How to Use Fintech to Manage Small Business Finances

Small businesses, which refer to enterprises whose annual revenue and number of employees fall below a certain threshold, account for over 99% of U.S. businesses as of last year. But how is it possible that businesses known for having fewer than 500 employees and $7.5 million or less in average annual receipts comprise such a large percentage of the business population?

Well, there is a strong likelihood that financial technology (fintech) is to thank for the growing role in small businesses’ rise. Historically, one of the most frequent reasons for small business failure is due to cash flow problems, such as poor expense management or outstanding invoices. But the innovation of financial technology services is changing how small businesses manage concerns with cash flow. Fintech provides solutions that enhance the efficiency of financial processes, allowing small businesses to streamline their operations.

Let’s take a look at how small businesses can utilize the rapid and continuous advancements in fintech to better meet their financial needs:

1. Maximize Your Business’ Finances With Online Banking Technology

Seeing as small businesses have fewer employees, thus a smaller payroll, and less annual revenue than larger corporations, it’s not uncommon for small business owners to use their personal bank account for their business’ finances. But a crucial part of successfully managing the finances of a small business is organization—and fintech can help.

Before any bookkeeping can begin, proprietors should open a separate bank account solely for their business’ finances, and be selective when doing so. Many small businesses opt for bank accounts with mobile features to manage finances in real-time and gain a competitive advantage in what seems to be an increasingly cashless society.

Although, as an entrepreneur, you may want to control your finances with second chance banking. Your personal credit score can play a large role in determining your business’ credit score, so having a banking account that doesn’t conduct credit checks can substantially help your small business in terms of your ability to secure a business loan or get proper funding for your business.

2. Use a Crowdfunding Platform to Help Get Financing

Technology doesn’t only help businesses manage their finances; It also helps them acquire finances. For example, crowdfunding is a popular method for small business owners to start, grow, and sustain their business. Instead of seeking capital from investors, a crowdfunding platform can provide small businesses with the necessary funds to kickstart their venture.

Instead of taking on debt, paying costly interest rates, and potentially damaging your credit score with a small business loan, crowdfunding can serve as a more feasible avenue to obtain money for your business when first starting out. In today’s digital age, there are numerous platforms that can supply small businesses with monetary contributions to fuel their efforts when first starting out.

Crowdfunding also provides indirect financial benefits by increasing your business visibility, which is especially helpful if you have a tight marketing budget. Some platforms even offer marketing and design resources from their internal teams that your small business can utilize.

3. Automate Your Business’ Billing and Payment Process

Electronic billing services, online payment methods, and invoicing software are just a few of the additional ways fintech is working to diminish financial obstacles for small businesses. Collecting timely payments is essential as you grow your small business. Still, businesses often experience difficulties with late payments from customers, affecting their overall cash flow and hindering financial operations.

Luckily, implementing financial technology that automates your billing payment process helps you better understand and monitor your business’ accounts receivable. Instead of wasting time mailing paper statements or waiting to get an invoice paid, automation allows you to generate and issue invoices electronically.

Aside from improving how you track your business’ unpaid and paid invoices, processing invoices online enables faster payments by allowing customers to pay anytime via mobile devices or computers. You can also choose to create recurring invoices with a card on file, set auto-reminders, and even send receipts via email or text message. Aside from customer convenience, technology also reduces human error, creating stronger customer relationships in turn.

4. Simplify Your Business’ Tax Preparation with Software

Taxes are taxing—pun intended. And despite their modest size, small businesses are not exempt from business taxes. As a small business entrepreneur, you may not know where to begin when tax season rolls around. Alas, fintech is here to help again.

There is much to know when it comes to business taxes. It can be difficult to decipher between the various types, including income taxes, estimated taxes, self-employment taxes, employment taxes, and excise taxes. To reduce the chances of filing incorrectly, minimize tax liabilities, and maximize tax saving, take advantage of affordable tax software designed for small businesses.

Many of these offerings will help with tax-related calculations for your business, gather and manage tax documents, and automatically prepare and file your tax returns. Some also offer features like access to live support from tax professionals and the ability to track your business’ tax filing status for added peace of mind.

Technology is ever evolving to make our lives easier by automating simple processes. Fintech is one of the main ways that entrepreneurs and small business owners can utilize technology in order to ensure financial success. Fintech allows you to automate different facets of your business like invoicing and general financial tracking. Using technology will help you cut cost in the long run, making your business more profitable.

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