The Waterfall Effects Of Integrated SMB Accounting

Automation in small business accounting can certainly be beneficial, but when a cloud-based accounting platform remains within the confines of its own interface, there can be unexpected friction that prevents business owners from gaining real-time financial insights.

That’s because the more software solutions a business implements, the more platforms there are for accountants, payroll professionals, financial executives and others in the enterprise to toggle between, opening up the opportunity for manual data entry, recording errors and wasted time.

Indeed, while accounting digitization can solve many challenges, it can create new ones that impede the ROI of these technologies.

Kapil Rana, president of small business cloud accounting platform HostBooks, told PYMNTS that there are several ways in which accounting software can augment its capabilities to better serve the needs of SMBs. But as functionality expands, what is perhaps more important is that accounting solutions can co-exist with other back-office platforms.

Data integration, he said, can have a waterfall effect with wide-ranging efficiencies.

Elevating Functionality

Migrating the accounting function to the cloud can offer a slew of benefits for small businesses, thanks to the flexibility of software to operate across platforms. It’s what enabled HostBooks to recently announce the launch of its mobile app, a key feature for SMBs that must gain access to financial data regardless of location, said Rana.

He noted that more small businesses will continue to embrace the cloud migration of accounting.

“By moving to the cloud, you don’t have to deal with downloading, installing, updating and maintaining the software and servers used,” Rana said, also pointing to the added benefit of “decreased risk of data loss” as servers automate data backups and security.

The reduction of manual workloads is among the largest benefits for small business owners who lack the resources and extra staff to key in data and crunch numbers. But the accounting function does not exist in a vacuum, and its relationship to other aspects of running a business must be recognized in order to obtain the full benefit of cloud-based platforms.

Siloed Platforms

Accounting is part of a wave of cloud-based enterprise software solutions helping to digitize corporate financial processes, but the accelerated adoption of multiple portals means significant friction in having to move data from one tool to the next.

By expanding accounting platforms’ functionality, software can help to remedy this challenge, said Rana, while data integration across other platforms like payroll, AP and AR are essential to financial transparency.

“It is not efficient or smart to have separate accounts to track bills, invoices, payroll, expenses and more,” he noted. “Separate accounts will not give business owners the trust understanding of the health of their business. Factors such as accounts payable, accounts receivable, payroll and expenses need to be collectively gathered as a whole to see the true financial state of a business.”

A lack of integration elevates the risk of data entry errors, and the more portals that have been deployed, the higher the risk of making a mistake, added Rana.

This understanding is also the motivation behind another new feature HostBooks recently announced, which enables the platform to integrate with SMBs’ payroll solutions. Rana said this connectivity is key for financial reporting and tax filing.

“Lack of integration can mean a major gap in financial statements, and, as a result, impacts tax returns,” he noted. “With payroll integration, speed of completion increases because authorized persons from different departments have easy access to the same data they need to work.”

A Waterfall Effect

Every business is different, so it’s not feasible to assume that a single software solution can provide all the functionality one business needs to manage money, from payroll to AP.

But data integration can reduce the number of software platforms being used and cut through the data silos standing in the way of financial visibility. Accounting is in a particularly opportunistic position to achieve this efficiency, according to Rana.

“Accounting automation brings centralization to creating invoices, accepting payments and updating financial books,” he said, noting that because accounting touches so many other areas of finance, automation and data integration can have a waterfall effect of benefits.

That includes accelerated order-to-cash cycles, with automation allowing for faster generation and submission of invoices and, therefore, faster incoming payments. Data connectivity means AR teams can automatically receive notifications about overdue invoices, further reducing the need for manual work.

It’s only one example of how cloud-based, integrated and automated accounting can introduce benefits for small business owners who are strapped for resources.

“Small business financial management is definitely heading toward an integrated ecosystem because of the simple fact that it allows for increased efficiency and reduced cost of resources and errors,” said Rana. “In an integrated software, all accounting and compliance outcomes are available on one platter, leading to faster and smarter decision-making.”