Why your business should digitise the physical world

Beyond the immediate benefits, digitising business processes allows businesses to punch above their weight and take advantage of advanced technologies that use machine learning and AI for greater success.

A survey of 150 SMEs in Singapore by Xero in 2017 found that small business owners spend an average of 15.5 hours a month manually importing and reconciling their bank statements. Over two thirds of them cited manual bank statement reconciliation as a key challenge in managing their operations. Time-strapped business owners are often tempted to put it off or leave their accountant to deal with months’ worth of records and information gaps.

Accounting is the backbone of all businesses, big and small. It allows business owners to keep track of their finances and business performance, and conduct analysis and financial forecasting to plan ahead. In a small business, though, accounting can easily take a back seat in favour of seemingly more urgent tasks like sales and product development. After all, it takes a lot of time and patience to carry out administrative tasks, such as recording expenses and preparing invoices. But one way to relieve the accounting burden on small businesses is to digitise the entire process.

Nine real business impacts of cloud accounting

When businesses digitise the accounting process using software like Xero, processes are streamlined and they gain increased visibility and greater control over the business. As a bonus, business owners are able to get more out of their partnership with accountants since they can focus their efforts on strategic, analytical work, and less on mundane, administrative tasks.

1. Improve cash flow management with real-time visibility into accounts

Cash flow management is the backbone of a successful business. In fact, up to 82 percent of business failures have been attributed to poor cash management. Every business owner needs to know the financial health of the company at all times, and that’s done by having full visibility into your accounts.

With updates reflected in real time and accessible on various devices, cloud accounting software gives businesses an updated overview of all their accounts. Cloud-enabled application programming interfaces (APIs) let apps integrate with each other, making it possible to get a view of your books, bank accounts, invoices, and other financial data all in one place.

This enables you to make sound business decisions based on accurate, updated financial data.

2. Increase access to working capital

By digitising, small businesses are able to improve the accuracy of their data and the integrity of their accounts. This places them in a much better position to run the business efficiently, prove they are financially viable if they need a loan, and secure funds faster than before.

It means small businesses can enjoy an easier application process so they get access to capital faster. Lenders (banks and alternative lenders) who are given access to a real-time view of the finances within the business’s cloud accounting platform can access relevant financial information to make a faster credit decision.

3. Reduce manual and routine work

Anywhr, Asia’s first and only surprise trips curator, estimates that digitising their accounting process helped them save 15 hours a month that would have otherwise been spent on manual tasks. With digitisation and automation, businesses can reduce time spent on manual data entry, chasing late payments, reconciling accounts, preparing invoices and more. 

Business owners can then dedicate the extra time and resources to activities that directly add value to the business, such as building relationships with potential clients and planning for growth.

4. Shorten the payments cycle

Xero’s research reveals that businesses spend around 25 days a year chasing overdue invoices. However, when businesses digitise their accounting process, the payments cycle shortens. Xero small business users saw a reduction in the number of days between invoicing and getting paid from 42 days to 32 days in Hong Kong, and from 43 to 30 days in Singapore (2015–2017).

This can be partly attributed to the e-invoicing function within Xero’s cloud accounting which allows businesses to create and issue invoices digitally, and accept payments via various channels such as PayPal and Stripe. Eliminating the manual tasks, delays, and errors associated with manual data entry, processing and payment reminders, and offering more ways for customers to pay, typically speeds up the invoicing process and shortens the payments cycle. In fact, businesses see at least a nine percent increase in the number of invoices paid on time when they use an e-invoicing tool.

5. Reap insights from data analytics

When data is digital, it can be easily extracted and analysed using apps complementary to the cloud accounting platform such as Spotlight Reporting or Futrli to deliver comprehensive performance reports, conduct cash flow forecasting, scenario modelling and create customisable dashboards.  These help businesses to make data-driven decisions, identify potential markets, predict financial trends, and manage risks associated with compliance. Analytics tools can also spot anomalies in data over time, thus helping business owners and their advisors to detect financial reporting mistakes, poor performance, and fraud.

It is no wonder many CFOs and finance executives have marked predictive analytics as a priority for their business, according to the 2018 Finance Trends Survey Report. In that survey, 70 percent of CFOs and finance VPs identified financial planning and analysis as one of their top priorities, 62 percent also mentioned enhanced data analytics, and 53 percent pointed to the need to improve their analytics process.

6. Enjoy greater data security

SaaS providers employ complex security controls to safeguard their clients’ data. With financial data on the cloud – instead of in physical books or on USB drives, both of which can be easily tampered with – businesses can limit access to certain users. They can also track who accesses the data and when, enabling greater transparency within the organisation.

7. Connect apps so they work together

With APIs, different apps can work seamlessly with a digital accounting software, allowing businesses and their advisors to view all of  business data on one platform. Together, these form a stack of apps that businesses can tailor to their needs. For example, an ecommerce business may choose to link Shopify with their cloud accounting tool. Businesses can also opt to integrate other core business apps to support their administrative, inventory or HR needs.

8. Automate invoicing with online invoices and automatic reminders

The digitisation of accounting lets tasks like preparing invoices and recording them as accounts payable to be automated. Today’s accounting systems can also send automatic reminders about payments being due and follow-ups. All these depend on the rules you or your accountant sets up, which reflect your internal accounting processes, controls, and compliance procedures.

9. Utilise machine learning and AI without having to invest in it yourself

Machine learning and artificial intelligence (AI) involve training the software to understand, analyse, and categorise data. IDC predicts that data worldwide will grow from 33 zettabytes in 2018 to 175 zettabytes by 2025, and that much of it will be stored on the cloud. (One zettabyte is equivalent to a trillion gigabytes.)

With the help of AI and machine learning, many back-end administrative tasks can be automated to save businesses precious time. Xero has already automated the coding of 80 to 90% of transactions that clients do on a daily basis – but that’s only the beginning. AI has practically eradicated the time spent on manual and administrative activities such as punching and coding transactions, allowing business owners to focus on running their businesses, and advisors on providing strategic counsel to their clients.

One way of seeing it is that every small business has a personal robot dedicated to learning how they do business and help them automate a large portion of their administrative, routine tasks!

Think digital to accelerate business growth and punch above your weight

It’s normal for a business to feel anxious when taking the leap into digital, cloud-based systems. Business owners may be concerned  about what challenges they’ll face as they migrate and about data security. The good thing is cloud-based solutions tend to be flexible and highly scalable, allowing businesses to choose subscription packages based on the features they need and the number of users.The immediate and long-term benefits that digitising the accounting process bring allow small businesses to punch above their weight and compete on an even playing field against much larger players.