How the Evolution of Fintech is Transforming Accounting for Small Businesses

Fintech is rapidly transforming the way that small businesses manage their money and oversee their accounting, introducing next-generation real-time data management and advanced predictive analytics. 

According to McKinsey research, revenues in the fintech industry are expected to grow at a rate almost three times faster than the traditional banking sector between 2022 and 2028. While traditional banking is forecasted to achieve 6% annual revenue growth, the fintech landscape is expected to see 15% annual revenue growth over the years ahead. 

Thanks to advances in accounting technology, small business owners can benefit from automating tasks, improving efficiency, and working alongside accountants to make decisions based on unprecedented new qualitative insights. 

With this in mind, let’s take a deeper look at the transformative potential of fintech in accounting and how it can help to improve the cash flow of the small businesses it serves: 

Embracing Predictive Analytics

Utilizing predictive analytics within small business accountancy teams can help to forecast trends by analyzing large volumes of structured and unstructured data. This helps to identify patterns, predict cash flow fluctuations, and alert parties to potential risks. 

One key benefit of predictive analytics is that it empowers businesses to make informed decisions and optimize their cash flow, helping them reach both short-term and long-term goals. 

Artificial intelligence improves decision-making processes by delivering rich insights that would be too time-consuming or impossible to provide manually. This can help businesses to anticipate seasonal trends, evaluate their policy insights, and detect inefficiencies in real time. 

These predictive insights can help in planning resources, managing risks, and improving financial performance as a whole, transforming the role of accountants from reactive to proactive. 

Real-Time Analysis

The handling of financial records has been made far more cost-effective and time-efficient for small business owners thanks to the emergence of real-time analysis from fintech tools. 

While accountants had traditionally relied on historical data to gain insights into a company’s financial health, the availability of key financial metrics in real-time is empowering more decision-makers to take informed actions for more positive outcomes. 

The transition towards real-time reporting driven by fintech innovations is causing more accountants to rebrand themselves as business advisors, prompting more focused advice for small businesses regarding growth and cash flow forecasting. 

These innovations are becoming increasingly accessible for small businesses in a range of industries, and even hands-on companies in the field of construction are benefiting from empowering metrics like financial insights, project reporting, and compliance costs, all encapsulated in real-time software analysis. 

According to a recent survey, 84% of accountants agree that technology will empower them to work on higher-value work at a time when artificial intelligence developments are challenging more traditional roles associated with accountancy. This can pave the way for actionable insights that focus on factors like recurring revenue, customer acquisition costs, loan-to-value, and cash burn to improve the prospects of small businesses. 

Utilizing Blockchain Technology

The strength of fintech is that the technology is not only streamlining time-consuming and labor-intensive tasks when it comes to auditing, but it’s also incorporating a wide range of financial innovations, such as blockchain. 

Although blockchain is widely associated with digital currencies, the technology is an immutable digital ledger that can not only make accounting audits more efficient but can also significantly enhance their accuracy. 

Blockchain serves as a decentralized, distributed ledger that records transactions across a network of computers. Every time a transaction is made, it’s recorded as a new block, which is intrinsically linked to the previous block, forming the blockchain itself. 

Crucially, this forms a tamper-proof record of transactions and makes it virtually impossible to alter or falsify data, helping to deliver unprecedented levels of transparency and security. 

As a result, accounting processes can be streamlined at scale, automating record-keeping and lowering dependence on manual reconciliation. What’s more, is that blockchain has the potential to stamp out instances of human error and data entry mistakes that can undermine the effectiveness of audits. 

The immutable mechanics of blockchain mean that the authenticity and transparency of financial records are assured, with companies like Auditchain and Chainalysis already emerging to bring blockchain audit capabilities to businesses of all sizes and ambitions. As a result, clients can reduce the time and cost associated with traditional audits while benefiting from a tamper-proof record of their financial health. 

The Changing Role of Accountancy

Fintech has become a critical part of accounting for businesses, and its impact is far-reaching for adopters. 

From enhanced predictive analytics to real-time data processing and enhanced decision-making, modern fintech solutions have brought exponential benefits to the accounting landscape for small businesses. 

Embracing these technological advancements can help more small business owners to stay competitive in the digital landscape, helping them to protect their income and outgoings more effectively and overcome prospective issues caused by human error. 

In gaining an edge over rivals in a competitive industry, advancements in fintech accounting technology can be crucial, and making use of it can open the door to more sustainable growth.