Cash flow is the lifeblood of every business. But maintaining healthy cash flow can be an ongoing struggle for any company, particularly during times of economic uncertainty. Xero's Small Business Index shows that UK companies now have to wait longer to get their invoices paid. This has increased from 29.0 days in December 2021 to 30.6 days in June 2022.
And, as running out of cash is one of the most commonly cited reasons for a business failing, cashflow visibility and management is more critical than ever.
Accountants are under pressure to act as business advisors to their clients, by helping them to leverage data, accurately forecast cash flow and optimise their payments processes. Fortunately, over the last few years, a number of fintech services have been developed to help accountants do exactly that.
These solutions are cloud-based and easily integrate with leading accounting software vendors. They also have automation at their core, so processes are streamlined and can be rolled out efficiently and quickly.
Integrate Cloud Forecasting Software
Accountants can now move away from manual and fiddly spreadsheets and instead use cloud forecasting tools to generate instant cash balances for clients.
These connect directly to cloud accounting software, automatically recreating the chart of accounts and sync the latest data to build forward-looking forecasts. Such tools also leverage historical data and customer trends to predict when sales invoices will be paid, rather than assuming they get paid on the date they become due. For example, the software will account for a customer with 30-day invoice terms who consistently makes payments ten days late.
Cloud forecasting tools allow accountants to provide their clients with a ‘light-touch’ service that can be cost effectively supplied, requiring minimal time to set up and maintain. Some vendors offer a free service with limited features, so it may be worth giving this to clients initially to see whether they wish to make use of it.
Optimise Working Capital With Payments Tools
Working capital can be optimised by using Faster Payments to hold onto funds for longer and bolster cash balances.
Fintechs, such as Modulr, are directly connected to the Faster Payments network and offer real-time payments solutions, with funds clearing in seconds.
Compared to more widely used payment methods such as Bacs, this is a game changer. For example, Bacs take three working days to clear, and there are restrictions around when payments can be set up (i.e. transactions can't be executed on weekends or bank holidays).
With Modulr, transactions can be set up and executed on the exact day they fall due, 365 days a year, 24 hours a day. So cash forecasts don't require adjustments for cash in transit, yet to clear.
It's simple to run client payments through the Modulr Payments Dashboard, as the platform provides a single workflow for managing and making payments, with transaction details and values being pulled across automatically from accounting software.
Get Paid Faster With Digital Invoices
Setting up digital invoicing for your clients enables them to collect payments faster from their customers. Digital invoices, with a ‘Pay Now’ button, increase the likelihood of getting paid quickly by providing a frictionless payments experience.
Most leading cloud accounting software providers have the functionality to set this up and allow businesses to customise their invoices with their brand identity.
To make checkout even more seamless, integrate with an Open Banking technology provider. This will allow customers to settle invoices without manually entering their banking details, with payee details and payment details automatically populating from invoice data.
Credit Check New and Existing Clients
Cloud credit checking services, such as Chaser, enable accountants to monitor the health of existing and future clients.
These connect directly to core accounting software and track against adverse changes on credit agencies.
This can help flag potential issues or areas of risk. In these instances, accountants can recommend that companies with poor credit scores pay invoices upfront or be offered limited credit (i.e. insist on payment in 14 days rather than the standard 30 day invoicing terms).
Customers who fall behind on invoices can be chased with automated and personalised emails and SMS messages, and cases that need to be escalated can be outsourced to debt collection agencies.
Access Finance to Support Clients
Surprisingly, most businesses still don't seek external advice when looking for a loan. A recent survey shows that just 9% of all respondents approached their accountants for advice.
There is a huge opportunity and need for accountants to help their clients improve their cash balances by accessing finance. This can either be to cover short-term cash gaps or to meet the needs of expanding companies.
Accountants can support their clients by reviewing their financing options with alternative online providers. This can be done speedily due to these lenders having automation baked in throughout by connecting to various data sources, including accounting software, banks and Companies House.
Applications can be made in under 15 minutes, and in some cases, funds are received on the same day as successful requests.
Online finance marketplaces that work with a range of different providers are the most efficient way to review finance options due to their breadth of lenders, meaning accountants only have to complete one application rather than many.
Associated financial admin of funding requests can be reduced by using tools, like the Modulr Payments Dashboard, so minimal adjustments are needed for requests.
Accountants should only work with finance marketplace and lenders who conduct soft searches so that permanent traces are not left on clients' credit files.
Your Cash Flow Services Strategy
How to Roll Out and Price Fintech-Led Client Cash Flow Services
Wherever possible, fintech tools and advisory services should be included within annual fixed price retainers, alongside standard accounting services such as bookkeeping, company filings and tax returns. Retainers should smooth out the cost of annual services by splitting fees evenly throughout the year.
Cash flow forecasting and credit check tools are sold on a subscription basis, so accountants should add a margin on top to reflect their setup and maintenance.
Payments tech is often priced to accountants on a usage basis, with each transaction being charged individually. To scoop this up in fixed price retainers, accountants should consider the volume of transactions clients will likely be generating in the future and mark up on this basis to avoid awkward price increase conversations.
As finance providers give accountants a commission for successful referrals, this service can, in essence, be provided for free. However, firms that are members of accounting trade bodies will need to disclose the nature of these relationships.
Create Stickier and More Profitable Engagements
Providing cash flow services will lead to accountants becoming more embedded within their clients' businesses.
Rather than just focussing on historic data associated with company filings, they will have visibility on how their clients will perform in the future. This will enhance relationships and result in more profitable engagements. As cash flow forecasting services are a win-win for accountants and clients alike, take a look at the fintech tools on offer if you haven't already.
Modulr’s Payments Dashboard is a single online portal that brings all your workflows and payments together and automates them. Best of all, the dashboard integrates with you’re the accounting software you already use, such as Sage, BrightPay and IRIS, because we love them as much as you do! Which means you won't even have to consider an awkward breakup just to benefit.
Why Modulr? Well, Modulr is authorised and regulated by the FCA and we’re plugged into the same major payment schemes as UK banks, including Faster Payments, so your payments will clear within seconds, even on a weekend or bank holiday. The Modulr dashboard is secure and gives you and your clients full control and, because you'll be speeding through your payments within minutes, you'll have scope to start pushing your business in whatever direction you want to go.
Speak to an expert today.