Challenges abound for the small business. Not just the usual, like those of running a business in a competitive economic environment.
There’s the ongoing uncertainty surrounding the UK’s departure from the EU, the increasing prevalence and importance of digital technology, and the continuing issue of late payments from larger organisations.
As covered previously, Brexit is causing small businesses sleepless night due to the ongoing uncertainty about the eventual outcome of the ongoing political machinations in Westminster and Brussels.
Small businesses don’t know what it will mean for their prospects, including the viability of their supply chain, growth opportunities and general economic prosperity. This is a factor in why small businesses report falling revenue and are putting recruitment on hold. This has reached record levels, according to research by the Federation of Small Businesses.
The transition to digital technology for many business processes presents another challenged. While it offers many benefits to small businesses, such as lowering the barriers to accessing enterprise-class technology and capabilities, it also presents challenges in terms of transforming processes and policies.
For example, Making Tax Digital (MTD), the government requirement for small companies to submit their VAT tax returns online, means finance departments are having to adapt their processes to meet the requirements. This will continue when other business taxes are added in 2020.
While there are suggestions that MTD, like other digital technology developments, will bring productivity benefits for SMEs, it doesn’t take away from the fact that it requires small businesses to do things differently.
Related to technology, security is providing a challenge, with evidence that small companies are being increasingly targeted by cybercriminals. Two-thirds of companies with 10-49 employees suffered some form of cyberattack in the past year according to recent research, with a cyberattack costing, on average, £65,000 and phishing still representing the biggest threat (25 per cent of all attacks).
Then there is the persistent issue of late payments, often with larger businesses being slow to pay the SMEs that perform work for them. Small businesses have fewer financial resources to fall back on compared with larger organisations. Late payments can result in employees being paid late, suppliers being forced to wait for money they’re owed, and valuable time wasted by chasing payments.
While the government has proposed measures to help small businesses benefit from more timely payments – including empowering trade bodies to highlight best and worst practices to deliver practical improvements and promoting innovative technologies – the likelihood is that the late payment crisis could be a part of small business life for some time yet.
Another challenge to add to the pile, is that many small business owners also feel tax rules don’t work in their favour. Recent research by the British Chambers of Commerce found that 67 per cent of UK SMEs feel believe tax rules aren’t applied evenly and 58 per cent said the tax regimen is unfair to small businesses. In addition, 49 per cent said they are not given as much support to be compliant from HMRC as larger businesses.
Clearly, there is a lot for small businesses to contend with. But virtual banking can help.
With the prospect of some international markets becoming harder to deal with if the UK does indeed leave the EU, a virtual bank accounts’ ability to support multiple currencies and rapid international payments around the world, will be major advantage over more traditional forms of banking.
Thanks to being built on digital payments and designed to operate online, virtual banking fits well with other digital technologies. The functionality they provide can be easily integrated with other technology, making the financial side of digital transformation simpler to achieve.
Virtual banking also minimises delays by supporting mass payments (to employees or suppliers for instance), and provide an online and near-real-time record of payments that can be linked directly to suppliers and clients, giving visibility of where money is coming from and going to, meaning delayed payments can be easily traced.
This approach to banking also supports 24/7customer service, meaning issues can be resolved quickly, even if they occur outside normal business houses – something that is particularly helpful for small businesses dealing with customers and suppliers based in other countries.
While the challenges for small businesses will change over time, the flexible, cost effective and efficient way of managing business finances that virtual banking offers, will remain hugely relevant.