Danish accounting platform Billy is harnessing Open Banking to get access to SMEs’ data from banks and transform the way they perform their accounting.
Billy, which has 18,000 customers in Denmark, was the first company to obtain permission from the Danish Financial Supervisory Authority to get access to customers’ banking data.
Approval from the Danish regulators means banks are required to give Billy access to the accounting data of their clients which fuels the platform’s engines for automated bookkeeping, budgeting and so on.
This is an interesting, but potentially less-explored, development courtesy of PSD2. Billy’s CEO, Jonas Midtgaard, sees open banking as a catalyst for streamlining accounting procedures, where the system is based on a single set of data rather than one set from the bank and one from the company’s own internal systems.
Billy has also teamed up with Nordic API Gateway to get access to the data in real time.
Clients of Billy are alerted when transactions occur in their bank account, allowing instant reconciliation to keep bookkeeping and accounting aligned. This is designed to prompt businesses to manage the small accounting tasks diligently on a consistent basis, making the larger job of filing accounts at the end of a quarter or tax year smoother.
“I’ve always said that the iteration between banking and accounting processes is unnatural and I believe it only exists because of the lack of access to data,” Midtgaard says.
“It doesn’t make sense that you have your cash-in-hand logged in your accounting system, while money in the bank is separate.”
A merger of these two entities would allow for a greater crossover between banking and accounting at SMEs.
Billy is now looking at developing a system enabling its clients to pay invoices simply by taking a photo of it. This is designed to dissolve some of the frictions related to booking an invoice, physically arranging the payment through the bank and filing the necessary documentation in the accounting system.
This is being launched in collaboration with Nordic API Gateway and will work through recognising a transaction and matching it to a specific invoice, with users able to set up as how the invoice should be classified.
This service would rely on the assumption that the majority of a company’s creditors are regular payments, which would certainly be the case with suppliers of suppliers, couriers, utility companies and so on. Midtgaard states that 80% of all accounting can be performed based purely on referring to the action that was carried out the last time.
Adapting and streamlining
Midtgaard believes that platforms like Billy will reduce the need for companies to pay for the services of accountants to perform tasks that can be automated.. This may well be an option widely explored by businesses looking to reduce costs in a post-Coronavirus world.
SMEs who have previously outsource accounting to specialists may find themselves having to tighten their belts in order to stay afloat.
The ongoing coronavirus crisis and the prolonged economic downturn that is expected to result will change several norms in the way businesses operate as they are forced to adapt to new challenges. This is where fintechs will spy an opportunity to help streamline administrative tasks and reduce costs for SMEs and traders.
One example of this is the BBVA-backed Holvi, that offers business banking specifically for small traders. The months ahead could see Holvi extend its target segment to gig economy workers, which may be a growth area as people previously in secure employment are forced to take contract or freelance work.
Holvi’s service is aimed to assist traders with bookkeeping, invoicing and cash flow or expense management.