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Empowering Entrepreneurs & SMEs 2024

Open banking unlocks real-time data for cloud accounting

Daniel Jenkinson

Senior Policy Manager, Open Banking Limited

Open banking has become a vital part of cloud accounting for the UK’s small businesses, helping them manage their finances more effectively.

We first reported on the effect that open banking data connections were having on the UK’s small businesses and their accountants in our 2022 Impact Report. This research highlighted the role that open banking has played in the adoption of cloud accounting, as well as helping many small firms to better manage their finances.

Open banking gives companies and sole traders the ability to connect their business bank account to cloud accounting packages, giving access to real-time transaction data and benefits to businesses and their professional advisers.

Improved forecasting and cash flow

Many small businesses find it hard to get an accurate picture of their current financial position. Consequently, it can be difficult to control fluctuations in cash flow, prepare for unexpected shortfalls and collaborate effectively with accountants, finance professionals and lenders.

Open banking integration with accounting software provides near real-time access to financial data, offering a comprehensive view of cash coming in and going out. This can highlight savings opportunities (so firms can move funds to interest-bearing accounts or make investments), as well as possible areas of concern, enabling advisers to offer actionable advice before problems escalate. This accurate snapshot also informs decision-making and provides access to affordable lending via faster eligibility checks.

The continued growth of cloud accounting is
helping to drive the digital transformation
of many small businesses.

Tackling late payments

Getting paid on time is a perennial problem for many small firms. As well as the shortfall in cash flow, firms may waste time chasing late payments. However, some accountancy packages enable firms to share a payment link with a client and receive account-to-account payments in near real-time. This helps to improve cash flow, saves time and effort on administration and supports the effective reconciliation of accounts. Real-time transaction data means that small business owners get the latest information on which invoices have been paid and not paid.

Making small businesses more efficient

Some packages offer bill payment features via open banking, allowing firms to pay multiple bills without leaving their accounts software, saving time on manual administration and helping reduce the risk of manual errors. The continued growth of cloud accounting is helping to drive the digital transformation of many small businesses and improving long-term efficiency and productivity.

Open banking and cloud accounting are a powerful partnership. Our March 2024 Impact Report revealed that one in five of the UK’s small businesses are now actively using open banking, many as part of their accounts software, and we expect to see continued efficiencies and opportunities offered by this pairing.

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