Fintech: When finance and forecasting tools collide
In recent times, cloud accounting app ecosystems have seen the appearance of a new hybrid of cashflow and forecasting tools. Nick Levine explores what this convergence could mean for accountants and their clients.
Over the last decade, the leading cloud accounting software providers have spawned rich and diverse ecosystems featuring hundreds of different functional add-ons.
Between them, the Xero and QuickBooks app marketplaces feature close to 1,000 apps. Typically these add-ons focus on a single task: for example cashflow forecasting, receipt scanning or invoice chasing.
Yet the market is maturing, with a handful of brands achieving dominance in each category, making it harder for newer entrants to gain traction unless they serve a particular niche.
Established category leaders such as Receipt Bank and GoCardless have attracted substantial later-round funding from institutional investors. More significantly, perhaps, high-profile acquisitions such as Sage’s purchase of AutoEntry and Xero’s Hubdoc takeover show that the big platforms are also keen to invest in fast-growing sectors they identify as “horizontal” functionality.
Software vendors in different categories sometimes form strategic partnerships to promote one another, but there is another path opening up where different app categories start to merge.
Forecasting meets finance
This development could potentially save accountants time in selecting vendors. Dealing with a single app will also make for a simpler, more consistent user experience.
Satago’s cashflow management tool, for example, incorporates mail chasing and credit analysis tools to risk assess their debtor book and potential customers. and access to invoice finance if they identify an impending cash shortfall.
“SME owners and accountants have little time to spare, so by accessing all the tools they need on one platform they can remove the manual burden of trawling through multiple offerings to find the solutions they need at any given points,” explained Satago CEO Sinead McHale.
Slide is another app that helps accountants and businesses to manage their cashflow. It presents users with a real-time view of different data sources, alongside predictive and confirmed payments and sales insights.
Slide incorporates this functionality by aggregating balances and transactions via Open Banking application programming interfaces (APIs), alongside third-party data feeds such as cloud accounting software.
The longer-term vision of the app is to connect users and their accountants to third-party funders.
Simon Lyons, chief commercial officer at Slide, thinks Open Banking and third-party data connectivity will lead to more effective lending.
“The positive output of aggregation is the identification of cash issues that can be resolved by gaining lending earlier or managing cash in a more practical manner. Cashflow has always been driven from the bank account and a separate task, but we are changing that,” Lyons told AccountingWEB.
Remedies fund stimulation
The Banking Competition Remedies fund has played a part in stimulating these hybrids. Online finance providers iwoca and Funding Options received extra cash injections with a remit to make business lending more competitive.
Cashflow forecasting tool Fluidly received £5m in Pool D funds, which targeted financial technology relevant to SMEs.
One of Fluidly’s core commitments was to extend its AI-driven cashflow forecasting software to incorporate access to funding through third-party lenders.
Fluidly founder and CEO Caroline Plumb said the next logical step for the system’s existing scenario planning functionality would be to link it to different funding options to help businesses find the most suitable financing product for their specific needs.
As the market matures and consolidates, the accounting engines will probably get in on the act, too. Intuit already offers direct funding to small businesses in the USA through QuickBooks Finance. If that proves to be a long-term success, extending it to global customers would be a logical next step.
Against this backdrop, Plumb thinks that more single-use apps will develop or incorporate multiple features.
“The strategic challenge for accounting software providers is how to deliver a platform business, rather than a curated marketplace. They will need to balance their core product with partner collaborations, while at the same time facing down competition from well-funded and fast-growing neobanks.”
What does this mean for accountants?
The development of multi-feature apps creates both threats and opportunities for accountants.
Matthew Gambold, managing director of practice firm Chaddesley Sanford believes that being able to offer a single solution for multiple processes will save accountants time.
“Using the same app on a firm-wide level also helps ensure consistent service levels due to all relevant staff being trained on the same software,” Gambold said.
The rapid growth of competing apps has encouraged new consultancy services offering to educate accountants about the best apps for their clients. But the rise of multi-feature hybrid apps may yet diminish demand for these services.
As the ecosystem evolves into new forms, accountants will need to stay on their toes to ensure their firms stay plugged into the apps that best fit their target sectors. Accountants with sector-specific industry experience who can bring their knowledge and networks to a cloud-savvy client base will be in particularly high demand.
The ultimate winners from the convergence of cashflow and forecasting services will be business owners, who will be able to further refine their financial performance and grow their respective companies.
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Nick Levine is a chartered accountant and journalist, with a particular interest in fintech. He was formerly the Advisory Lead at Deloitte’s Propel and the Head of Enterprise for ICAEW. His writing portfolio includes The Times, Wired and Real Business.