Ten years ago, a small business owner might reasonably expect to visit the local bank manager and – assuming the business was fairly healthy - negotiate a loan or an overdraft. But that was before the series of calamitous events that have hit the global economy and changed the financial industry forever.

Case study

Reality check

The proprietor of Bristol-based Auxillio.com, Chris Hawes, says: “My book-keeper has access to my online accounts so can check on the situation of my accounts without having to ask me, which saves us both time and prevents delays in queries being answered.”

Using online accounting to issue invoices in the moment means I am managing my cash flow more efficiently, because invoices are issued as soon as a job is finished, rather than being left to the end of the month.”

Chris is just one of many small businesses – and their accountants – who have woken up to the fact that while the economy and the banks search for recovery, there are some simple things that small businesses can do to protect themselves.


The economic downturn of the past few years has been tough on small businesses and a number have gone to the wall for the lack of funding being offered by the banking sector. Here, Gary Turner, UK MD of Xero, a leading provider of online accounting tools, offers a simple solution that could see many small business lose their life-or-death dependency on the banks completely.

Ten years ago, a small business owner might reasonably expect to visit the local bank manager and – assuming the business was fairly healthy - negotiate a loan or an overdraft. But that was before the series of calamitous events that have hit the global economy and changed the financial industry forever.

So, isn’t it about time we all faced up to this fact and started to change how we deal with this? Sure, it’s up to the banks and the governments to start putting in plans that will provide small businesses with more tangible help and not just words, but can small businesses really afford to hang around and wait for that to happen?

I’m not for one second suggesting that most business owners are bad at this, but according to many of the accountants we work with, there are definite gains to be made through more proactive and timely financial management, based on having better visibility of up to date information.

The desire for this insight is not new, but until recently, access to transparent, accurate data was not possible. Now, advances in technology – cloud computing and mobile in particular – have opened up a new way of working in a more collaborate, real-time way.

At the same time, we’re seeing a new vanguard of forward-thinking accountants emerge, who understand that they can play a far more useful role to their small business clients than their more traditional peers, helping to improve cash flow, visibility of debtor exposure and even better quality data that can be used to support a business case.

I’ll explain. Most business owners connect with their accountants ‘after the event’, often only when the management reports are due. The accountant tells them what happened and has very influence on changing what is by then a generally foregone conclusion on the outcome.

Modern-thinking accountants work with small businesses to assess what is happening or what might occur in the near future, to address impending issues or suggest areas for improvement. These might include spotting a future dip in cashflow, over-dependency on a particular set of customers, or a peak in outgoings. For the busy small business owner, these patterns can be hard to observe.
Advances in technology have opened up a new way of working in a more collaborate, real-time way.


In this way, accountants can become ‘virtual’ financial directors to small businesses, reducing their dependency on banks, although ironically, this level of real-time accurate data can be used to present a more compelling business case to gain a bank’s confidence.
 

Technology is the key

As I said earlier, technology has been much of the catalyst for trend. Cloud computing – where data and applications reside on a remote system – means that accountants and their clients can simultaneously view financial records at the same time. Compare that to the old days of putting a bunch of lever arch files in the back of a car. Live automatic bank feeds mean that when the business owner logs into his or her online accounting system, the latest transactions – and therefore exact cash position – are up to date. Compare that to manually inputting transaction data, which can take some businesses hours per day. Mobile applications mean that invoices can be issued the moment someone leaves a customer. Compare that to saving up invoices to the end of the week or month, only to become an onerous task and one that can delay incoming cash.

Access to rich online accounting information makes it a lot easier to create detailed accurate reports, ones that will help get the confidence of the bank and who knows, may even them encourage them to lend small businesses more money.