Digital tools help small businesses master their money

Technology can be a game-changer for small businesses, especially when it comes to managing money, where greater levels of efficiency and accuracy can yield remarkable results for your business’ bottom line.

While there are still many barriers to South Africa’s small and medium enterprises (SMEs), they are steadily adopting technology and transforming digitally.

There has been a proliferation of digital solutions and small businesses now have many different tools that are scaleable, easy to use and cost-effective.

The Business Partners Limited SME Confidence Index, a quarterly report based on a comprehensive survey of the local SME ecosystem, has consistently found that maintaining a healthy cashflow is the number one challenge small businesses face.

Other finance-related challenges, such as access to funding and economic conditions, have remained among the top three hurdles that SMEs need to overcome.

These indicators highlight the importance of effective financial management, particularly during a business’s foundational years, as a key factor determining long-term success.

Cloud accounting leads the way

Small businesses rely heavily on the expertise of their accountants or financial managers for advice and guidance on how to run a sustainable enterprise.

In the past, financial managers were tasked with processing and analysing large volumes of data using manual processes. A substantial part of their work therefore involved admin-intensive duties related to aspects such as taxation, payroll and expense management.

With the launch of cloud accounting software, many of the manual tasks financial managers perform have been automated and simplified, giving them more time to focus on providing business executives with informed opinion and advice.

A recent report by Xero shows that SME’s adoption of digital tools such as cloud accounting has increased exponentially in South Africa, from 13% of SMEs in 2017 to 61% in 2020.

Platforms such as Xero and Sage are multi-tasking machines, using automation to perform tasks such as invoicing, expense tracking and reconciliation, and providing real-time insights into cashflow and profitability.

By eliminating manual data entry and human errors, small businesses can optimise their financial processes and focus on strategic decision-making.

Digital payments solutions

Another key development to watch is the rapid and large-scale adoption of digital payments solutions. In a relatively short space of time, it has become commonplace for micro- and small businesses of every kind, to make use of portable devices and cardless technology to process payments.

The adoption of technology such as SnapScan and Zapper, for example, has grown significantly, allowing small businesses to leverage greater levels of smartphone penetration on the local front.

Fintechs have played a vital role in the proliferation of these kinds of tools. Yoco, an African payments and software firm, for example, has seen dramatic spikes in SME interest and the usage of their payment devices across South Africa. Shoppers have grown accustomed to making use of Yoco devices to pay with their cards at almost every kind of business, from boutiques to spaza shops.

To this point, Yoco reported a 16% year-on-year surge in transaction volumes between the first half of 2022 and the first half of 2023. Subsequently, spurred on by the rising demand for its mobile payment devices, Yoco has grown its customer base to 350 000 local merchants.

Using these kinds of tools, businesses can offer their customers an unmatched degree of choice and convenience. This has played a particularly essential role in winning customer confidence amid growing levels of awareness around cybercrime and fraud. The more businesses can demonstrate both flexibility and security in processing payments, the more confident local customers will become in trusting this technology and using it more widely.

Expense tracking tech

Cashflow management involves two key processes, namely optimising the inflow of revenue and minimising the outflow of revenue. So, while it’s important for business owners to keep a sharp eye on aspects such as prompt invoicing, favourable supplier arrangements and diversified income streams, it’s just as important to stay on top of expenses.

Thankfully, technology can help with this too. Expense management technology allows business owners and employees to easily capture expenses through mobile apps or web-based platforms.  With features like receipt scanning and automatic categorisation, businesses can ensure accuracy as well as compliance with expense policies. By eliminating manual data entries, businesses can save valuable time and reduce the risk of errors, ultimately improving efficiency and productivity.

Some cloud accounting packages, such as QuickBooks, include an expense-tracking function that is designed to reduce the administrative burden involved with keeping receipts and matching them to transactions. Functions such as these are not only useful from a cashflow perspective but also come in handy when submitting tax returns.

Expense management technology therefore has a dual benefit of helping small businesses to streamline their financial operations and control costs.