Which bank is your favourite? Do you even have a favourite bank?
Actually, it doesn’t really matter, because embedded finance means you can focus on running your small business, and the banking just happens behind the scenes.
From your online accounting software, you can collect payments on invoices, and schedule payments for bills – without even logging in to your bank. And your customers can pay you quickly, easily, and securely without any extra work!
The money and financial information moves automatically and silently. You maintain full visibility, control, and security, as well as getting paid by your customers faster, and saving time on small business admin.
Embedded finance by any other name would smell as sweet
Clear Books has had a vision of how businesses will manage their financial data for many years – we published our predictions back in 2018. Our vision is of online accounting software as the central hub of your business finances – connected seamlessly to banks, lenders, payment providers, and other fintechs.
At the time we called it “centres of excellence” – fast forward to 2021, and that vision has become reality. It’s now called “embedded finance.”
What is embedded finance?
Embedded finance is when a financial service, like payments, for example, is embedded in a digital experience in a way that delivers new, innovative, and streamlined customer experiences. The financial services can include banking, payments, lending, investments, insurance, and more. They can be embedded in an experience where financial services haven’t been before.
An everyday example is when you get out of your Uber you don’t fumble with cash or have to pass your debit card to the driver – your payment is made seamlessly and automatically inside the Uber app.
For a small business, it’s easy to see the benefits, many of which we’re used to already. For example, Clear Books customers use bank feeds to get bank transactions into their bookkeeping software, and use payment integrations to offer easy and effortless payment options for their customers.
Better experiences for your customers
Embedded finance improves the experience you deliver to your customers, as well as how your business can work behind the scenes.
Your customer-facing interactions in the front-office are streamlined. Your customers can pay you with a simple click using integrated payment options like direct debit or card services. This means they can choose the payment option that suits them, your customer doesn’t have to rekey any bank details, and when the reference number is automatically included in the payment transaction, it makes it fast to reconcile the payment to their account, delivering them great customer service.
Your back-office benefits too. Take the invoice payment example above – you or your admin staff (if you have any) will receive payments faster from customers, have less back-and-forth following up on payment details, and enjoy quicker and more accurate matching of payments to invoices.
These baseline benefits are easy to see the value of. Beyond this, there are further layers of benefits embedded finance brings to your business.
How embedded finance delivers layers of benefits for businesses
Getting started with embedded finance is easy – which means getting the benefits is easy too. Like anything, the more you invest the more you can benefit.
The benefits from embedded finance come in layers:
Layer 1: Baseline benefits
Automation of business admin means it takes less manual work. This means less effort, less time and ultimately less cost is spent on managing the day-to-day paperwork. Take Clear Books automated bank feeds as an example – instead of having to manually upload bank statements – they automatically appear in our accounting software.
Automation reduces the chance for human error, and all the resulting costs and rework associated with fixing errors. The old adage “a stitch in time saves nine” rings very true here.
Layer 2: Information and insight benefits
Information is powerful. When your business has up to date information to hand, you get greater business oversight. When you know that the quality of your accounting records is high, and you can easily access that information, you can quickly make better-informed business decisions to outperform your competitors.
Insights are even more powerful than information. By getting an at-a-glance view of your business finances, such as from the traffic-light cash health insight on the Clear Books dashboard, you don’t need to go looking for the information – it’s ready for you.
Layer 3: Action benefits
Insights are most impactful when they also suggest possible actions to take to respond to the insight. Imagine a scenario where your traffic-light cash health insight is red – you’re at risk of running short on cash. The next natural step is to consider what loan options might be available to bridge the gap. Because loan searches are embedded within Clear Books online accounting software, you can launch the search immediately from the insight, and see the loans that are best suited to your own business’ circumstances.
Layer 4: Next-gen benefits
Beyond actionable insights, the sky’s the limit.
Imagine full automation like the sweeping of cash into a savings account to maximise your interest earned, or sweeping of cash into your overdraft to minimise your interest paid.
Imagine automated bill payments that ensure you benefit from early payment discounts while not paying too early therefore maximising your working capital.
Imagine a customer payment was due but hasn’t come in yet, and your accounting software shows your bank balance is dipping. You’re now short on funds to make your payroll next week. Your accounting software presents this insight, and your options: send an automated chaser email to the late-paying customer with an easy click-to-pay button, or easily apply for a loan. You choose to do both, eliminating your payroll headache.
That’s the power of embedded finance.
Clear Books online accounting software and embedded finance
Clear Books has been at the forefront of embedded finance. We have offered bank feeds since they were first available, and we have led through the transition to the new industry standard open banking bank feeds.
With our leading payment integrations, we let your small business offer easy card payments to your customers, as well as to set up and take direct debit payments. Beyond that, we have impressive invoicing features that make the whole process a delight for your business and your customers. When the experience is a delight and the payment is seamlessly embedded, you’d never consider any other option.
Paying bills and business expenses has been easy with Clear Books since long before API integrations were available. Back in the day, our bank export files were the best way to extend our great expense and bill tracking features while the financial institutions caught up. We continue to push the space forwards; now your business can scan receipts with our mobile app and create draft payments for bills and payroll directly into your bank account.
You can trust Clear Books with your HMRC submissions, and all the tricky compliance behind them, including that all-important digital record keeping and digital links to ensure you’re Making Tax Digital compliant. Clear Books has been submitting VAT returns digitally for years, and was one of the first to roll out Making Tax Digital for VAT to customers. We also support many other digital taxes including payroll RTI calculations and submissions, and Construction Industry Scheme reporting for those in the building and construction industries.
Your online accounting software is your hub
Your accounting software is the central hub for your business that reduces your small business admin and headaches. It is the “center of excellence” that your bank and business finances are embedded into. Regardless of your bank (and whether they’re your favourite), you’ll be enjoying your favourite accounting software several times a day.
If you’re not using embedded finance in your small business today, you’re missing out on every layer of benefits we looked at earlier.
Ultimately, embedded finance in your accounting and bookkeeping software frees up your time to spend it how you want, instead of doing business admin. If that means more time to think about how to grow your business, more time innovating on new products or services, or more quality time spent with your family or friends – embedded finance is your path
The future is here – but this is just the start
We’re not done yet – and neither is the industry. Embedded finance will continue to develop and Clear Books will continue making waves as we push ahead to offer the easiest to use bookkeeping tools for your small business – no matter which bank is your favourite.
David Carr is CFO and Head of Product at Clear Books.
Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances. All users benefit from the outstanding free telephone and email support. Clear Books was launched in London in 2008 and offers a free 30 day trial with free ongoing support and bank feeds. We’re rated as ‘Excellent’ on Trustpilot.