By Pauline Green, Head of Product Compliance & Programs, QuickBooks
Talent acquisition, investment and long-term growth remain major challenges for small and medium-sized businesses (SMEs) partly due to limited access to financing. With fewer long term lending options available, many SMEs are forced to rely on short-term credit solutions to cover essential costs. A recent survey illustrated the scale of the issue, finding a third (33%) of small businesses in the UK had charged over 25% of their monthly expenses to credit cards in the last 12 months.
As small business owners in the UK navigate economic shocks, market fluctuations and monetary policy shifts, it’s perhaps no surprise that adoption of technologies such as artificial intelligence (AI) has fallen down the priority list.
While focusing solely on short term survival may be tempting, SMEs that take a long-term view on AI today are the ones best positioned to reap its benefits tomorrow. In this article, we’ll explore the top three benefits AI tools offer SMBs for better financial management, as well as potential challenges when it comes to adoption.
Getting ahead of the game
AI and Machine Learning (ML) tools are already providing value to SMEs by offering significant opportunities for scaling and growing operations. By automating administrative tasks, these tools enable business owners to spend their time where it matters the most: with their customers. However, the proportion of SMEs in the UK currently investing into AI and machine learning tools remains low (11%).
After COVID, small businesses significantly increased their use of credit cards, but the rate of repayments did not keep pace, resulting in higher outstanding balances. When inflation swelled, leading to increased rates of interest, these balances continued to grow, leading to a substantial increase in interest expenses. The average monthly interest payments increased within a really short timeframe, leaving businesses little time to prepare.
The result. Less cash to invest in new technologies. Yet, for those SMEs in the UK that have invested, over half (58%) agree that digital tools have already made a difference when it comes to improving efficiencies across the business.
By starting small and integrating AI-enabled tools into their existing workflow, SMEs can gain reassurance and confidence in the technology and what it can deliver. For instance, AI can help to maintain healthy cash flow by sending out automated reminders for late invoices and tagging those that need immediate action. Business owners don’t need to burn the midnight oil sifting through seventy low-priority invoices when those that are overdue are easily identifiable. This is a gamechanger when you consider UK SMEs waste 56.4m hours a year chasing late payments.
The steps for effective AI implementation
Many SMEs may already be leveraging AI and Machine Learning in their daily operations without realising it. From AI-driven search engine summaries and automated customer support chatbots to predictive analytics in financial software, AI is increasingly embedded in everyday business tools. However, to maximise its benefits, SMEs must shift from passive adoption to strategic implementation. SMEs must develop more of a conscious understanding of AI to ensure it is always deployed with a clear business objective rather than as a superficial add on.
One area where AI is making a significant impact is in embedded financial management solutions, which seamlessly integrate AI-powered analytics, automation, and decision-making tools into business workflows. These solutions help SMEs gain real-time financial insights, automate invoicing and expense tracking, and improve cash flow management. By leveraging AI-driven forecasting, businesses can anticipate financial challenges before they arise and make proactive adjustments to optimize profitability.
AI technology is emerging as a crucial buffer, enabling small businesses to adapt swiftly to challenges and shifting economic conditions, making them markedly more resilient.
Accountants and the journey to digital transformation
With 99% of accountants in the UK already using AI to support their clients, accounting firms are rapidly becoming a valuable source of guidance for SMEs, particularly those without dedicated IT expertise. Accounting firms can help SMEs make informed decisions about their digital uptake by identifying areas across the business where AI is likely to make the most impact.
For example, AI models can simulate multiple financial scenarios based on different variables, such as market conditions, customer demand, or supply chain disruptions. SMBs can use these simulations to prepare for potential risks and adjust their strategies proactively. AI can also play a crucial role in providing SMEs with a high-level overview of their cash flow, automatically distinguishing between allowable and disallowable expenses, while identifying opportunities for cost reduction.
It might be time to speak to an accountant about your borrowing too. Financial management systems help get your accounts in order so you are more appealing to lenders. So before embarking on refinancing, seek some advice about the best options and ensure you can present your business as low risk. Our recent report helps explain the standing of different banks when it comes to borrowing. And remember, what you save could be put to good use in AI-enabling your future.
* Based on U.S. Intuit Assist Beta customers using outstanding invoice notifications and AI-drafted invoice reminder features, compared to customers sending standard invoice reminders to the same customers, from January 2024 to August 2024. Not available in QuickBooks Online Advanced.
