Business leaders failing to capitalise on fintech

Insight: Why Open Banking is good for business

Richard McCall,
13 Jul 2021

The UK ranks as the highest in the G7 group of economic powerhouses for the number of micro and small businesses created per capita. This entrepreneurial spirit, however, is in stark contrast to productivity figures – where the UK ranks lower than any other member of the G7 by a significant 16%.

This makes sense when considering the generally low headcounts of these small businesses – roles tend to specialise as a business grows, focusing departments on what they are good at.

Smaller business owners, in contrast, can struggle to be at their most productive when facing multiple administrative tasks without the resources and support to carry them out effectively.

The need for external support

Managing the finances of a business is an area where small businesses especially can struggle. Businesses owned and led by a great butcher, baker or candlestick maker will not necessarily have the resources or skills internally to manage spreadsheets, cashflow or invoicing effectively. Increasingly, these are also difficult skills to learn.

Instead, many businesses muddle through, using a combination of weekends and evenings to cobble accounts information together and then share this with accountants that support effective financial management and reporting.

Alongside promoting the success of the company, directors must uphold the company’s constitution – in other words abide by the rules – and keep proper records.

Accountants often play a vital role here in checking that directors can demonstrate regulatory requirements have been met, as well as ensuring they stay the right side of the law. As an example, trading while insolvent can lead to directors being personally liable for prosecution.

Many directors of small businesses rely on their accountants to provide early warning signs that a business is struggling unduly or may be going down the wrong path.

Getting the information right

Of course, this relies on accountants having access to the right information to be able to best assist company directors. For bigger businesses, the accounts team will be responsible for this, but for millions of businesses, this is not an option.

Instead, they rely on copies of bank statements or downloading spreadsheets from online banking services and sharing these with their accountants.

This process is fraught with difficulties: the mountain of paperwork that piles up is often the last thought on the mind of a company founder trying to maintain or grow a business.

In the digital age, photocopying or scanning pages of bank statements or sharing spreadsheets via email is unreliable and unsecure. There has to be a better alternative.

Open Banking is here to help

Open Banking offers a simple and elegant way for accountants to request financial information from businesses.

The business can share data across multiple accounts and over specific time periods – meaning that all the relevant information can be accessed and analysed quickly and easily. Built for a world where access to information is often via a mobile app, business owners do not even need to log into a PC to share the relevant information.

Accountants can be certain that this information is coming directly from a verified source – reducing the risk of fraud or error significantly.

Services that use Open Banking can empower businesses to provide the information that their accountant needs without the traditional hassle. A request for information can be securely signed off in moments.

This is clearly very positive for productivity. Busy business owners can get accurate and up-to-date financial information from their professional advisers without being the bottleneck.

Owning and running a business is difficult enough, without the administrative burdens that come with that role.

Open Banking offers businesses a way to help them help themselves by delivering a frictionless link between a business and its accountant. This saves hours of administrative time while also offering a clearer overview of the financial wellbeing of a business at any moment in time.

Richard McCall is CEO of Armalytix