EXCLUSIVE: 84% of Businesses Feel More Efficient With Cloud Accounting – Cloud Reigns Supreme For SMEs

In the third edition of the Open Banking Impact Report, the Open Banking Implementation Entity (OBIE) placed an important focus on the impact of cloud accounting for SMEs, where they can manage accounting tasks such as managing cash flow and issuing invoices through cloud-based software and Open Banking. After attending an event at The Embassy on the 5th July, I was lucky enough to hear the thoughts of Charlotte Crosswell, Chair and Trustee, OBIE, Martin McTague, Chair, FSB, Rob Burlison of Intuit and Richard Koch, Senior Policy Lead at Open Banking, on the matters to underpin the true importance of the OBIE report.

“It is hugely encouraging to see such positive feedback from wide ranging SMEs” began Crosswell in her opening remarks. When you turn your head towards the evidence, this statement is so undeniably true, not just in the metrics but in the sentiment of the observations as well. Cloud accounting and Open Banking is improving the lives of SMEs beyond the numbers, and I believe that is evidence of true success. But what were the initial problems that SMEs were facing?

The Original Problems – McTague outlined how “the number one issue is cost inflation”, with 9/10 small businesses surveyed in the report are seeing significant increases. In fact, cost inflation is said to be running at about 22% for those businesses, massively affecting their profit margins and therefore their disposable income. The result is that SMEs can either endure this reduced profitability, or pass the prices onto the consumer, which only fuels further inflation and makes more participants unhappy in the economic ordeal.

Financing has also proven to become really difficult to achieve and mitigate cash inflow problems for SMEs, for simple reasons too; people don’t want to endure more debt. Equally, banks no longer have as much of a risk appetite to take on these businesses, hence why the landscape may be proving difficult in this time

The Strong Signs Of Success – The optimism is still there for SMEs battling against gloomy odds.

Koch outlined the approach currently in order to drive Open Banking for these players, starting with providing availability, driving adoption, and then delivering promising outcomes. And this is clearly in play!

1 in 9 small businesses in the survey noted they had an active Open Banking connection in March 2022, a figure that is continuously rising. In fact, the findings were only based on CMA9 data and so the reality could be even larger, potentially nearer to 30%.

Fully regulated providers (128) in the survey stated that there was clearly an increase in benefits:

• 39% said they have improved financial decision making
• 18% said it had expanded their choice of pay
• 18% said it allowed better borrowing, solving financing issues that were existent before

When we look more specifically towards cloud accounting, the advantages only continue to demonstrate themselves.

• People saving about 9 hours a day on manual entry by using cloud accounting with this Rob’s software
• 77% of businesses agreed that they have more immediate and accurate insights into how their business was doing as a result of using cloud accounting
• Cloud accounting makes small businesses feel more efficient, according to 84% of respondents.
• Cloud accounting cuts costs, with 59% of respondents saying cloud accounting had delivered internal savings and 64% claiming external cost savings.
• Over four in 10 small businesses reported they no longer needed external accountancy support. This is not to say that we don’t need accountants anymore, but just showing the benefits and security that cloud accounting can offer those who don’t.

What’s Next For Cloud Accounting? – A key focus seems to be integrating all of the components to grow a small business in one single platform so that SMEs can comfortably navigate their operations in one seamless experience.

Burlison also mentioned two buzzwords, with one beginning to cement itself within traditional, mainstream financial services; crypto & the metaverse. Burlison pondered whether we will have crypto accounting in the future, or whether the metaverse will be the meeting point for accountants of the future? Whilst these were merely deliberations, it is interesting to see how fundamentally and drastically different the accountancy space could look like for SMEs after it has remained so traditional for so long. Burlison rightly noted too that in order for any innovation to be achieved, attracting top talent is a necessity.

Despite the benefits, there is still more work to be done to encourage some SMEs, particularly those who are sole traders and those with less than 4 employees, to stop resisting change and use Open Banking infrastructure with cloud accounting platforms to transform the way they operate forever. Reports showed 22% of businesses with 0 employees used cloud accounting, whereas 78% of businesses that had 5-9 employees adopted the method. Clearly, as the report shows, this is the path for a more efficient, effective and easier future for those players.

Embrace the future!