Businesses that incorporate a digital payments platform into their operations can greatly improve cash flow, says Thomas Priore, CEO of Priority.
That’s because the right platform allows businesses to receive customer payments and pay suppliers more efficiently.
It’s called cash acceleration, and it’s particularly critical for small to medium-sized businesses. Unlike big businesses, SMBs are more likely to face a cash crunch as they balance the timing of income and expenses.
Cash acceleration, Thomas Priore, CEO of Priority said, is an important component of an emerging, tech-driven financial system in which businesses are relying less on traditional banks.
“Unified commerce, where tech platforms connect all stakeholders, their back-end and front-end processes, aided by embedded payments, can make real-time cash flow management a reality,” Priore said in an interview with PYMNTS media CEO Karen Webster.
What Is Priority?
Priority has built a scalable payments/banking platform to collect, store, lend, and send money. Its systems include the end-to-end B2B payments platform CPX and the MX Merchant suite of services for merchant acquiring that automates tasks such as billing, sales tracking, and customer engagement. Priority Passport allows businesses to accelerate payments through their own application or through Priority’s standalone platform. Priority also offers Plastiq, which allows businesses to leverage credit cards in a number of ways, including increasing working capital and earning rewards.
Thomas Priore became the company’s CEO in 2018, and under his leadership, Priority has grown from a tech startup to be the fifth largest nonbank merchant acquirer in the United States, and a leading provider of commercial payment solutions to major global institutions.
Priore is considered a leading expert in finance and the potential of fintech, focusing specifically on potential solutions for businesses that technology can provide.
“Most consumers experience modern commerce through cellphones and mobile apps, but that’s only half the equation,” he said in an interview. “The other half is figuring out how to accelerate businesses by bringing together solutions that solve their problem areas. We focus on creating better payments and banking experiences through technology because cash flow and working capital are necessary to run a business well.”
What Is Cash Acceleration?
Cash acceleration refers to the concept of businesses using strategies and techniques that speed up the process of converting sales into actual money in the bank. Doing so improves a company’s liquidity and financial health, especially when coupled with cost reduction efforts that also free up cash.
It’s essential for businesses — especially smaller enterprises — to manage cash flow effectively to meet short-term obligations, such as paying suppliers, employees and operational expenses. Cash acceleration is all about optimizing cash flow.
To improve cash acceleration, companies focus on a variety of strategies, most of them involving shortening the cash conversion cycle. This cycle refers to the time it takes for a business to sell its inventory, collect payment from customers, and then pay off its suppliers. By streamlining any of these steps, businesses improve cash flow.
Digital payments processing systems bolster many of the techniques used to shorten the cash conversion cycle. They include prompt invoicing, streamlining the payment process by offering customers multiple payment options, inventory management and real-time cash flow monitoring.
Cash acceleration tends to cause a positive ripple effect up and down a supply chain. When businesses can quickly convert sales to money, Priore noted, they have more cash on hand to buy more materials from suppliers.
For example, he said, in the construction industry, contractors can more quickly pay subcontractors. “You keep those folks working and on-site because they are getting paid quickly,” Priore said. That, in turn, “reduces the business carrying costs on the back end — they’re not paying for money that’s sitting around that they had to borrow to keep things going.”
Benefits of Cash Acceleration in the Current Economic Climate
Thomas Priore said many small and medium-sized businesses face a host of issues that could impact spending, including inflation, interest rate pressure and rising consumer debt. He said the use of digital payments processing systems is important because they help increase the chance of success for SMBs, a cornerstone of the nation’s economy.
“The first thing I would say about small businesses, just generally — they’re scrappy,” Priore said in a PYMNTS interview. “There’s a reason why small business in the U.S. is over 50% of U.S. gross domestic product. They’re the strength of our economy when you consider it from that standpoint.”
He said the current economic climate has led to more significant burdens on SMBs. “I agree with the notion that there are known uncertainties out there — inflation, interest rate pressure, the growing debt burden on consumers — that will affect small businesses,” Priore said. “Those will change by vertical; some will benefit, some will be hindered.”
He noted that banks, historically, haven’t been able to provide solutions to cash flow issues for small businesses, and many SMBs aren’t happy with their bank relationship because of this.
The question for business owners becomes: How do I find other assets within my business so I don’t need to borrow money? Or plug into other sources of embedded finance and just use my cash better? Digital payments processing systems can help provide that solution.
“At the end of the day it gets pretty simple,” Priore said. “There is a value asset already running through your ecosystem. That asset is payment acceleration.”
