How small businesses are benefiting from open banking-driven cloud accountancy

In our latest Open Banking Impact Report, we share unique new research into how small businesses are utilising open banking-driven cloud accounting services.

We set out to understand how these services are changing the way in which the UK’s small firms manage their business and whether this is leading to improved efficiencies, insights, and cost savings as a result.

Business attitudes to open banking-enabled services
We believe this is the first time any quantitative research has sought to understand small business attitudes to these open banking-enabled services, which is possible for the first time given the growth in adoption.

Our independent research agency interviewed 904 users of cloud accounting packages to understand in detail their day-to-day experience of this software. More specifically, we wanted to explore the role that open banking has played in the adoption of cloud accounting.

We’re pleased to reveal that there are some very positive outcomes, which show that these services are delivering considerable benefits to the small businesses that adopt them. For full details of our research, view the June 2022 Impact Report here.

Open banking has become a critical component of cloud accounting
Although cloud accounting services pre-date open banking, it’s helpful to note that 75% of users started using the software less than three years ago, with 36% having adopted it within the past year.

More significantly, 72% of respondents cited the ability to connect to a bank account as an important feature of their service, and 58% regarded the availability of real-time transactions – an integral part of open banking connections – as important.

Snapshot of financial position
We know that many small businesses find it hard to accurately understand their current financial position. An overwhelming majority (77%) of respondents reported that they now have better visibility of their financial position at any given time as a result of using these services.

Cloud accounting users are positive about the service
Small businesses of all sizes have positive experiences of using cloud accounting software, with 87% of respondents indicating that they will continue to use the service.

And although cloud accounting represents an additional cost for many tightly-squeezed small businesses, a large majority (79%) also believe the service offered good value for money.

Users find it easier to interact with their accountants
As trusted advisers, the recommendation of their accountants plays a key role in small businesses adopting cloud accounting, and 73% of the firms we surveyed agreed that using this software made it easier to collaborate with their accountant.

These results are even more marked when looking at larger and more complex businesses – 76% of businesses with five to nine employees agreed with this statement, as do 78% of businesses with a turnover exceeding £500k.

Supporting efficiencies and profitability
It’s clear that using cloud accounting software has helped small businesses feel more efficient and 84% of the firms we spoke to agreed with this statement.
When we explore these efficiencies in more detail, we can see more specific benefits.

• Late payments – 70% of businesses said they saw benefits in the management of late payments, a long-standing challenge for many firms and one that they find hard to track.
• Cost savings – some small businesses suggest that cloud accounting services are saving them money: 59% said it had delivered internal savings and 64% external cost savings.
• Reduced reliance on external accountancy support – 44% of small businesses reported that their use of the accounting software means they no longer need external accountancy support.

These are important ways to help businesses feel more productive and profitable – a key aim of the 2021 Kalifa Review.

Rob Burlison, Director of Corporate Affairs, Global at Intuit, makers of small business accounting platform QuickBooks, said: “Intuit QuickBooks welcomes the OBIE’s Third Impact Report exploring the role of accounting software in the UK.

“Open banking is super-charging real-time cloud accounting which supports small business cash flow planning, streamlining business administration and helping them get paid quicker.

“The success of open banking in the UK merits consideration from governments around the world as they decide how best to roll out their own versions of open banking.”

Recent research from the Federation of Small Businesses found that 72% of small businesses struggle to accurately forecast their earnings for the year, suggesting that these new insights are particularly valuable.

The ability to calculate tax and VAT, to share information with their accountant and the availability of real-time transaction data were also rated as valuable features of the software by our respondents.