B2B Payments

Lending A Big Hand To Small Biz Accountants

When the U.K. held its general elections earlier this year, much of the political debate was zeroed in on “cutting the red tape” for small businesses and their ability to manage cash flow. Both Prime Minister David Cameron and then-rival Ed Miliband proposed ways to slash the regulatory hurdles SMEs have to jump over to manage their finances, from opening a bank account to securing a small business loan.

The cutting of the red tape will come from several avenues, including political action and greater competition in the small business FinServ space. One of the U.K.’s Big Four auditors, KPMG, is taking a collaborative approach to this cause by partnering with lenders — both mainstream and alternative — and eyeing how technology can make accounting faster and easier for small business owners.

PYMNTS spoke with KPMG’s Bivek Sharma, head of small business accounting, to discuss the ways SMEs can be held back by what critics consider to be too many rules and regulations.

According to Sharma, on average, businesses across the U.K. spend one day every week on financial administrative tasks. The concern isn’t unique to KPMG; recent research from the International Federation of Accountants found that red tape and regulatory compliance are becoming the top burden for corporate finance officials and that businesses consider these rules to be innovation-killers.

[bctt tweet=”On average, businesses across the U.K. spend one day every week on financial administrative tasks.”]

It’s this burden that led KPMG to ink partnerships to develop tools and services for SMEs that speed up their accounting processes and automate compliance.

The most recent of these partnerships is a tie-up with Metro Bank, an alliance, Sharma told PYMNTS, is “designed to cut through this red tape” and reduce the hassle of small business money management.

Sharma said that the partnership allows SMEs to open a business account with Metro Bank “in a matter of hours,” while KPMG provides that business with an accountant “to deal with all the day-to-day accounting and tax requirements."

KPMG’s operations integrate directly into Metro Bank, meaning small business processes and bank transactions are collected and streamlined into a single source in real time, Sharma added, allowing for automatic bank reconciliations and business performance reports.

It’s not the first time KPMG has launched a venture aimed at the small end of corporate FinServ. The auditor has also paired with alternative lenders, which Sharma said can expand in the market and provide small business services in harmony with traditional banks. “It’s about providing small business owners with a choice,” he said, adding that the expansion of P2P small business lenders has “resulted in a more varied and healthier funding market, providing better services from all parties."

Data, Sharma added, will be key to pinpoint the areas of small business accounting that involve the most red tape and tend to trip up SMEs more often.

For example, data obtained from KPMG from a recent research report found that the more small businesses spend on their accounting services, the less satisfied they are with those tools. Further, the study also found “little difference” between the accounting services obtained by a small business that costs less than £1,000 compared to services that cost more than £4,000.

“It seems that whilst small businesses may be investing in their accounting, they may not be getting the value for money and support they need,” Sharma said.

Data is also key for solving the problems it identifies, he added.

Sharma said KPMG is “obsessive” about staying on top of the newest ways to apply Big Data and technology to streamlining accounting. While policymakers will look to bureaucracy to cut red tape, Sharma said that Big Data will also be key to easing friction in SME money management.

"Using data to allow businesses to benchmark their performance within their peer group is also vital,” he said, adding that data analytics are critical in identifying where small businesses are over- or under-spending.

[bctt tweet=”Using data to allow businesses to benchmark their performance within their peer group is vital.”]

KPMG’s focus on small business accounting and its recent joint ventures are part of the company’s efforts to provide more than tax and accounting compliance support; they’re also to guide small business owners through the process of understanding their cash flow and the process of accessing financing.

Sharma said that’s because SMEs are the “lifeblood” of the economy, and yet half of startups go bust in their first five years of operations.

"In my opinion, this is mainly due to cash flow issues and a lack of financial or accounting support,” he said. “It’s vital that we, as a Big Four firm, aren’t just acknowledging their importance but are actively innovating to ensure we’re supporting their growth and success."

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