How Vertical SaaS is Transforming Financial Management for Small Businesses

The business world has been digitally transformed, and the evolution is still underway. From spreadsheets on a computer to financial tools in the cloud, companies big and small are finding more efficient ways to manage essential business functions. However, many small business owners have been slow to embrace this digital movement and adopt fintech products.

According to a recent report by Cornerstone Advisors, New Revenue Opportunities From Embedded Accounting, more than 50% of small businesses are still managing their finances by using cumbersome spreadsheets that leave a lot of room for errors and take a significant amount of time to manage.

It really isn’t surprising, when many of the fintech options on the market basically force business owners to use multiple online tools to manage their business. Payroll is usually a service separate from general accounting, payments, and invoicing, and most small businesses aren’t aware that they can get easy access to capital online.

These small business owners need and want a one-stop shop — everything in one place. It’s too cumbersome to sign in to multiple fintech tools and transfer data from one system to another just to manage their finances.?

Vertical SaaS providers have a clear opportunity to create one-stop shops for their small business customers who find themselves in this scenario. Beyond their vertical business platform offering, many SaaS providers are adding other features their customers need, like embedded payments, embedded capital, embedded payroll, and embedded accounting.

According to Cornerstone Advisors, vertical SaaS alleviates the need for small businesses to custom-develop applications to support their operation and avoid or reduce the use of generic solutions like spreadsheets and database management tools to run their business.

How the Process Works

Small businesses go to vertical SaaS companies for the primary business operations solution they need, and they develop a relationship and trust with that provider. But then they realize that they still have to use 10 to 20 other apps to manage their business, which is inconvenient and messy, and they want more from their trusted vertical SaaS provider.

What they truly need is a single trusted platform to solve their problem — to bring all the financial tools they need together.

The ability to leverage the platform they already use to manage clients and services to include managing financial tasks efficiently, is a game changer. The information needed about their customers and business is already there, which simplifies tasks like issuing paychecks and invoices.

With the right APIs, a vertical SaaS platform can become a one-stop shop with a unified UX, so customers don’t need to be handed off to different vendors. All the top functions small business customers need are in one place:

Embedded Payments

Along with accounts payable functions, embedded payments improve cash flow. It also reduces the need for additional resources to manage accounts payables. Notable vendors in this space include Melio and Mercoa .

Embedded Capital

A small business’s short-term financing needs can be efficiently resolved by providing embedded capital services. Based on the company’s revenue data that’s already within a platform, needed cash can be accessed more quickly and inexpensively than by going to a banker. Notable vendors in this space include Pipe and OatFi .

Embedded Payroll

With payroll embedded in a vertical platform, the business can simplify the process by leveraging data that already exists in the system. Certain aspects could be unique to a vertical, making use of that information even more convenient. Notable vendors in this space include Gusto Embedded and Check .

Embedded Accounting

Adding embedded payments, capital, and payroll to a vertical platform is great, but these systems need to be unified with a general ledger so the business has accurate financials and can make better decisions.

A robust platform will include invoicing, expense tracking, financial statements, bookkeeping and accounting functions, plus real-time income tax estimates and filings. I’m proud to have co-founded Hurdlr a decade ago to fulfill this need. Our premier embedded accounting offering has been white-labeled (and battle-tested) by some of the best small business-focused vertical SaaS providers, horizontal SaaS platforms, and even banks. To date, our products have served over 1.2 million small businesses.

If vertical SaaS can include all the software a small business owner needs to run their business on a trusted platform, they can be the hero small businesses need. And if they succeed, they will be substantially rewarded with greater user retention and new customers.

I encourage you to download and read this recent report by Cornerstone Advisors: New Revenue Opportunities From Embedded Accounting to learn more about what small businesses need and the current opportunities.