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Economic headwinds stimulate cash app use
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App usage responds to economic headwinds

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When times get tough, the first thing accountants look for is better visibility. With up-to-date management reports and forecasts to hand, finance teams and external advisers can set their minds to working out where cuts can be made to bring cashflows back to a sustainable level.

14th Oct 2022
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“All the data on what you spend and receive is in your system, so you can extract what your expenses are and define what spending is necessary and where you can cut back to reach a minimum operational budget level,” one adviser told me recently. 

Given the direction of travel of the UK economy over the past two years, we asked AccountingWEB’s software insight team to analyse the extent to which accountants were using software to cope with belt-tightening and cash management activity.

With the UK economic already slowing in 2022, bookkeeping software (cited by 16% of respondents) and management reporting tools (12%) both featured near the top of the “most likely to purchase” list in AccountingWEB’s software state of the nation report in July. 

Other factors such as Making Tax Digital also influence this broad trend, so the most illuminating recession-related findings are likely to show up among specialist tools such as cashflow forecasting, credit control and collections.

Overall, business accountants lead their practitioner counterparts with 49% of respondents to the July survey using software to manage debtors and model cashflows. But finance managers tend to rely on apps they already have, either Excel or tools provided within their accounting systems.

Julian Green, AccountingWEB’s head of insight, commented: “As the economy worsens we are likely to see an acceleration of the trends that are already established: usage of this kind of software will increase more among business users than those in practice. Among practitioners, the early adopters will be expanding their tech stacks to address increased demand for cash management and cashflow forecasting as their clients’ belts tighten.” 

Cashflow forecasting 

The quarterly AccountingWEB software insights survey picked up an acceleration in budgeting and planning cycles back in July and Green noted that specialist apps were making “slow, but steady progress”, mainly among practitioners.

Overall, 31% of practices supported business clients with some kind of cashflow forecasting service. Specialist cashflow apps such as Float and Fluidly have made inroads among larger firms and early adopter/small practices, but the July survey found a surprisingly high proportion of smaller, more traditional practices (42%) helping clients in this area, mainly with Excel-based forecasts.

Accountants in practice were more likely to use Excel for cashflow forecasting (55%) than business accountants (43%). Just over a quarter (28%) of business users relied on cashflow forecasting tools within their accounting platform compared to 14% of practitioners.

Pillow May founder Jessica Pillow, who will be appearing in a webinar on cash management apps for firms providing outsourced “virtual finance” services said that ever since Xero enhanced its practice reporting capabilities, she has been moving away from specialist tools.

“We can use Xero to produce most of the formats we need, or output the data to Excel if we want to do a more detailed forecast,” she said.

Credit control and cash management 

Within practices, the use of credit control tools such as Chaser and Satago lag behind cashflow forecasting. Small firms who identify themselves as “early adopters” support nearly half of their clients with credit control or collection tools and are planning to increase their use over the next two years.

This service line is much less common among medium and large firms, whose clients are much more likely to undertake collections and cash management tasks themselves. 

Given the direction of travel across all these recession-sensitive application segments, Julian Green concluded, “Overall, adoption of specialist solutions is unlikely to be quickly and widely adopted by other segments of the market who will rely on Excel and apps on their bookkeeping platforms.”

The signs are there of increased usage of software for cash forecasting and management, but the recessionary forces currently not having the same transformative effect on app sales that Covid had when so many businesses switched to working from home and needed help with cashflow forecasts for government support loans. 

The one question that remains about the underlying trends is whether DIY and generic tools will cope with all the demands placed on them if the economic situation gets any worse. Or is cash management one of those neglected activities that only gets reviewed in a crisis? 

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