The Fintech industry has witnessed steady growth in India over the last few years as digitization catches on across the board. While B2C Fintech has been a major driver of this growth with customers integrating the use of Fintech led solutions as part of their everyday transactions, B2B Fintech adoption is also picking up speed from both investors as well as end users in critical spaces such as spend management which involves digitizing the end to end cash flow process.
Fintech players are offering to help businesses through a range of tech based solutions that can improve the efficiency of accounting and operations by automating time-consuming, error-prone manual work. It shortens the turnaround times and provides for continuous accounting. Further, with modern spend management, teams work together cooperatively and experience an increased sense of accountability, ownership and agency with respect to their spending and their company’s budget. The benefits of streamlined processes, plus visibility and control, are felt across the organization and ultimately help finance leaders build better, stronger companies.
The role of technology in enabling efficient spend management
Technology in spend management works to solve a significant problem of efficient spend management for SMBs and mid market companies. It is often seen that smaller businesses that are part of the SMB (small and medium businesses) cluster or startup realm often tend to focus on managing expenses rather than spend. This often leads to difficulties such as cash flow issues, improper vendor and supplier management, loss of reputation due to delayed payments, and inefficient operations among others.
Hence, the necessity for adopting a holistic tech-based solution which epitomizes trust, transparency, ease of use and profitability. Spend management is a broader concept which focuses on optimizing expenses and collections of a company with a view to manage the business cash flow better. This concept works to examine each cost element of the business and works towards the best way to maximize it. Hence, the use of technology certainly provides a boon for all cash flow related matters across businesses especially the SMB’s.
AI and ML are now necessary tools for a startup to stay competitive and offer value to users. Fintech firms play a significant part in providing tech-based solutions for businesses. By having access to a plethora of data, they are able to develop ground-breaking products and significantly enhance those which are existing in the market. For instance, efficient use of clustering algorithms to define customer personas for better decision making.
Secondly, predictive modeling, AI/ML, and market analysis are the driving force for multiple aspects, from fraud detection, data security (authentication, encryption, transaction approval checks, right up to complete digital onboarding as well as management of invoices, payables, and expenses). Modeling for fraudulent patterns to track suspicious activity to avoid security threats even before they arise. Additionally, further leveraging ML to set up intelligence alerts and monitoring transactional volumes to best suit their workflows, processes, and various policies to underwrite and perform credit assessments.
The advancement in innovation and technology certainly aids in the collaboration of financial institutions with fintechs. As spend management matures as a focus area for several companies looking to cut costs and become more flexible, business leaders are looking to shift away from legacy methodologies and legacy technology and seek an approach that uses intelligence.
There are a number of key transformations that have been seen in the product space. One of the best examples for this being Virtual cards: Boosted during the pandemic, virtual cards are touted to be the next major trend. They are being offered by fintechs in partnership with banks. Similar to the credit card in its features and operations, virtual cards differ only in the lack of a physical card. They are suitable solutions for corporates when teams are working remotely, or a one-time allowance is to be issued. Virtual cards are cost-efficient and allow for online payments, enhanced security by the lack of physical access and greater control. Some of the other transformations include, invoice automation, factoring automation, Payment automation and Do It Yourself (DIY) platforms.
Using a tech based or digital approach in a company’s cash flow reporting has multiple advantages. Spend management along with digital money analysis capabilities help in difficult times by enabling data backed solutions. These assist organizations with benefits such as providing access to budget management, approval matrices, virtual accounts, virtual cards, hierarchies, digital receipt management, invoice management, and more to enable a broader approach. All this facilitates making calculated and well thought decisions in a highly transparent and efficient manner.
(The author is Mr. Naveen Bindal, Co-Founder, EnKash and the views expressed in this article are his own)