Revolutionising Cash Flow Management for Small Business Success in Asia

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From the mom and pop restaurant to the fledgling fintech start up, small businesses are the beating heart of Asian economies. They employ a majority of the population and contribute anywhere from 17 to 50 percent of GDP in nations across the Asia Pacific.

But SMEs face a tough reality. Every month, businesses have to contend with unpaid invoices and late payments. In fact, 9 out of 10 small business owners we encounter here at Xero have clients who do not pay on time. That’s a major problem, as cash flow is the blood flow of these companies. A blood clot is rarely a good thing! Time and again, we read reports that poor cash flow is the most common cause of failure among startups and SMEs.

Gaining access to working capital is also a challenge for small businesses. SMEs typically do not interact with financial institutions until they have a problem, such as when their finances are in a dire state and they are in need of loan. Often they are unable to get the full loan quantum as a result of outdated financial reports or simply not meeting the credit criteria.

In Singapore alone, these barriers to financing have created a funding gap for SMEs worth as much as S$20 billion.

Bringing SME banks and fintechs onboard to increase financial visibility

At Xero, we’re committed to helping small businesses and their advisors by making the accounting process more transparent and efficient. SMEs can leverage Xero to automate bank reconciliation, accounts management and keep track of their financial health.

With the expansion of our financial web and the launch of open banking API, banks and fintechs can integrate with Xero’s platform more quickly and securely, with minimal development, to provide real-time bank feeds to small businesses.

It is noteworthy that more than 180 financial institutions have existing integration with Xero.

We are very proud of these, but they were custom-built, requiring specialised development and much time and coordination between Xero and the partner institution. The integration process has now become much simpler and efficient for all parties with the new open banking API.

In Hong Kong, we’ve established partnerships with DBS and HSBC for bank feed integration. This is in line with the Hong Kong Monetary Authority’s move in July to launch an Open API Framework as part of its efforts to usher in a new era of smart banking.

We have also rolled out partnerships with the key local banks in Singapore—Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC), and United Overseas Bank (UOB)—to better serve the local SME community.

As a result, SMEs in Hong Kong and Singapore can view direct feeds from their bank on their Xero books, with much of the manual work of reconciling transactions now automated. This provides them up-to-date financial data at their fingertips, anytime, anywhere and on any device and hopefully improves their ability to manage cash flow more accurately and efficiently.

Improving cash flow management with NETS e-invoicing and DBS IDEAL

Singapore users will now also be able to issue e-invoices, as well as track and receive payments made through PayCollect, an electronic collections platform developed by NETS.

By expanding our payment options, we can help our customers in Singapore receive payments 32% faster. This is super powerful when you are a small business owner as you will have better cash flow and liquidity to run your business and scale at ease.

This is on top of more than 20 payment service providers that are already available for integration into Xero, so users can bring their entire billing cycle online, get paid more quickly, and reconcile accounts with ease.

Come early 2019, there will be enhancements to the Xero-DBS integration where small businesses will experience a more streamlined payment with the ability to send payment instructions directly from Xero into DBS IDEAL. This will bring about a better user experience and real-time payment status notifications which will significantly improve cash flow management for existing Xero-DBS customers in Singapore.

Improving access to working capital

Another promising facet of the open API is the ability to bring onboard traditional and alternative lenders. For example, in Singapore, Xero has partnered with InvoiceInterchange, Moolahsense, and Validus Capital—all fintech companies aiming to fulfil the unmet financing needs of SMEs.

By providing lenders accurate and real-time data on a business’ working capital and accounts, the Xero platform will speed up the process of making an accurate credit decision. This can allow SMEs to get loans that suit their needs, whilst not overextending themselves more quickly.

Seeing the bigger picture and planning for business success

It’s extremely convenient to be able to send out e-invoices, track and receive payments, and reconcile financial data all in in one platform, with many automated steps in the process. But more than easing the bookkeeping and accounting burden on business owners—and providing accountants a better quantity and quality of data—the benefits of the open API can help SMEs improve their bottom line.

Insights gained from having a real-time overview of the company’s financial data will guide owners in making crucial business decisions. They’ll be able to analyse their business performance and financial health without having to rely heavily on their accountants. They’ll also be able to identify trends and establish benchmarks and KPIs for the business, and from there, plan for business growth and expansion.

This will be a game changer for small businesses. SME owners will now be able to easily and securely understand their financial position, allowing them to improve cash flow, get paid and make payments quicker, and access credit when it is needed.

And as SMEs grow, Xero will be right alongside them, supporting their growth by enhancing their ability to track, analyse, and manage their finances.

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