B2B Payments

SMBs Cross The Chasm Of Accounting Innovation

Small business (SMB) adoption of technology can be a process filled with growing pains and friction points, thanks to the cost and disruption associated with integrating a new technology. Those challenges have made SMBs notoriously technology-adverse, though it may be an unfair characterization, particularly considering the influx of small business FinTech innovation in recent years.

One of the most popular targets for innovators is the accounting space, where business processes touch on various aspects of an overall company, from accounts receivable and payable to cash forecasting and financial strategy development. Accounting is at the center of some of the most cutting-edge technologies, including robotics process automation (RPA), artificial intelligence (AI), machine learning and more, said Erik Asgeirsson, president and chief executive officer of CPA.com, and Lawson Carmichael, chief operating officer of the Association of International Certified Professional Accountants (AICPA).

Positioning themselves at the center of small business accounting innovation, the CPA.com and AICPA recently sponsored their second annual startup accelerator, choosing three startups in the SMB accounting market that address particular pain points through technology. The winners include bot-enabled accounting automation firm Gappify, accounting communications platform Client Hub and cash flow forecasting firm Dryrun. According to Asgeirsson and Carmichael, the companies illustrate the broader environment of innovation that the SMB accounting space enjoys today.

“Technology is changing the practice of accounting and finance,” Asgeirsson said in an interview with PYMNTS. “And a lot of the innovation is coming at the early stage.”

Startups are often well-positioned to use technology to tackle the biggest issues of small business accounting because they are small businesses themselves, he noted, experiencing these pain points firsthand.

“The wealth of talent and innovation that’s going on at all edges of the profession is really quite extraordinary,” added Carmichael. “The smaller-business side of innovation is healthy and alive.”

Adoption of cloud accounting is, indeed, on the rise, with FloQast data recently finding that 79 percent of accountants have adopted at least one kind of cloud-based financial application. This has introduced a new dynamic for the small business accountant.

While the industry has shifted from concern that automation and technology will replace human talent, to concern about the ability among accountants to step up to a new role for SMBs, Asgeirsson said the paradigm shift is an opportunity. Today, technology allows CPAs the chance to step into the role of “trusted advisor,” he said, and it’s a change that could not have occurred without the migration of accounting to the cloud.

“There is a collaboration between the business and [its] trusted advisor through the cloud,” he said. “That was impossible when all information resided in a small business’ server room or on [its] laptop.”

Crossing The Chasm

According to Asgeirsson, the cloud’s ability to solidify itself as a new standard in small business accounting has enabled SMBs overall to cross the chasm from technology adoption struggles to technology adoption opportunities all thanks to the cloud.

“In America, we have millions of businesses using cloud accounting, using cloud-based payroll systems, cloud-based bill payment systems, so they have made that first big step,” he said. “Now, adopting the next solution that integrates into [cloud platforms] is becoming much easier.”

The cloud has reduced barriers to link multiple platforms together, and for developers to introduce new features and functionality into cloud accounting tools, he continued. For small businesses, the challenge now is designing and understanding a business strategy to decide what functionality they need and, in many cases, collaborate with a third party to act on that strategy.

Small business FinTech innovation continues to accelerate, making it easier than it was a decade ago for entrepreneurs to adopt sophisticated solutions once reserved for the largest enterprises. Yet, that does not guarantee actual adoption and penetration of the new solutions coming into the market.

Carmichael explained that the industry must focus on what he called “practical innovation” to address key challenges that can be solved for business owners. For the business owners themselves, there must be a strategic plan established to identify which solutions are needed, and to implement that tool. He described that process as the “three I’s: isolate, incubate and integrate.”

“Technology isn’t the solution in and of itself, but technology is enabling [and] empowering these firms to evolve the business model, and evolve the operating model,” he said.

Even in the last two to three years, Carmichael added, the small business accounting space has seen a “tipping point” that is driving more dramatic change. It’s not only promoting further innovation among accounting technology developers, but it’s changed the way small business owners think about technology.

At a recent industry panel, Carmichael recalled, one CEO participant said the topic of adopting technology was one of his top-five priorities.

“It’s not a question of ‘do I need to change?'” he explained. “It’s ‘how fast? Am I moving too slow? How can I move faster?'”

The acceleration of small business FinTech innovation, particularly in the accounting sphere, is empowering that shift in mindset for business leaders, he added.



The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.