The finance teams at smaller business-to-business companies are struggling with a range of operational shortcomings, according to a report from a trio of vendors.
Some of the challenges these companies face are familiar to organizations of all sizes. According to the report, based on a survey of 100 senior finance professionals in North America at companies with up to $100 million in annual revenue, rising operating costs and the macroeconomic environment are their two biggest challenges.
Some of the other, lesser challenges that confront small B2B companies are in areas generally more important to larger, more complex companies. For example, only 24% of those surveyed identified pressure to adopt AI as a major challenge, and just 11% pointed to payment fraud/business-email-comprise risk.
The research was conducted in this year’s third quarter by CoreData on behalf of three vendors: Fortis Payment Systems, a provider of payment processing and embedded finance solutions; Avalara, maker of a software platform for automating and managing tax compliance; and Traild, an integrated accounts payable solution focused on efficiency and financial control.
The list of operational priorities for smaller B2B companies was topped by increasing efficiency via automation, optimizing working capital and free cash now, and fixing foundational data/process issues.
“While most organizations are performing in line with revenue growth targets, a significant proportion are struggling to meet cash flow and liquidity KPIs,” the report said. “Operating model shortfalls are likely contributing.”
Many respondents reported underperformance by the finance function against various KPIs, including forecasting accuracy and data quality (46%), cash and liquidity (39%), cost efficiency and productivity (37%), growth and revenue quality (34%) and profitability/margin (30%).
Additionally, when asked about working capital challenges, the top one was slow invoice-to-cash cycles/high days sales outstanding, mentioned by 61% of survey participants. Right behind was lack of real-time working capital visibility (59%).
“Customer payment behavior and longer billing cycles may contribute to higher DSO,” the report said. “But the findings also point to an internal factor that’s within businesses’ control: how their finance systems and processes are connected.”
The average current DSO for survey participants was 53 days. An outlier was the construction industry, at 77 DSO. The best-performing industry was wholesale and distribution, with 39 DSO.
With respect to the maturity of ERP setups, just 8% of respondents reported that their company has a single platform service as the primary “source of truth” for all finance-function processes. About a quarter (26%) said their ERP is integrated with multiple other systems, but process and integration issues remain across departments and ledgers.
That left two-thirds of the survey base (66%) who said their ERP setup is fragmented, with multiple disconnected systems and finance relying on manual work to reconcile data across departments and ledgers.
Those results were similar to the survey’s findings on the maturity of accounts receivable/payments infrastructure, with only 8% saying such infrastructure is embedded within the ERP and 62% saying the function is managed through a stand-alone tool with no ERP integration.
