A revolution is underway in SME finance, as accounting platforms, neobanks and fintechs battle to automate businesses’ most time-consuming financial admin. Thanks to the open banking legislation and the liberation of thousands of APIs, it’s now possible to collect and connect financial data in real-time from a whole ecosystem of sources. As a result, businesses are gaining unprecedented convenience and control of their finances – from book-keeping, to cash flow management, or even applying for loans.
However, all this progress comes at the cost of increased complexity. We’ve reached a point where SMEs are overwhelmed with apps. The Blissfully SaaS Trends Report showed that SMEs used on average between 40 and 99 different apps in 2018. You can have too much of a good thing, it would seem, and time-short businesses are suffering ‘app fatigue’ as they struggle to juggle the numerous different tools and interfaces on offer. Consequently, Hokodo’s recent report, Blurring Lines, predicted the emergence of a single ‘SME Cockpit’ as the next logical step, bringing together all the finance tools that SMEs need within one central hub.
What does this mean for accountants?
In the next few years, until the integrated cockpit materialises, accountants will have an important role in helping their SME clients to navigate the technology on offer, advising them on which apps to install and how to make the most of them.
In the longer run, the rise of the SME cockpit will irrevocably transform the way small businesses are run, effectively putting them on finance autopilot and giving them real-time visibility of their cash, in order to make faster and better business decisions.
As accounting platforms, neobanks and fintechs race to become the ultimate finance hub for SMEs, the big question is where traditional accountants will fit alongside the integrated SME cockpit. With much of their core bookkeeping and tax filing role becoming automated, what will this mean for their business model going forward?
Automation is closer than we think
The automation of accountancy is not a new topic. As far back as 2013, Oxford University estimated the chance that book-keeping would become entirely automated at a whopping 98%. And just last week, the Accountancy 2030 study from GovGrant found that 40.5% of accountants fear being replaced by technology.
But the speed of innovation we’re currently seeing means that a high level of automation, via an SME Cockpit, is closer than many might think. ‘Super apps’, such as AliPay and WeChat in China, show that the ‘cockpit’ model already exists and that consumers are open to the idea of accessing numerous services from a single interface. Our prediction is that within three to five years something similar will be available for SMEs.
Threat or opportunity?
But it isn’t all doom and gloom for accountants and there is still plenty to be positive about. As in other industries, the roles that are most at risk are lower-value, admin-focused tasks, such as entering and checking data, which still swallow up a lot of accountants’ time. Having these automated will not only free accountants from a lot of monotonous work, but also enable them to focus on higher value tasks, such as offering advisory.
For over two decades, accountants have been told that the future of the profession will be focused on advice, yet many haven’t gone down this route because they simply haven’t had time. Greater automation solves this issue for them, and the evidence suggests that this will be the incentive they need.
After all, the SME cockpit might give business owners a whole load of real-time data, but many will still struggle to understand what that information actually means for their business, and how to respond. For this reason, the technology could actually create more scope for accountants to advise their clients, who will be more aware of potential problems and opportunities and need more help in figuring out the best way forward.
That’s not to say it will be easy. SME accountants need to start developing new competencies, so as to remain relevant, such as skills to achieve organic growth, instead of rotating portfolios or acquiring smaller practices. Tech and data science skills will also be essential so that they can help their clients interpret the data and advise them on the best tools for their needs. The Accountancy 2030 study found that 30% of accountants are concerned about keeping up with new technological developments, so this is something they will need to work on.
And finally, new technologies are also likely to demand new ways of working and communicating, to accommodate the inflow of data. Clients will expect real-time advice alongside their data, so this will mean moving away from quarterly or monthly meetings, to being on the end of the phone, email or WhatsApp, on a much more immediate basis.
A new era for accountants
Transformation isn’t a new concept for accountants who have a long tradition of embracing new technologies. But this latest phase of change is on a different scale, requiring a Herculean shift from a transactional to advisory service, in a very short space of time. Those who don’t move fast will rapidly find their old revenue streams diminishing without anything to replace them, as their clients head elsewhere for the advice they need. On the other hand, for those who do develop new tech competencies, the future is bright, with the potential to help SMEs make better financial decisions and become more successful, while driving larger profits in the process. The time to act is now!