Financial technology (or fin-tech) has been around for about 65 years, beginning with the introduction of credit cards in the 1950s. The next decade brought automated teller machines or ATMs, which allowed people to make transactions without having to go to a branch or needing to speak with a teller. Computers and the internet embodied and defined the 1980s and 1990s. During these years, more complicated data and record-keeping systems were introduced to banks’ mainframe computers while the internet allowed entrepreneurs and customers to engage in eCommerce.
The 21st century has brought smart financial technology to the business world. This includes money management tools such as mobile wallets and payment apps. These client-focused tools are gaining more and more popularity as eCommerce flourishes on a global scale. As a result, there is a substantial increase in the number of financial technology startups that innovate the way entrepreneurs and customers interact with each other.
What is the relevance of smart financial technology to small businesses such as yours? Before you answer, consider this question for a moment: How much time do you spend on financial management – everything from generating international wire transfers to managing cash flow?
Challenges of Financial Management
On average, tax preparation alone can take 41 hours a year on average. (Forty percent of small business owners spend more than 80 hours a year on this process.) Other financial management processes take up time, too. Invoicing takes an average of 2 hours per week while accounting takes 3 hours per week—that’s 104 hours per year and 156 hours per year respectively! Moreover, expense management is also time-consuming. Seventy-four percent of small business owners agree that expense management keeps them from more important business-related activities.
The simple truth is that the majority of small business owners are not financial experts. Are you one of those who struggles with small business financial management? Well, there’s a solution.
Benefits of Financial Technology
You can manage your finances more efficiently with financial technology. Here are four benefits that you can get from fin-tech:
- Reduced costs
- Time management
Cloud options allow you to access your financial data securely whenever and wherever you want. If you have an accounting team that helps you manage your finances, uploading your financial data to the cloud also makes it easier to collaborate, instead of sending files back and forth via email. With everything in the cloud, you also don’t need to worry about the additional space and costs of keeping your files in-house.
Mobile options can also improve accessibility not only for you but also for your clients. Mobile apps make it easier for your customers to transact with you and your business.
If you’re just starting out, you can choose to use an accounting tool to manage your finances instead of hiring an accountant or bookkeeper, which is the more expensive option. (Without proper knowledge of accounting, however, hiring or regularly consulting with a professional is a smart move.) There are also financial management tools that allow you to transfer money to your suppliers without wire fees or domestic transfer fees. Some offer great foreign exchange rates for international business transactions, so you can reduce costs and maximize profits.
Financial management tools make accounting and other processes easier. Because your data is more accessible in the cloud, you don’t have to sift through paperwork to find what you need. This accessibility reduces communication and collaboration time with your accountant or bookkeeper.
With less time spent on financial management, you can focus on business activities that lead to growth. Whether it’s engaging with your customers on social media or providing better products and services, financial technology helps you become a better and more successful business owner.
Financial Management Tools
Veem is a fine example of a financial management tool that helps small businesses complete transactions. It also handles other financial processes quickly and conveniently. With Veem, you can wire transfer money without a middleman, so you don’t need to worry about bank delays, fees, or long forms. Veem also allows you to integrate other financial management tools such as QuickBooks Online and Xero to your account.
Xero is accounting software that allows you to securely send invoices to your customers with just a few taps. You can also pay bills, create purchase orders, track inventory, and integrate more than 500 third-party apps. You can access all these services with your mobile phone.
Another financial solution is Acuity, a bookkeeping service where you can get a dedicated account manager to help you with your tax return. With Acuity, you can clean up your recordkeeping, manage your payroll, pay bills, send invoices and prepare expense reports.
NetSuite is cloud-based business software that allows you to manage your business in one unified suite. You can perform enterprise resource planning (ERP), so you have a bird’s eye view of your business’s most important aspects.
Cost of Financial Technology
The great thing about financial management tools is that you can choose how much to spend on them. Most of them have packages or subscription tiers, so you can pick the option that best fits your needs and budget.
To compare, let’s look at Xero. Its premium package (wherein you can send invoices and quotes, enter bills, reconcile bank transactions and complete multi-currency transactions) is priced at $40 a month. You can use the service for an unlimited amount of time within the given month.
Another great thing about financial technology is that most of these financial management tools are partnered with each other. That means that if you are subscribed to, say, Acuity, you can get Xero for free, etc.
Financial Technology and Profitability
Without a doubt, financial technology allows small business owners to cut costs significantly. It gives you more freedom to focus on more important aspects of your business and lets you work on growth and innovation. You can use your time to engage with your customers, develop lasting relationships that lead to retention and new customer generation, as well as increased profitability. Financial technology is unquestionably the future of business.