Finance departments in SMEs have historically not enjoyed resources available to counterparts in larger firms and while many currently still struggle to gain visibility over accounts and spending, technology and initiatives like open banking are promising to make their lives easier going forwards.

Many UK SMEs are struggling to gain visibility over their finance spend – a state of affairs that is forcing them to spend hours every week on time consuming expense or financial management tasks – but technology is promising to come to their rescue, according to a study by corporate expense management solutions provider Fraedom.

A recent survey by Fraedom found that less than a third (31%) of UK SMEs have a clear picture of business spend at the end of each month and “little visibility” on a day-to-day basis. This lack of visibility is leading more than half (57%) of the sample to spend more than two hours per week on expense or financial management tasks, while 22% admitted having to regularly ‘spend significant time” on determining who spent what.

“It is vital that businesses have real-time visibility of spend, just as we have in our personal lives, in order to have a good view of cash flow and help guide investment decisions. A lack of visibility is forcing SMEs to regularly go back and interrogate audit trails which is a drag on the business’ resources, efficiency and productivity,” said Kyle Ferguson, CEO of Fraedom, which was acquired by Visa last year.

In addition to struggling with visibility of spend, the survey also found that over half (52%) of UK SMEs find it difficult to access funding. According to 28% of the sample, access to funding has become more difficult over the past five years, while only 14% feel it improved over the period.

High expectations

With small businesses accounting for 99.3% of all private sector businesses in the UK and therefore vital for its economy, Ferguson believes it is vital they gain greater visibility and easier access to funding. Banks have a critical role in helping firms to address these problems and are now beginning to really do so with the aid of technology: “SMEs nowadays have high expectations of their banks and that has led to banks investing significant resources to better serve the market. One area that stands out is the growing emphasis among banks on the provision of technology-driven solutions to deliver greater visibility and control of spend with, importantly, mobility in mind.

He adds: “In addressing the demand for visibility and control, we’re seeing functionality that has so far only been widely available for consumers, suddenly gain a foothold in a business context. The delivery of real-time mobile alerts when a card purchase is made and the ability to attach a receipt and categorise that spend on the go – in essence, basic expense management functionality – are going to become commonplace. Natural extensions to this will include leaps forward in the use of virtual card technology. We’ve seen mobile wallets gain widespread use, again in a consumer context, and now the use of virtual cards for B2B purchases is exploding.”

Additional payoffs

Looking at card-based spend, Ferguson says another area to watch is the functionality which comes with basic card controls: “The ability to temporarily freeze a card that’s been misplaced, or even limit the time and place in which a card may be used – is now all possible from within a smart phone app.”

More broadly, he believes increasing penetration of technology-driven visibility across SMEs will generate additional payoffs for them in terms of analytics and reporting of business spend. “The delivery of high-level business finance insights – who spent what and when – on a mobile device will rapidly become commonplace,” he says.

Aside from demands from better solutions from the SMEs themselves, Ferguson points to open banking as a major driver of change for the better: “It will act as a key piece of the puzzle, with potential to accelerate the provision of these new services for SMEs. It finally hands control of financial data back to its rightful owner, the consumers and businesses themselves. By unlocking access to that data in a safe and secure way, it opens the door for technology solution providers to offer innovative new value adding services.”