Financial Technology Levels the Playing Field for SMBs

Published : 5 years ago, on 26/11/2019

By Bill Thompson, Financial Applications Analyst, Centage Corporation

For a long time, access to public accounting resources has been a case of the haves vs. the have nots. The Big Four accounting firms attract the best minds and college graduates in financial accounting and strategy and build elite teams of experts in market verticals. These teams are thoroughly positioned to help clients pinpoint new opportunities for growth, maximize efficiencies and outwit their competition. Of course, only the top tier of the Fortune 500 companies, like Walmart, can access these resources. Smaller companies, like a regional retailer with 10 outlets or less, will never have access to those teams. True, the Big Four will take on the accounting and auditing work of smaller companies and deliver excellent tax returns and audits. But they won’t look beyond the raw data for the kinds of insights that are game-changing. There is also a cost-to-benefit issue, as one can very well spend more on analytics than they are worth. This puts SMB companies at a disadvantage.

Fortunately, emerging financial technology is changing that calculus by providing SMBs the ability to access the kinds of data-driven insights that are so critical for enterprise-class businesses. Given the importance of the SMB market in the American economy and job growth, that’s a positive development.

To understand why this is monumental, let’s step back and look at the way things once worked. I started my career working in a small public accounting firm, though our clients weren’t particularly small; some had $70 million in annual revenue. The skillsets we offered were limited: accounting, auditing and taxes. We had no vertical expertise, no ability to observe the unique nuances of an industry and offer strategic insights. That didn’t worry us too much as we assumed our clients were experts in their markets. They could easily glean plenty of insights out of their data just fine on their own, right?

What we didn’t realize is that for them, running a business day to day is all consuming. They didn’t have forty hours to spare to examine tax returns for hidden market insights.

And if I’m honest, even if my old firm had the vertical expertise to advise clients, we weren’t in a position to deploy it. Spending hundreds of hours entering line item data into a tax return puts a person deep into the weeds, and unable to see the big picture. That’s just human nature.

FinTech Automation

Over the past decade the market has seen a new generation of technology emerge in the Financial Planning and Analytics (FP&A) space. One of the most beneficial aspects of this technology is the degree to which it eliminates the need to enter data manually year after year after year. A financial team, or their accounting firm, can build a model of the business just once, and then the data from all points of the business are integrated (e.g. the the G-L, ERP system, etc.). As a result, the financial teams of these small companies (or the accounting firms that serve them) are freed up from a lot of busy work, giving them the time and space needed to think big picture.

Back when I worked for a small accounting firm, I never once considered metrics that are essential to our clients but fell outside of accounting, auditing or taxes. When I audited a retailer, I wasn’t looking to see if it was using 100% of its available space or calculating the revenue per square foot. We never even looked at that data, much less offer ways to optimize floor plan usage. But innovations in analytics software lets CFOs and accountants analyze metrics in numerous ways using real-time data from the business. Suddenly they can ask things like: what’s our floor plan use going to be? If we eliminate space set aside for operational purposes, what kind of revenue lift can we expect to see? It’s not just about revenue anymore, it is revenue tied to operations at a granular level. The more granular the view, the better the outcomes.

Manufacturing companies can also benefit from emerging financial technology. For instance, they can budget and plan on a per unit basis and analyze by SKU to see where profits are less than ideal, or which products are too costly to produce. If they have a loss, they can analyze each line item for each product made and isolate variables. This is pretty powerful.

Thanks to these advancements in fintech tools, all of this information is accessible and streamlined for the busy SMB owners and operators. This gives them the ability to compete with the likes of, say, Walmart.

The secret to growth has always been top notch FP&A analytics, and emerging financial technology is beginning to democratize those analytics. In a very real sense, the Fortune 500 companies working with the Big Four firms no longer have exclusive access to the keys to growth. SMBs can now play on a level field.

Bill Thompson serves as Financial Applications Analyst for Centage Corporation. He is an expert in corporate finance and accounting, with extensive experience in financial controls, corporate and partnership taxation, audits (Cash/AR/AP/Fixed Assets), reporting, financial systems, cost containment, budget management and tax strategy consulting. At Centage, he spearheads solutions deployment, client onboarding and product functionality training for Centage’s Planning Maestro, the cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. Follow on LinkedIn or Twitter @centage.