Data is becoming central to business strategy. But SMEs often struggle to get useful data about their financial health and cashflow.
This presents an opportunity for accountants. By harnessing new technology and providing clients with real-time information, they can add more value to their services and help SMEs navigate the difficult times ahead.
Why data is increasingly mission-critical
Whether you’re running a growing SME or a multinational corporation, effective use of data is increasingly critical to business success. It’s key to understanding the environment within which any business operates and should be used to inform every tactical and strategic decision.
For example, many businesses analyse their customers’ transaction data. Armed with these valuable insights, they’re able to identify their most profitable products and forecast demand. They can also build a better understanding of their relationships with individual customers and spot opportunities to increase loyalty.
Other businesses make excellent use of supply chain data – using it to understand risks associated with inventory items, suppliers, contracts, or specific manufacturing or logistical processes. They may even use data to model the effects of external factors on supply chains, such as changes in the weather, natural disasters or geopolitical risks.
The challenges of cashflow visibility
But while most of today’s businesses realise the strategic importance of data, there’s a key area that’s often overlooked: cashflow.
You’d think that understanding the financial health of your business would be a top priority, especially during the current recession brought on by COVID-19. Unfortunately, businesses of all sizes – and especially SMEs – often struggle to get a clear, detailed and real-time view of their cashflow and financial performance.
This is partially due to the problems inherent in existing payment processes. Many SMEs rely on Bacs to pay their employees, suppliers and invoices. But Bacs payments take three days to clear. And the process is often further delayed by manual data entry and sending files back and forth to accountants. This impedes the flow of money and makes it difficult for businesses to get an accurate, real-time view of their financial position.
Accountants are struggling to offer support
Too often, the issue isn’t helped by accountants. Many accountancy practices still haven’t embraced the full possibilities offered by new technologies. In fact, when Modulr ran a virtual accountancy event and asked accountants if they had the tools in place to create cashflow forecasts easily and accurately, only 12% said yes.
Many accountants are still reliant on legacy systems and outdated processes – obstructing their view of clients’ payment flows. As a result, their financial reporting to clients may be based on historic data that’s six or even twelve months old. And in today’s world, that’s not enough. Data needs to be real-time if accountants are to help SMEs are to draw any meaningful and useful insight.
As Lara Gilman, Head of New Ventures and Co-Lead at iwocaPay explained: “Businesses are looking for professionals they can trust to help them understand what’s happening. One of the most important things accountants can do right now is feed their clients good information. We need to stay updated ourselves and play that advisory role.”
How accountants can unlock the value of data
If accountants have access to the right technology and payment systems, they can help their clients to unlock the valuable insights hidden in their financial data. One way for accountants to achieve this is by helping their clients gain access to the UK’s Faster Payments Scheme.
Unlike Bacs payments, which take three days to settle, Faster Payments are processed in under two hours – and often go through in just minutes. And while Bacs payments can only be made during normal business hours, Faster Payments can be made 24/7. This can help businesses by eliminating payment delays and giving them more accurate, real-time cashflow data.
Accountants can work with FinTechs to gain access to Faster Payments and pass these benefits on to their clients. Modulr is directly connected to the Faster Payments Scheme and holds a settlement account at the Bank of England. This means we can provide accountants and their clients with direct access to Faster Payments as well as a powerful payments engine, without the reliance on third parties or legacy banking systems prone to outages.
Modulr even offers dedicated accounting solutions such as Sage Salary and Supplier Payments. This platform automates many aspects of the payment process for accountants and their clients. It gives accountants a much clearer and more accurate view of their clients’ cashflow, and they can pass these data-driven insights on to their clients. These insights can then be used to inform strategic business decisions.
Staying ahead of the technology curve
The strategic importance of data is only going to grow, especially as businesses strive to stay afloat in the wake of the pandemic. To stay relevant, accountants should be constantly looking for new and better ways to deliver data-driven insights to their clients. Otherwise, SMEs may turn away from their services and look elsewhere for support.
We suggest that forward-thinking accountants join the Modulr Accountancy Pathfinders programme. This network is for accountants seeking to harness technology in innovative ways so they can deliver better, value-added services. Members receive industry insights and invites to exclusive events, as well as the chance to participate in new accounting product trials.
In this information age, uncovering the insights buried in business data can make the difference between profit and loss. Data-driven insights can guide SMEs as they invest in their businesses, grow, create jobs and ultimately help the economy recover from the damage caused by Covid-19. Armed with the right technology, accountants can help SMEs unlock all this potential.
To learn how you can use improved data accuracy and the very latest technology, apply to join our closed Pathfinders programme.
This is a first of its kind industry network, giving its members perks and benefits so they can forge new paths in the world of finance and technology.
Apply to become an Accountancy Pathfinder.