How open banking can boost business insights

Improved forecasting and cash flow with open banking

Challenge >>

Many small businesses find it hard to get an accurate picture of their current financial position – the FSB estimated that up to 70% of SMEs can’t accurately forecast their finances. As a result, it can be difficult to control fluctuations in cash flow, prepare for any unexpected shortfalls and collaborate effectively with accountants and finance professionals.

This can hinder future earnings forecasts, slow decision-making on core areas such as investments in assets, impact employee

pay scales, and limit research and development. Any or all of these can hinder growth.

The same applies when it comes to calculating tax, particularly Value-Added Tax (VAT). Lacking access to real-time transaction data and an inability to share information with their accountants can leave some firms subject to unnecessary charges, or potentially miss out on tax relief.

Solution >>

Our June 2022 Open Banking Impact Report demonstrated that small businesses are increasingly utilising open banking-driven cloud accounting services to manage their operations, improve efficiencies, access better insights, and drive cost savings.

The report shows that cloud accounting services delivered through open banking are providing considerable benefits to those small businesses adopting them.

From visibility of their latest financial position to an improved ability to connect with their accountants, open banking is making a substantial and demonstrable difference to the way their businesses operate.

Benefits of open banking-enabled business borrowing

Real-time data access – open banking allows seamless integration between banks and accounting software, providing real-time access to financial data. This ensures that forecasting and cash flow analysis are based on the most up-to-date information, enhancing accuracy and reliability.

Automated bank feeds – by enabling automatic retrieval of bank transactions and feeding them directly into cloud accounting software, the automation driven by open banking saves time on manual data entry, reducing errors and improving efficiencies.

Enhanced visibility of cash flow – with direct access to business bank accounts, open banking-enabled cloud accounting services offer a comprehensive view of cash coming in and going out. This allows for close monitoring of cash positions, prompt identification of potential shortfalls or surpluses, and the ability to make informed decisions regarding effective cash flow management.

Improved forecasts – open banking facilitates the integration of historical financial data with forecasting tools built into cloud accounting software. This integration enables more accurate forecasting models, taking into account actual banking transactions and patterns. This generates more precise financial projections which can better inform business decisions.

Streamlined reconciliation – as open banking automates the bank reconciliation process by matching transactions from accounting software with bank records, the reconciliation process is streamlined. For small businesses, this means a further reduction in human error, along with accurate and up-to-date financial records.

Effective financial planning – open banking-enabled cloud accounting services provide a holistic view of financial data, allowing for better financial planning and budgeting. With precise and timely information, customers can identify trends, track expenses, and allocate resources more effectively.

Access to third-party apps – by allowing integration with a range of third-party applications and services, open banking expands the functionality of accounting software and offers additional tools for financial analysis, forecasting, and cash flow management.

Options for businesses >>

Many businesses underestimate the value of their banking data. It extends beyond balances and transactions, encompassing credit costs, invoicing, payroll, and more. Securely sharing this information with regulated companies, such as banks and fintech firms, offers access to more cost-effective products, services, and apps which support better understanding of business finances.

Conclusion >>

Driving better decision making

Access to a wide range of intuitive, flexible, and secure open banking technologies can help tackle day-to-day challenges for firms and sole traders and open up a world of actionable data. For late payments alone, 70% of small businesses reported that using cloud accounting services have helped improve their management. Combined with other payments technologies, the potential on offer to small businesses is compelling.