficiencies that, at best, eat into productivity and, at worst, can hinder progress and growth.

First, you need to identify your business’s financial inefficiencies. Then, you can implement tools and technology to help solve those inefficiencies. Not sure where to start? Here are five inefficiencies I commonly see in businesses and firms of all sizes and various technology solutions that can help you solve them.

Inefficiency #1: Too-Slow Spend Tracking

Spend tracking is critical to understanding the financial health of your business. Traditional methods of tracking spend are often slow and tedious. Consider: Excel spreadsheets or paper files and receipts. This can lead to outdated financial data and mistakes in acquittals, making it difficult for decision-makers to act promptly.

Solution: I always recommend that businesses use software to help them automate their spend tracking. An integrated software solution can help you establish a robust spend management strategy, where you can not only review expenses quickly but also establish processes and controls for approvals, set up cadences and formats for spend and expense reports, and determine informed uses of available data.

Inefficiency #2: Variances Between Budgets and Actuals

Many businesses I speak to struggle to align between projected budgets and actual expenses. If these variances go unnoticed for too long, they can impact everything from cash flow to strategic decision-making. Even when discrepancies are quickly noticed, it can take time to dig into financial reports, identify the causes, and determine what levers can be pulled to get back on target.

Solution: SMBs can’t plan actuals before they happen—all they can do is analyze financial data once it is available. The key is to have the right tools in place once the data is in hand. The good news is that financial forecasting software tools are now available that leverage artificial intelligence (AI) to aid in identifying discrepancies early. This enables you to make timelier adjustments and more accurate financial forecasting.

Inefficiency #3: Shared Corporate Cards

When a few corporate credit cards are shared among multiple employees, unmonitored and unregulated spending can create accountability and transparency challenges. This makes it difficult to track who is spending what and when, potentially introducing new problems, including compliance risks and more.

Passing around a physical card also has risks—it’s easier to lose, which could result in delays while the card is being replaced. Some businesses I’ve spoken to have also run into prioritization challenges when determining the order in which each employee has access to a shared card, which also slows things down.

Solution: Providing corporate credit cards to all employees can save you time and money. When linked with a spend management system, business owners and finance leaders have better visibility and security around employee spending, with detailed tracking and reporting linked back to individual users. This adds a layer of accountability and control to corporate spending while also ensuring compliance and reducing the risk of financial discrepancies.

Inefficiency #4: Cash Flow Visibility

As every entrepreneur knows, a business is only as viable as its cash flow. Too often, SMBs struggle with gaining clear visibility into their cash positions, which leaves them unable to test scenarios or glean strategic insights.

There can be different causes for this lack of visibility: siloed data, outdated software, or even just a lack of time or understanding of how best to drill down into transactional data. Many SMBs also use multiple platforms to manage their cash flow, which can result in missed payments, a lack of funds for investment, or an inability to quickly capitalize on market opportunities.

Solution: Effective cash flow management requires a combination of current and predictive insights, which are often missing from outdated financial systems. Upgrading your technology to a truly integrated and comprehensive financial automation system can give you timely cash flow visibility, empowering you to easily and quickly identify and solve problems, grasp opportunities, and make better, more accurate, and strategic decisions for your business.

Inefficiency #5: Manual Expense Management

Manual expense management is tedious and time-consuming. Every hour that an employee spends on this is an hour that could be reinvested in higher-value work. This manual process is also a recipe for errors and inconsistencies. With little-to-no real-time visibility, businesses can be left in the dark about expenses until the end of the month. This often leads to delayed reimbursements and can also be a significant administrative burden.

Solution: Financial automation tools enable you to automate your expense management. Digital expense management systems streamline the entire expense management process, from capturing receipts digitally to automating approvals and reimbursements. This reduces the time spent on cumbersome expense reporting and increases accuracy and efficiency.

It’s not only convenient—but one of the most important benefits you’ll see is increased visibility into the overall state of your finances, allowing for more flexible and scalable processes. Better oversight helps you manage compliance and mitigate potential fraud. SMBs with automated expense management also see faster end-of-month close times.

More Efficiency Leads to Greater Success

Tower 28, a fast-growing beauty brand, is a great example of a business that tackled its financial inefficiencies. From 2022 to 2023, the business tripled, and the employee base grew from 12 to 30 people. Chief Financial Officer Victor Liu says that financial automation “gave [the company] both oversight and comfort with a lot of flexibility and real-time updates as transactions come up. We’ve approved payments from meetings, airports, conventions—basically everywhere.”

For businesses to succeed in today’s competitive environment, they need financial operations that are agile and adaptable to real-time changes. The first step to achieving this is eliminating the financial inefficiencies holding your business back. Automating your finances through a robust tech stack empowers business and finance leaders with the data they need to control their finances. This ultimately paves the way for stronger growth and success.

Irana Wasti is the Chief Product Officer at BILL.

Small business finance stock image by Drazen Zigic/Shutterstock

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