It is safe to say that this year was not what any of us had anticipated. For some that has presented opportunity – the chance to streamline, to revisit remote working practice and to further invest in technology.
In a recent report by Xero, the top 10 trends of 2020 were identified, based on the experiences of 2.3 million small business subscribers. The lessons that emerge from the research pivot on adaptation and resilience and are likely to continue into 2021.
In this month’s Fintech Friday, we look at 5 of those top 10 trends in more detail.
“Seeing into the future is hot right now”
Xero reports that 70% of business owners have experienced cash flow difficulties at some point (Xero, 2019, Needs Beyond Accounting). Unsurprisingly, it was the most searched for tool in Xero’s app marketplace in March and April of this year. Cash flow forecasts are a key business tool for projecting income and expenses, to help businesses manage shortages. If you do not already prepare them, we urge you to consider doing so. Ideally you should be looking at an annual forecast (which would cover the VAT due in the next year etc) as well as a 13-week rolling forecast to cover your short-term requirements. While your cloud accounting software will provide basic cash flow information, most businesses would benefit from a more sophisticated cash flow tool. To help with this, we can work with you to identify and apply the most relevant forecasting app and to help to interpret the output, so that you are better armed for what is to come in 2021 and beyond.
“Rainy day funds are going to bulk up in 2021”
If the pandemic has taught businesses one thing, it is the importance of a financial cushion to weather a downturn. We usually advise businesses to set aside an amount of cash to cover exceptional circumstances, depending on the size, sector or scale of their business. With 70% of small businesses expecting a decline in overall revenue for 2020 (based on a study commissioned by Xero and conducted by Forrester Consulting, Oct 2020), it is likely that we will start to see more emphasis on contingency in next year’s budgets.
“Business relationships will get a whole lot more love”
Has there been a point in the last 9 months where you have relied on the goodwill of a supplier or a customer to benefit from a bit more flexibility? Or have you been the one being flexible with customers around payments, or suppliers around timescales? Small businesses have benefited from being more agile in the face of adversity. 93% of consumers said they would buy more from, and recommend, a business that showed empathy toward the community (Forrester study, 2020). As a result, we are highly likely to see continued cries to ‘support local’ as we move into 2021, with more value being put on personal relationships. For our part, we have enjoyed more regular contact with clients during the pandemic, which has given us the opportunity to be even more proactive – something we will be taking forward into 2021.
“Remote working will become even more of a thing”
This one is hardly a surprise, as across the UK many businesses were given a matter of days to accelerate remote working practices (if not already in place) prior to national lockdown. Across our own client base, we have seen that businesses that run their finances via cloud-based software were better placed to deal with the impact of Covid. This is backed up by Xero’s study, which reveals that users of at least one other business app alongside their Xero software suffered 12% less revenue loss than other businesses, whilst those that used five or more other business apps suffered 33% less revenue loss than other businesses. With the right management and the right technology-led solutions, 2020 proved that remote working did not equate to less productivity. For those in roles which enable them to work from home, many have not returned to their office-based desks since March. When viewed alongside the cost savings, the uptake in homeworking is sure to remain favourable to businesses – or at least a hybrid variation of it.
“Selling online will be all the rage… again”
During lockdown, up to 58% of customer spend happened online. And businesses said online sales accounted for 12% more revenue than normal (Forrester study, 2020). It is no wonder, then, that we have seen a steep rise in e-commerce adoption. Take, for example, local restaurants that have developed ‘cook at home’ kits to sell online whilst they have been unable to welcome footfall to their restaurants. Or a North West-based B2B giftware supplier that launched a B2C offering via Shopify to capture sales directly to consumers, whilst delicately balancing the needs of their existing customers at a time when retail units were forced to close. The app marketplace is brimming with tools that make it easier than ever for businesses to reach customers via e-commerce – a space that will no doubt continue to grow in 2021.
Looking forward to 2021
If these trends highlight one thing, it is the importance of agility. Back in April we blogged about ‘pivotal moments’ and the importance of responding effectively to survive when things don’t quite go to plan. That must be one of the biggest lessons to come out of 2020 – business resilience stems from the agility of business owners, and business owners are able to be more agile when they have real-time information to make informed decisions. The threat of the pandemic may fall away next year, but the necessity to be open minded as a business owner and to adapt at a critical juncture must remain.
How can we help?
If you are thinking of reviewing your processes and transforming your finances in 2021, contact our digital advisory team or call 0161 905 1616 for a no obligation chat.