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New Survey Finds Small Business Use of and Satisfaction With Payment Cards Jumps Significantly Over the Past Year
Visa’s second annual Small Business Cash Management survey also notes that cash management, financial planning and budgeting remain key concernsSAN FRANCISCO, March 21, 2006
Small business owners are increasingly adopting and are more satisfied with business payment cards as a tool for managing their business, according to a new Visa
The survey of several hundred small business owners and individuals with financial authority within a small business found that the use of business credit cards increased by nearly 10 percent to 65 percent over the past year. Overall satisfaction with business credit cards as a form of payment reached 64 percent. Additionally, within the next 12 to 18 months, 30 percent of small business owners said they plan to increase their reliance on business payment cards.
Receiving and collecting payments (52 percent) is the cash-management issue that was recognized as being the most challenging for small businesses -- regardless of their size. The ability of small business owners to manage and move funds was ranked as the second most challenging issue, at 21 percent, followed by their concern with making payments (14 percent).
"These findings are in line with what we have been hearing from small business cardholders for years; good management of cash position might mean the difference between the success and demise of any small business and is, therefore, their primary concern," said Raghav Lal, senior vice president of small business products, Visa
Business Owners Focused on Managing the Bottom Line
For the second consecutive year, financial planning and budgeting was noted as being the predominant financial concern for small businesses, with 53 percent of respondents agreeing this is their greatest concern. However, reconciling bills and financial reporting were significant concerns for larger ¹small businesses, with 19 percent saying that this is their greatest concern, versus just 3 percent in last year's survey.
Sluggish cash flow ranked as the largest factor driving small business owners' cash management challenges, particularly not being able to always accurately estimate the timing of payables and receivables (35 percent). Another 27 percent noted that the cash management process is labor-intensive administrative work, followed by observations of a cumbersome operational process (18 percent).
"Migrating to business payment cards helps business owners better predict the timing of payments, track the status of finances, and manage their cash position," adds Lal. "By accepting business payment cards, small businesses can also accelerate receivables by eliminating the time and costs associated with preparing and sending an invoice to a customer. In the end, instead of pushing paper all day, small business owners can now maximize their time, energy, financial resources, and passion on pursuing their business."
The Increasing Role of Electronic Payments
For those respondents who already have business credit or debit accounts, 45 percent noted that if they could, they would make all of their purchases using some type of business payment card. Benefits noted by this group included greater ease in managing and moving funds (27 percent), greater efficiency in receiving and collecting payments (30 percent), and greater efficiency in making payments/disbursing funds (28 percent).
Additionally, these small businesses see business payment cards as an effective tool for managing travel and entertainment costs (91 percent), personnel supply services (48 percent), as well as for purchasing capital equipment and raw materials (42 percent).
Respondents consistently recognized that business payment cards are a strong solution to help improve the cash-management process. Nearly 27 percent said that they see card-based payments further providing greater efficiency in receiving and collecting payments. Additionally, 25 percent found that these products offer greater ease in making payments, as well as managing and moving funds (21 percent).
Visa has designed a suite of products and services to meet these needs and help maximize efficiencies through the electronification of payments and the delivery of detailed online reports allowing small business owners to better manage their cash flow process through greater visibility into business spending. Visa business payment cards achieved record overall growth in calendar year 2005, at 30 percent year over year, and are the cards most accepted by small businesses nationwide.
Growth Opportunities for Business Payment Cards
The Visa Commercial Consumption ExpenditureTM index, which tracks business-to-business spending, identified areas in which small business spending occurs. Tracking results of the survey against spending identified by CCE indicates continued growth opportunities for business credit and debit cards.
According to the CCE analysis, small business spending grew 5.4 percent in 2005 to $4.7 trillion with growth expected to slow slightly to 4.3 percent and reach $4.9 trillion in 2006. In 2005, the largest share of small business expenditures (54 percent) comprised core business services, such as legal, accounting, insurance, and shipping and mailing.
Based on the survey results, the leading expense categories representing opportunities for business payment cards include:
- Raw materials/manufactured goods. These accounted for the largest portion of small business spending, representing nearly $800 billion of small business expenditures (17 percent). The survey reported that 42 percent of respondents used business credit cards and that 38 percent used business debit cards to pay for this large expense.
- Professional services. In 2005, small businesses spent $541 billion, or 11 percent of all small business expenditures, on professional services; yet only 10 percent of those surveyed reported making these payments on business credit cards and 6 percent reported using business debit cards -- exemplifying a largely untapped segment for business payment card use.
- Rent. This represented 9 percent of small business expenditures, or $412 billion in 2005; 42 percent of those surveyed reported using business credit cards, and 38 percent reported using business debit cards to make such payments.
- Personnel supply services. Most businesses in the survey (48 percent use credit cards; 56 percent use debit cards) reported using business payment cards for these costs, which represent nearly $404 billion of small business expenditures.
About the Survey
The Visa Small Business Cash Management Survey was conducted by Survey.com in January 2006 and involved the responses of 468 small business owners or individuals with financial authority within a small business. Of the respondents, 9 percent had annual sales of less than $1 million ("small" small businesses), 34 percent had annual sales of $1 million to less than $10 million ("midsized" small businesses), and 32 percent had annual sales of $10 million to less than $25 million ("large" small businesses). Visa defines the small business segment as companies with less than $25 million in annual sales and the self-employed.
About Visa Commercial Solutions
Visa offers small businesses, midsized companies, large corporations and government agencies trusted, reliable solutions that meet their many commercial payment needs - for virtually any purchase type, any situation or any business process. These capabilities help businesses and government agencies streamline operations, reduce overall costs and improve cash flow for better management of their payment processes. Visa's commercial solutions offer a great way for businesses and the public sector to pay and be paid. For more information about Visa's commercial business, please visit www.visa.com/commercial.
About Visa
Visa
Worldwide, cardholders in over 150 countries carry more than 1 billion Visa-branded cards, accounting for more than $3 trillion in annual transaction volume.
Visa offers a trusted, reliable and convenient way to access and mobilize financial resources - anytime, anywhere, anyway.
CONTACTS
Jennifer Doidge
Visa USA
415.932.2350
jdoidge@visa.com
Michael Smith
Fleishman Hillard for Visa USA
612.573.3105
smithm@fleishman.com