Over 80% of businesses fail because of cash flow problems. The vast majority of these failing businesses are micro, small, and medium-sized enterprises (SMEs) and they number in the millions. These businesses matter and when they fail, the outcomes are invariably bad for everyone. Failure rates for SMEs are notoriously high at the best of times, but whilst in the grips of Covid, the last two years have been brutal.
Over 11% of UK SMEs fail every year, but why?
Each business has its own story to tell, giving us plenty of unique reasons to fail – but with or without a global pandemic, cash flow problems are the major theme. Being able to pay the bills and balance the books is the cornerstone of business survival. Most businesses don’t employ senior finance personnel, and this tends to leave cash flow management to overworked business owners and managers. Businesses may have external accountants and bookkeepers, but they are not involved in the day-to-day rigours of cash flow management.
Accounting packages. The good, the bad, and the ugly
Accountancy help is at hand for SME owners and managers trying to stay on top of their finances. The growing sophistication of accountancy software and its accessibility means that 64% of businesses now have access to an accounting system. This software enables accounts to be interrogated, and, when linked with a business bank account, provides invaluable insights into a business’s financial health.
The downside is that it can be both complex and time-consuming to navigate around accounting packages to gather the information needed to gain a clear view of the cash flow position (including the all-important creditor and debtor positions). Many SME owners leave accounting for ‘when they have time’ which may mean a few rushed weekend moments. Yet making rapid and informed decisions ‘in the moment’ is often critical to survival, especially when a business is under cash flow pressure (and most are).
“As a number of studies have shown, business owners and managers without financial literacy are more likely to have businesses that fail.”
It’s not just about finding time, existing financial tools and accounting software packages require a degree of financial literacy. Not everyone who runs a business can readily reconcile payments or understand the impact of an outstanding invoice on their receivables. As a number of studies have shown, business owners and managers without this financial literacy are more likely to have businesses that fail (even if their core product or service is good).
Often a business owner has a question they can express simply and naturally: “Have they paid me yet and what do I owe this week?” or “Have we got enough cash to run payroll this month?”, but standard accounting packages are not equipped to function in the way a human might. Users of accounting software packages are required to adapt the way they naturally think. They must break down requests into logic and search for specific information.
Why chatbots aren’t the answer
In order to provide a more intuitive service, there have been attempts to provide business owners and managers with tools that can be used ‘on the go’ to provide instant access to key information. One promising area of advancement has been chatbots. These are automated services that enable businesses to ask questions 24/7, rather like live webchat, but much more responsive.
Sage, a leading accounting software company, launched Pegg, a chatbot that set out to enable businesses to access information quickly and with greater ease than logging in to their accounting package. This text-based chatbot promised much. However, Pegg has consistently struggled to understand even the simplest of questions when typed in conversational ‘chat’ form. For this reason, uptake for the product has fallen far below expectations.
“If chatbots have been unable to cut the mustard in accountancy, action.ai’s conversational AI technology tells a very different story“
The simple and disappointing conclusion is that the chatbot technology used to understand what people say has not been fit-for-purpose, even from the key players in commercial accounting. The tech has also been text-only which limits appeal and puts the brakes on spontaneous use.
Have a word with conversational AI for stress-free accountancy
If chatbots have been unable to cut the mustard in accountancy, action.ai’s conversational AI technology tells a very different story. As pioneers in machine learning and computational linguistics, action.ai has now made it possible for business owners and their managers to ask accountancy-related questions to an intelligent virtual assistant that is available to them 24/7. Combined with state-of-the-art conversational Ai, the technology integrates seamlessly into accounting packages and bank accounts to enable convenient and comprehensive cash flow interrogation and control.
This type of accountancy is no less than a game-changer for SMEs. Finance-related interrogations are understood first time, every time – however business owners or managers choose to communicate them. No complex menus or financial terminology are required, users can simply express themselves and get the information they need whether via a phone call, mobile app, or instant messenger. Questions like “how’s the cash looking and who owes me money and how much?” or “what’s my oldest outstanding invoice and how much is it?” can be answered simply and instantly. Whether driving their car, standing in a busy storeroom, or sitting at home, business owners now have critical information in seconds via a channel of their choosing.
“Better access to information promises better decision-making and
fewer cash flow catastrophes, which is great for everyone“
This new paradigm of communication between businesses and their accounting software has a huge positive impact on everyday operations and in times of crisis. It’s hard work running a business and managing cash, but now there’s an opportunity to make it not just easier, but less stressful too.
It is too early to know what impact any new variants of Covid may bring or any resultant increase in restrictions will have, but the likelihood is that more small businesses will be under severe cash flow pressures. Whichever trajectory the pandemic takes, its continued impacts suggest that the market need for assisted accounting will grow. Better access to information promises better decision-making and fewer cash flow catastrophes, which is great for everyone – business owners, employees, customers, suppliers, and the economy.
