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TechTalk / Treasury & Capital Markets
Upgrade needed to better track SME financials
Legacy manual systems, software limits boost demand for fast, consolidated solutions
Jayde Cheung 4 Mar 2024

Understanding any company’s financial position is crucial to its survival and vital to enabling it to make timely and accurate decisions. Large corporates in Asia can easily deploy a unit or launch a sales tracking system to oversee their business performance and health. However, in small and medium-sized enterprises (SMEs), accounting is not as simple due to the gap in financial knowledge and resources.

Only 39% of SMEs consider themselves knowledgeable in finance and accounting, according to research from fintech solution provider Forward AI, which offers SME-centric cash management systems, while 20% of business owners are still tapping their personal banking accounts to operate their businesses.

Lack of proper banking and accounting services is not just a problem of missing records, it also hampers the loans available for SMEs by lowering their creditworthiness, thereby hindering business expansion.

For example, Hong Kong SMEs, notes corporate credit rating agency TransUnion, need at least five years of track records to apply for credits from traditional banks; otherwise, they end up borrowing from money lenders offering less favourable terms and conditions.

Manual delays  

Among SMEs, the notion of retaining organized financial records is widely recognized, but many of them have yet to digitalize revenue and expense tracking. Many SMEs, points out London-based financial software firm Finastra, still prefer manual cashflow management over software. As well, “SMEs, unlike the larger corporates,” the firm shares, “do not have the expertise bandwidth or scale to invest in a comprehensive in-house banking infrastructure.”

Being less tech-savvy leaves SMEs in the position of having to manually validate transaction records, including payment reconciliation – crosschecking bank records and bills. A quarter of SMEs surveyed by retail payment service provider Pay.UK consider this a problem as they have to spend 3.6 hours on it weekly.

The diversity of payment methods, including by credit card, further lengthens the time needed for reconciliation, the Pay.UK survey adds, as it takes up extra time to upload these records to the accountancy system. And, for larger SMEs, this process can take up to 40 hours a week.

“Not only does this represent a significant hidden cost, similar to that of reconciliation,” the survey notes, “but it also represents a large diversion of time from running the business.”

Software inadequacies

Facing the grind of mundane calculation and cross-checking, SMEs tend to rely on external software or digital banking solutions to lessen their burden. However, even these applications could be better.

And while common cashflow-related analysis, including that involving insights, prediction and visualization, is widely offered across different business financial management solutions, a Deloitte report on digital banking for SMEs finds, these solutions deal almost exclusively with cash management. Invoice management, which SMEs are also looking for, the report adds, is only available in less than 50% of these banking solutions. The percentage is even lower for that of expense and travel management.

“The tech market provides many choices for financial management,” Davis Chan, CEO of KPay, a payment solution provider based in Hong Kong, tells The Asset in a video interview, “but a consolidated platform with all necessary functions is missing.”

KPay, which has served more than 30,000 SMEs in Asia since 2021, has developed a one-off point-of-sales (POS) solution addressing payment collection, accounting and financing that aims to reduce the time and labour required to complete these duties.

“Many SMEs,” Chan shares, “are still tracking the spending through Excel or Google Sheets [spreadsheets].” But the proposition of using fintech to ramp up the business has gained traction in Asia, facilitating KPay’s expansion. In Hong Kong, KPay’s client base has tripled, and gross process volume has grown eightfold between 2021 and 2023, while Singapore’s process volume has also experienced a rapid increase since the solution landed.

Faster monitoring

The SMEs that Chan has had contact with, he notes, have been searching for the most suitable financial management tools that meets their needs, which has made them very skilful at adopting new software like KPay.

Although deploying specialists to onboard new KPay users is inevitable, he adds, young Asia SME owners, as opposed to some of the more elderly ones, generally have the knowledge to use KPay without encountering any hurdles or tech hiccups afterwards. “It is just in the area of regulation that we need to localize and make fine adjustments.”

Still, despite the higher cost that comes with change, KPay’s survey of merchants finds that there is a demand for a faster system to more closely monitor cashflow and costs. “Every second is important,” Chan states. “SMEs need the easiest and simplest system to track their businesses.”

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