Why Embedded Accounting Is Critical for Small Business Survival

Digitization of the workplace has brought with it the ability to streamline processes and create flexibility for workers and business owners. This is a good thing. However, small business owners often miss out on many of the opportunities brought about by technological advancements.

As I discussed in an article last month, the report by Cornerstone Advisors, New Revenue Opportunities From Embedded Accounting shows that revenue and cash flow are the most critical factors for small business owners trying to survive in the early years. But without good accounting practices, these issues can rarely be overcome.

Managing finances has remained challenging for small business owners as the rest of the business world digitizes and streamlines accounting processes. According to the U.S. Bureau of Labor Statistics, 1 in 5 small businesses fail in the first year due to poor financial management and lack of capital.

Small Businesses Struggle with Poor Accounting Practices

Sadly, 52% of small business owners still do their bookkeeping on spreadsheets and aren’t inclined to open a complex QuickBooks account.

Of course, hacking and hustling whatever is possible is a great way to kick a great idea off the ground, but you can’t grow a business with spreadsheets. You can’t show up at a bank to get financing approved with a spreadsheet. Banks require proper financial reports that make business owners look like they know what they’re doing and have a high potential for success.

What Leads to Small Business Failure

Not using good accounting software to track business expenses and generate clear reporting often leads new business owners to be misinformed about their true status. They frequently think they are making more money than they actually are because they confuse revenue with profits.

It’s hard to imagine how anyone can succeed in business if they don’t understand the basic and very important difference between revenue and profit, yet it’s quite common. Unfortunately, this is not something schools typically teach. But when you look at how many people will run a business at some point in their lives, business finance should be a mandatory part of general education at every high school.

How Fintech Can Help

Business owners, particularly small business owners, know their market, and they know their business. Few have business finance training. They don’t necessarily know what they need. And they don’t know what they don’t know.

Small businesses generally do unique things, such as innovating in a market, and regular accounting software doesn’t fit what they do. However, providers of fintech software for specific verticals do understand — and they can simplify accounting for small business owners by providing the needed software within their platforms.

At Hurdlr, we make it easy for fintech providers to give their customers everything in one place by seamlessly adding our white-labeled embedded accounting solutions to their own platforms.

No one wins when a small business fails. Small businesses provide jobs, innovate within verticals, and make up a significant part of a healthy economy.

I encourage anyone who provides software or platforms for small businesses to download and read this recent report by Cornerstone Advisors, New Revenue Opportunities From Embedded Accounting. When a small business survives, we all benefit, and it is in our best interest, especially the vendors who serve them, to ensure they survive and grow.