Virtual banking has many attributes – low cost, flexibility, convenience and speed – that help small businesses operate more efficiently and effectively. One of the wider consequences of this is that using virtual banking can contribute to businesses becoming more confident.
Business confidence is currently taking a battering. With the ongoing political and economic uncertainty surrounding Brexit, and other issues impacting small businesses, such as high business rates, late payments and costs associated with the minimum wage increase, small businesses would be forgiven for losing confidence.
According to recent research by the Federation of Small Businesses (FSB), 68 per cent of small firms do not expect their performance to improve over the next three months, while 41 per cent expect it to get worse.
The just-published quarterly UK small-business index (SBI) confidence measure stands at -8.8 for Q2 2019, down 22 points compared to the same period in 2018. This is the fourth consecutive quarter in which the SBI has been negative – it’s the most sustained slump since the index was launched in 2010.
Concerns have heightened around labour costs and regulation following the introduction of Making Tax Digital (MTD) in April, an increase in minimum wage rates, and higher pension contributions for employers. As a result, 71 per cent of small firms say the cost of running their business is increasing, with 48 per cent saying labour costs are a main cause, and 34 per cent saying regulation is the primary reason.
But whether it’s their ability to be sustainable, grow, diversify or innovate, or a combination of these goals, small businesses can gain confidence from the fact that virtual banking can support them in a way that traditional banking can’t.
Traditional banking for small businesses often has limitations in terms of costs and capabilities. Low initial fees for business bank accounts can rise sharply when a business’ turnover exceeds a certain level. And some less-standard services, such as making or receiving payments from outside the UK, can’t always be accommodated, or are available only with a high fee.
There is also sometimes a need to run new business activities or ventures by traditional providers. Virtual banks, on the other hand, let businesses get on with things without the need to secure approval or change their financial arrangements.
Virtual banking is a much more flexible option for small businesses. It means they can be confident they won’t be punished for success or for trying new things – such as expanding into international markets – and don’t have to limit their ambitions.
Businesses using virtual banking can also be confident that they know exactly how much money the business has at its disposal. Payment fees are typically deducted at source and virtual bank accounts are updated in near-real time, meaning businesses shouldn’t have any surprises and can see exactly how much money they have at their disposal at any given time.
This clarity and simplicity extend to how virtual bank accounts and services can be accessed and managed, with it possible to access them via any internet-connected device. And issues can be addressed when they need to be, thanks to 24/7 customer service.
Due to the efficiency of virtual banking, many financial tasks – such as payroll or invoice payment – can be completed much more quickly. This means employees can spend less time on day-to-day tasks and more time on tasks that can generate more value for the business. For example, working on diversification plans, investigating new opportunities or developing new products or services.
All of this should enable small businesses to be more confident in their business operations and in their ability to succeed in the future. And with Brexit still dominating the thoughts of many, the capabilities virtual banking brings should also help businesses be more confident that they can successfully overcome whatever challenges it brings.