Finding suitable financial support in a time of need can take a lot of time and energy from a business. There are different approaches small business owners and entrepreneurs can take, like applying for a loan or checking credit limits.
However, opting for these options may feel slightly more challenging and confusing for many business owners. Fortunately, embedded finance provides more viable options for small businesses for financial support in economic distress.
There’s been a significant increase in the demand for Banking-as-a-Service (BaaS) services in the industry. The prime reason for this prevalence is the quality of services provided to business owners by fintech companies.
These companies are also providing substantial solutions to the companies, allowing them to expand their horizons and experiment more. Services like embedded finance have also become very popular in a brief period because of this approach. Businesses, big and small, are leveraging these methods for long-term business growth. Therefore, companies must know these payment methods and how to utilize them.
How Do BaaS Platforms Work?
BaaS platforms are much like API-first wholesale banks for small business owners and entrepreneurs. These services offer financial solutions needed to better meet and assess the market needs and assist with various requirements. These include:
- Debit cards
- Credit lines
- Cash management
Small business (SMB) owners can integrate these financial solutions into their SaaS products with little training and strategizing. This way, the software platforms have a more innovative approach to choose from. Embedded finance offers a variety of different approaches for business owners, allowing them to meet business goals.
These SMBs can partner with various providers working in the tech sector, offering embedded finance. It’s easier for companies to perform many financial tasks, including:
- Accessing debt more easily
- Determining the financial metrics
- Streamlining key finance acts, including
- Vendor Payments
How Small Business Owners are Leveraging Embedded Finance to Achieve Their Goals
Small business financing ensures the ventures have the necessary financial support for long-term success. By utilizing these embedded finance options, achieving goals becomes easier and more streamlined.
For instance, if a company faces payment issues for a long time, which slows its operations—embedded finance is the best option. It lets business owners get better, safe, and quicker vendor payments allow payroll management, and much more.
1. Embedded Payroll
Paying employees timely is a necessary yet challenging process. Small business owners face a lot of trouble while managing employee payrolls, causing undue pressure on their long-term performance. There are several technicalities involved in the process. For instance, the tax and wage compliance requirements are complex, and not all SMBs may fully understand them.
Small business owners and entrepreneurs may mess up these requirements, costing them their reputation. The requirements are more complicated because national and sub-national government laws differ based on your location.
Business owners have to regulate their payrolls accordingly. It gets more complicated if a business has offices and employees across different locations. Another complicated area is determining employee overtime. For instance, it can be for an employee working more than eight hours daily or more than forty hours weekly.
The payroll requirements become more complicated as we get into the more technical aspects. Nonetheless, all business owners have to consider their wage-and-hour laws leading to extensive paperwork in most cases.
Businesses should know how to handle this documentation—but that’s rare. The SMB owners also have to keep the pay rates for employees in mind, which is why they end up using accounting software. Some SMBs may even do this manually. However, it’s a legislative matter; a single error can land your business in serious issues.
How Embedded Finance Helps
Embedded payroll platforms provide automation for the complicated payroll process. It allows the SMBs based on a simple single pay rate (SPR), allowing the staff members to clock their arrival and departure company hardware or even staff mobile apps.
These embedded payment platforms can also determine specific employee hours and rate multiples based on various factors, such as:
- Split shifts
- Night shifts Etc.
With the payroll issues handled, SMBs can better meet other business-related tasks and resolve them as required. For example, it can also help manage the request for every payroll period. The platform will automatically complete the transactions and streamline the process.
2. Embedded Accounts Payable
Some SMBs might have thin operational margins in the first few years of working. These lesser margins might lead to issues in supplier relations and other business tasks. As an SMB, you may consider these issues minimal. However, once they occur regularly, they can seriously affect your market stature and reputation.
For instance, your SMB could deal with evictions or closures because of poor cash flow management. Understandably, minimal industry exposure can be a root cause for this. However, that’s not a justification for this issue.
The best way to ensure long-term operations in the industry is to collaborate with the leading suppliers and ensure timely payments. Similarly, ensuring every supplier gets the right payment conveniently (depending on the payment method of your choice) can also contribute to better market performance. With this streamlined payment method, you can gain hundreds and thousands of dollars by the end of every year.
How Embedded Finance Helps
By incorporating embedded finance for accounts payable, the suppliers don’t have to wait for the payments manually or file checks for each transaction. It is tentative and can save the company and suppliers from unwanted trouble.
These automated systems can also make order placements if the current levels drop down from a certain limit. You can digitalize the invoices and route them using mobile alert. This way, all involved parties can receive a notification about the payment in a single go for higher visibility.
You can do, manage, approve, and even track all the payments via a single platform. The business can manage the expenses better and ensure long-term positive cash flow without unwanted instances.
3, Embedded Insurance
Small businesses are leveraging embedded finance through their insurance products for their clients. These insurance products have become more viable in recent years because of the increased demand for fintech companies and better payment methods.
Once businesses learn to diversify their product offerings, generating new revenue streams should no longer be a problem. With the inclusion of embedded insurance, SMBs can also reduce business-related risk.
The scalability of embedded finance makes it a great option for those who want to invest in it. It may take some time to fully deploy embedded insurance in business operations.
How Embedded Finance Helps
Embedded finance for insurance products can provide several benefits for the operators. For instance, a small e-commerce business can utilize embedded insurance. They have access to the tech platforms, as well as pre-set insurance plans for the products sold and offered on the website. You can easily sell and offer those plans when the customer cashes out of your website.
Moreover, the e-commerce SMB can claim insurance and coverage if the orders are damaged or lost during transpiration. Yes, the premiums for these insurance policies may differ, but it’s still a great option for those who wish to thrive. Additionally, you can use these insurance options for:
- Purchasing a revenue stream
- Disputing process for the insurance claim
Is Embedded Finance Beneficial?
We’ve discussed various applications for embedded finance, but it’s understandable if you’re still skeptical. It’s easy for SMBs to feel intrigued before deploying embedded finance in their venture. Fortunately, these automated methods are beneficial for your business. Here are the primary benefits embedded finance offers:
Resolves Consumer Pain Points
Understanding embedded finance based on the discussion above, you can see how easily companies can leverage use. For instance, consumers had to look for credit and financing with third-party financiers. However, with this option, customers will complete for better customer satisfaction. It’s a great option for brands seeking loyalty in a competitive market.
By deploying embedded finance in your business, there’s a higher chance of better profitability. With these options, more consumers can purchase or return an item problem free and have a positive experience.
Delivers Usable Business Insights
Convenience is a major benefit of embedded finance. However, that’s not all. Embedded finance can also help businesses gather better insight and improve accessibility. With these insights, consumers can track their spending habits and determine their needs perfectly. With automated data, businesses can also develop better products, services, and offerings in the future.
Adding embedded finance to a small business can benefit the venture. Small business owners and entrepreneurs can leverage these tools for the best results. With the right small business financing tools, you can optimize the process, automate it, and improve it in several ways. We recommend deploying embedded finance in businesses and gaining their finance.