SME Owners Must Recognise Fintech as an Investment, Rather Than a Cost

  • By Lynne Darcey-Quigley, CEO and founder at Know-it

  • 14.05.2021 02:45 pm
  • Investment

Following the recent Budget announcement, SMEs will have been buoyed by the extension of furlough and the exemption of many small businesses from the proposed corporation tax hike from 2023. But these temporary measures, along with the financial support provided by the UK government, will only stretch so far, as many organisations continue to feel the effects of the pandemic.  

With an end to lockdown in sight, many SMEs are switching their focus from day-to-day survival to long term planning. Technology will play a key role in this process. The pandemic has reiterated that digitalisation is a big business differentiator for SMEs. In the face of decreased purchasing intent, reduced productivity and limited in-store traffic, SMEs which pivoted to technology demonstrated higher adaptability and resilience compared to those that did not. Doing so has meant various core business functions are now no longer stuck in an analogue era. Let’s consider finance as an example. 

The move away from manual processes has provided an opportunity to automate key areas like payroll, enabling leaders to focus on wider business opportunities. The benefits of doing this are easy to see for business leaders - better levels of efficiency and greater robustness during day-to-day operations are widely experienced. Because of this it is likely we’ll see more SME owners embracing digitalisation to support functions like finance, as the offerings available are no longer exclusively for the deep pockets of big businesses. 

Not only are the benefits seen from digitalisation felt in terms of productivity, they also translate to the individual business leaders themselves. 

Additional uncertainty 

Recent research carried out by Mental Health UK has found 78% of SME owners were concerned about cash flow management during the pandemic – the most significant concern of all respondents.

Another concern amongst SME owners is late payments. According to Bankifi, the average invoice cycle is 30 days, most businesses didn’t get paid for 56 days. That’s now gone up to 71 days as a consequence of Covid.

These concerns have only added to the backdrop of uncertainty. Tighter cash flow, economic uncertainty, national lockdowns and increased late payment culture are all thorns in the side of SME owners. As government support will not last forever, SMEs have had to take charge of their own destiny – technology is a tool to help leverage this.    

A helping hand from fintech    

Still to this day, many SMEs look at fintech services as an out-of-reach commodity, when in reality, many of the sleek and secure offerings are now readily available. 

Robust and streamlined credit management process

An example of an effective fintech offering now available to SMEs is that of accounting and credit management platforms. Credit management has typically taken a back seat in terms of priority for SMEs behind sales. However, a sale only generates into cash once the invoice has been processed. 

As many smaller businesses are unable to conduct background checks on customers or chase for payments, an estimated 50,000 SMEs close each year due to customers failing to pay on time.

Intelligent credit management platforms are now on hand to implement an effective credit management process for SMEs. These platforms allow small businesses to check, chase and collect payment of overdue invoices, all from one convenient place. 

These platforms function effectively alongside credit controllers and offers an overview of their credit risk and offers insight needed to address any threatening issues. 

Fintech for the future

It is important SME owners understand how new technologies can be leveraged to aid their business survival. Fintech solutions can step in and minimise mistakes and increase efficiency across finance teams. Gone are the days of fintech being exclusively for corporate giants. Now is the time for SMEs to utilise its services at a time when they need it most. 

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