How accountants can utilise Open Banking to help SMEs access better financial planning

Richard McCall, CEO of Armalytix, believes fast access to up-to-date financial data is essential to the success of small businesses in their recovery from COVID-19. Richard explains how Open Banking can help small businesses and the accountants that support them gain more visibility over their finances.

The UK is still a nation of small businesses with 5.7 million of the 5.98 million UK businesses considered a ‘micro’ business – employing less than 10 staff. Sadly, many of these SMEs will have felt the aftermath of COVID-19’s economic wreckage.

The UK Treasury was commended for its extensive funding and financial support to businesses over the pandemic. Initiatives including tax deferrals, staff furlough and funding schemes such as the Bounce Back Loan Scheme (BBLS) proved lifelines for smaller businesses. Between May 2020 and February 2021 more than £22 billion was borrowed via the CBILS scheme alone.

The value of financial advice

SMEs that have taken advantage of this support now face a unique set of challenges. As the furlough scheme closes, directors must consider how to face the repayment of government-backed loans and tax deferrals while also bringing back furloughed employees. Making informed business decisions relies on access to accurate financial data and good advice. For many SMEs, this will come from third-party professional accountants.

Settling with a faulty system

Sharing financial information can be difficult. Many businesses rely on sending photocopied bank statements or csv files to keep accountants informed, both of which can be problematic – bank statements need to be digitised and emailing digital files can be less than secure.

Typically, an accountant will request bank statements from a company director who is too busy to compile them. Weeks after the initial request and after several reminders, the director finally provides the bank statements, but these can be difficult to read copies or scans and potentially missing important information. This makes the job of analysing this data more time consuming for accountants.

Open Banking as a resource for financial planning

Open Banking apps, such as Armalytix, allow accountants to request bank statement information quickly and safely from a client, removing the wait and the need for scans or insecure files. The accountant makes an online request for specific banking information through an Open Banking platform and a director will quickly be able to authorise access to the information requested, without releasing additional or incorrect information.

This saves time and effort, which in turn allows accountants to provide small businesses with more up to date financial information and offer honest financial assessments based on the correct data.

The past 12 months have been difficult for business. In the next six months, many businesses will need to balance re-onboarding staff, assessing growth post pandemic and balancing this against additional COVID loan and tax repayments. Access to accurate information is critical to making the right business decisions. Open Banking can help small businesses and their accountants navigate the choppy waters ahead quickly and effectively.