• Managing Cash Flow
    • Make & Receive Payments

Why digitising financial management is not just for large companies

  • 5 minutes
  • Article

The advent of open banking has created a wide suite of solutions to help businesses of all sizes manage receivables and gain greater visibility into cashflow and liquidity.

One of the most beneficial aspects of digitalisation for businesses is that it can be a great equaliser. Systems that were once built meticulously, either in-house or by contracting specialised technical resource, in specialised treasury functions, can now be bought off-the-shelf or are integrated solutions within bank owned and agnostic platforms. This evolution has enormous benefits in efficiency, particularly to the finance departments of Small and Medium Enterprises (SMEs).

As companies scale up, their financial management needs change, sometimes incredibly quickly. Budgets and cash forecasts grow more complex, trading partners multiply and gaining a clear view of liquidity and cashflow at any point in time becomes more challenging.

But since open banking fully launched in 2018, the use of open APIs has become more prevalent and allowed banks and third-party developers to build new applications and services for transaction management and greater financial transparency at a phenomenal rate. More importantly for SMEs, it has also democratised access to these solutions. Alongside complete platforms, banks and other providers now offer multifunctional solutions that companies can pick and choose from. Within receivables management alone, for example, companies can now access a wide suite of options with negligible barriers for adoption, both in terms of cost and expertise.

Receivables: what companies need to know

According to Pay UK, one in four SMEs in 2022 reported high costs and lengthy times associated with manual reconciliation1. On average, SMEs were spending approximately 3.6 hours a week manually reconciling payments. Just under a third of SMEs (32%) experience delays in payments from customers, which often results in serious disruption at a day-to-day level; impacting cashflow and the ability to operate.

The opportunity to create cost and efficiency savings using digitalisation for receivables is huge. Not only does better receivables management offer these savings to businesses, but it also provides a simpler customer journey for clients and helps businesses to provide the most appropriate methods of payment for each client.

Breaking down barriers

The barriers to entry for digitalisation have crumbled with open banking, but the challenge is that digital solutions can often seem daunting, particularly when companies have established processes in place. Many companies know that technology can help them, but they’re unsure where to start. The right banking partner can make the world of difference in understanding what the customer needs and finding the right solution.

For example, a mid-size UK law firm approached HSBC with the problem that, as a law firm, it was under regulatory obligation to allocate any client money to the relevant account. But it was becoming increasingly difficult to see all of the relevant information from a sender of funds as the company grew. HSBC’s solution to the problem was to enable the customer to access virtual bank accounts through HSBCnet. Virtual accounts allow companies to give each of their clients a unique bank account number to pay funds into, quickly eliminating the challenge of identifying who has made the payment. However from a liquidity perspective, all funds received are aggregated in a single account.

“We looked for a banking partner that was going to work with us and help us to develop our business. It was as much about relationship capability as it was around pricing and technology. And HSBC were able to demonstrate market knowledge of a mid-size law firm’s banking requirements, but also a willingness and an ability to introduce us to other interesting parties. HSBC were able to demonstrate thought leadership in our professional services sector, which was something that we really wanted,” said the law firm.

Finding the right possibility

This is just one example, but the wide suite of options available means that it’s often a question of the art of the possible. Rather than one treasury platform that a company has to fit with, today’s solutions are about fitting the services to suit the company.

Another of HSBC’s clients is a retailer which is based in the UK, but has distribution centres in Europe. It needs to be able to be paid in Euro to make life easier for its customers, but wants the payments to end up in its British bank account. The answer in this case was to use HSBC Global Wallet, essentially a virtual account in a foreign currency that allows companies to receive payments like a local business.

Companies like this retailer and the law firm may have imagined that they were excluded from “treasury solutions” because they may not have a corporate treasurer. But the reality is that treasury is no longer a word that only applies to large multinationals. Whilst you may not be a Treasurer by title, managing a company’s cash forecasting and currency risk, invoice processing and payment reconciliation are all key elements of this wider role. Now receivables for companies of all sizes, and the solutions to support their management are much more readily available, with HSBC happy to support your business now, giving you a stronger platform for growth. At HSBC, our team of Global Payments Solutions Consultants are on hand to guide you through our solutions, making them fit your needs.

To find out we could support your receivables management, please contact your Relationship Director.

Eligibility criteria and T&Cs apply

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