Richard McCall, CEO, Armalytix
Despite the end to Covid-19 restrictions in England on 19th July, Britain’s small businesses face an uncertain future. Many have taken advantage of the various Government schemes available to help business through the pandemic, but as the reopening begins businesses will need to make crucial decisions on repayment of loans and recruitment of new people. CEO of Armalytix, Richard McCall, believes access to timely financial information, made easier by Open Banking, helps these businesses make the right decisions for the future.
A recent report by the House of Commons library shows Britain is a nation of small businesses; less than 100,000 businesses in the country have more than 250 employees with a staggering 5.7 million employing less than 10.
For smaller businesses, the challenges of getting business done can get in the way of planning. 65% of SMEs do not have a business plan or financial forecast in place, according to the Corporate Finance Network (CFN) and Association of Chartered Certified Accountants (ACCA) UK’s joint SME Recovery Tracker.
As these businesses enter the post-Covid recovery phase, many will be facing multiple challenges. The UK Treasury offered a comprehensive response to the COVID-19 pandemic, including VAT deferrals, bounce back loans and the furlough scheme. However, as these business support packages come to an end, a unique set of challenges emerge for small businesses. Directors will need to make decisions about bringing back employees at the same time as loan repayments begin. Others will need to consider how to repay tax deferrals despite an uncertain business landscape. Accurate business planning has never been more important.
Up-to-date financial information
Most smaller businesses are susceptible to peaks and troughs in trading and are used to a “feast and famine” existence. But the circumstances of the second half of 2021 will be unfamiliar for every business. Smaller businesses will need to rely more than ever on the support of external consultants – such as accountants or financial advisors – to help better understand the financial environment their business is facing.
Getting access to accurate and up-to-date financial information is critical to making informed decisions, but many advisors struggle to get this information from the small businesses they support. Even businesses that do regular monthly or quarterly management accounts find the process of sharing banking information complex. For example, accountants often receive either a jumble of photocopied bank statements, which need to be digitised manually, or csv files of banking information, which can be easily manipulated or corrupted.
Open Banking for business
The Open Banking standards were launched in the UK during 2018. Open Banking connects banks, third-parties and technical providers – providing them with a simple and secure way to exchange data for customers’ benefit. It provides a trusted and reliable framework for the sharing of financial information. Open Banking enables businesses to quickly and simply authorise apps to access and share specific and relevant financial information in a safe and secure way.
Simplicity and security for small businesses
With Open Banking, accountants and small businesses can streamline how they share financial information. Rather than sending a request to share financial information directly to a business owner, Open Banking allows advisors to do so within a secure platform (typically a third-party app that directly requests access to specific financial information). This can be requested by date or bank account. For the business owner, it is simply a matter of authorising the accountant’s request to extract the relevant information from a banking app and sharing it securely with the advisor. There is no waiting or hassle – the secure sharing of the right information can happen in seconds.
The process saves time and effort – in many cases days’ worth of chasing and longer still in either manually retyping the information or importing it into an accounting platform. By reducing the manual input required it is also possible to eliminate human error.
Better information is better insight
While this process makes life more straight forward for advisors it is also in the interests of small business owners. Half of UK businesses are not registered for VAT, which means they are only required to file a statement of accounts annually. This is far from ideal for business owner that need to keep a close eye on business performance: by the time an advisor sees that a business is struggling, it could be too late to intervene.
Faster access to accurate information acts as an early warning system for professional advisors to highlight any concerns to business owners. This is an important role at any time, but in the current uncertain environment access to timely information is more important than ever. In the complex post-Covid environment, businesses will need to navigate bringing staff off furlough at the same time as repaying bounce back loans and tax deferrals. With uncertainty around future lockdowns or the speed at which the economy will return to normal, business owners need accurate financial information to make the right business decisions. By offering their clients financial information sharing via Open Banking, advisors can make life easier for themselves and help small businesses more effectively navigate an uncertain future.
