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2020: Birth of the data-powered small business

2020: Birth of the data-powered small business

Recent byline published in Accounting Insight News

For decades, small businesses have been at a disadvantage compared with larger corporates, because they simply haven’t had the tools, expertise and resources to manage their financial performance effectively.

One of their most significant impediments has been the difficulty, if not impossibility to get a real time view of their financial position, with the vast majority having to wait until year-end for a comprehensive picture – by which time, it’s inevitably out of date.

The rise of cloud accounting

But this gap in finance capabilities is rapidly shrinking and a whole variety of tools now gives small businesses the same kind of visibility on their finances that larger businesses have had for years, while also reducing the dreary admin.

One could even argue that with accounting platforms such a Xero or Quickbooks, potentially coupled with an overlay of cashflow management & forecasting, such as Fluidly or Float can provide, SMEs are on the front foot when competing with larger companies.

Over time, the capabilities of accounting platforms and the apps built to support them, are becoming more diverse, more sophisticated with a plethora of add-on services.

Hence, today’s CFO can tap into an ecosystem of hundreds of congenial apps when a large corporate CFO is trapped with inflexible legacy systems. The only thing that is missing now is access to easier and faster funding and insurance.

The chart below provides an overview of the current app landscape and the ongoing convergence of accounting with business banking.

The risk of “app fatigue”

But let’s have a look at the flipside of the coin. Is there a risk that the proliferation of apps and services have the opposite effect than the one sought at the outset? Might it end up confusing the SME owner around which app to use and lead to an overall ‘app fatigue’?

Take the example of invoicing. This could be provided through single-focused apps like Zervant, Solna or InvoiceBerry, but also through more generalist apps like BigTime, which also offer additional features like project management or expense tracking. And what about the default invoicing functionality that comes with all cloud accounting platforms? Or even neo-banks that are starting to venture into value-adding services such as invoicing? Among this jungle of options, a tech savvy person might find it difficult to choose, let alone a small business owner who doesn’t have the time for this.

And the same question repeats itself for pretty much every single process, not only invoicing. More than 800 apps are now available through the Xero and QuickBooks app stores. That’s before mentioning the hundreds of apps that can be found on the SalesForce appstore. As a result, it is now estimated that SMEs now juggle with more than 50 SaaS products, of which more than 20 are paying.

At Hokodo, we believe that the app explosion is not sustainable in the long run. Small businesses will demand a no-brainer solution, that is a consolidated ‘business cockpit’ providing different insights and metrics to put their finances on autopilot. Look for more insights in the coming weeks as we look to ways to narrow down the winners and losers and come visit us at the start-up zone at Accountex on 1-2 May 2019.