How contributed data is building the small business utopia

We are moving towards a small business utopia, where businesses can spend more time on what matters to them. 

Karen Mills, former head of the US government’s Small Business Administration, has written compellingly about how financial technology is paving the way for ‘the small business utopia’. 

She describes a world where a business’s entire financial life is accessible through one app. Where before receiving an order the supplier already understands the credit-worthiness of the buyer and therefore what payment terms to invoice on. 

There is a problem however. Even the smallest of businesses are complex entities with specific requirements based on their sector, size and ambitions and to serve them well this application must reflect those requirements and offer an accurate representation of them as a business. 

It must be versatile and familiar but also feel personalised - the app needs to ‘get’ how the business operates.

It needs to reflect the internal technology stack of the business, building a picture of the internal workflows through connecting the different software platforms that a business uses for ordering, managing transactions, paying suppliers, tracking inventory and logging shifts. It looks like an ecosystem of connected platforms, providing consented, contributed data to a central application.

What is the small business ecosystem? And what problems are Fintechs solving with contributed financial data?

To understand this small business ecosystem and its pain points for a small business, we’ll look at the journey of the buyer-supplier relationship:

  • Order - it begins with a quote, negotiations, purchase orders and sometimes credit checks to agree payment terms.
  • Delivery - the supplier invoices the buyer, who now has a liability on its books.
  • Payment - a transaction is made and is tracked throughout the process of being received
  • Planning for the future - both the buyer and supplier need to understand their current and future cash position to survive and grow.
Fintech’s are providing solutions to make each step that little bit easier

Each of these stages incur a cost. From order and delivery, through to payment and planning for the future, fintechs are providing solutions to make each step that little bit easier. 

At delivery, the buyer is invoiced. Traditional invoicing is associated with long wait times and high costs. Fintechs are helping here -  e-invoicing solutions cost on average $0.35 per invoice in processing costs, compared to $8 for a paper invoice.

But what if the supplier is still awaiting payment? Should she allow her cashflow to suffer? Debt collection tools are incentivising early payment with discounts, providing automated follow-ups for unpaid bills. The invoice data is then pushed directly into the buyer’s accounting software. Now the buyer knows exactly what is owed and the supplier has 100% assurance of the bill being received.

Once accounts are settled, a business must ensure their business continues to flourish. 

Cashflow forecasting tools provide actionable analysis, helping answer questions like ‘how much cash does my business need to retain this quarter for our VAT return, based on my current sales trajectory?’. 

The combination of tax and accounts receivable data  solves these problems - this would not have been possible before the era of contributed data.

We’re on the right path

The contributed data that flows between accounting, commerce and banking sources is creating a full and up-to-date financial picture of the small business. 

The small business owner is able to consent access, validate and seamlessly share her company data with the financial services critical to her business’s survival and growth. As we move closer to a small business utopia, we are giving our small business economy the best chance of success.

Callum Taylor