One of the leading causes of small and medium (SME) businesses going bust is a failure to manage cash flow.
Centime, Inc. recently launched a comprehensive package to address the issue. “Study after study suggests this is a problem that hasn’t been solved,” said BC Krishna, founder and CEO of Centime. JP Morgan Institute did an analysis of 600,000 businesses they bank to see how much cash they had on hand. The median was 27 days of cash, “so if their cash flow dries up, that’s how long they could last,” the study found.
“The pandemic, with impacts you don’t control, can sweep through millions of businesses,” he added. “We help growing small and mid-sized businesses that employ between ten and one thousand employees. Growing businesses face numerous challenges as they scale and ensuring that they have control over cash flow is a critical life-and-death element of growth and survival.”
Centime’s cloud-based solution has four legs, added Krishna.
“The first is to build a cash flow roadmap, how much cash do you have, how long will it last. Companies need a forecast of their cash flow to see if they have enough receivables coming in to meet predictable expenditures, like payroll.
“Often these are timing issues. I have an invoice to IBM in 30 days but payroll next week.”
That could be a problem.
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Centime integrates with accounting packages popular for SMEs, like Quickbooks, and it uses artificial intelligence and machine learning to forecast how long cash will last.
“Having a forecast is necessary but not sufficient. Businesses have three things to control for cash flow. A big part of your cash flow is your invoices, will you be paid on time. Fifty-five percent of invoices are paid late. If you have 30 days of cash and get paid in 45 days, that has an impact. We help businesses predict payment delays and send out reminders to customers, starting with a followup when they send the invoice, another notice days before it is due, and a reminder to pay when it is due.”
Centime shows days payable outstanding and with its reminders it helps companies get paid faster.
“You also have payables. You expect to pay your suppliers but you have same issue — if you are short, you want to delay payments, but without a forecast your decisions will be suboptimal. You may want to put some bills on a credit card and get another 30 days, but then will the supplier accept credit cards, and will you accept the card fees if the supplier won’t?”
Forecasts, receivables, payables, and managing credit — some companies do one or two of these but Centime’s research didn’t find any that cover all four aspects of cash flow.
Flow is only half of the cash flow issue — for the cash side, First National Bank of Omaha is working with Centime.
David Cota, who leads wholesale banking at FNBO, said their SMB customers deal with cash flow issues every day.
“A lot of our business customers were telling us that in an effort to manage cash flow, the bank was providing part of what they needed, they were creating a lot of manual processes to manage their side. We had been working on ways we could help bring that full picture to light for them when BC stepped forward with Centime.”
Although some small businesses say they are neglected by bank lenders because it takes nearly as much time to do a small loan as it does to make a large loan to a corporation, Cota said FNBO has a very active business in SME landing.
“There are many small businesses out there that are very credit worthy, and we lend to them everyday. It’s an active, viable part of our business.”
The bank has long-term relationships with many businesses and also lends to new businesses, often through commercial cards, which is the way many new businesses begin to secure credit. It is developing plans for a pilot with Centime, he added.
“We are excited about the opportunity to partner with BC and his team because we think this is a real important need, especially in the SME space.”