Why is manual bookkeeping still a burden for three million SMEs

From handling invoices to managing payroll, open banking relieves the manual burden of bookkeeping by automating daily workflows. Despite this saving SMEs over 15 hours a week, why do three million still manually record their finances?

In a digital-first landscape, millions of SMEs count on fintech solutions to automate time-intensive tasks. Astonishingly, bookkeeping isn’t one of them.

Research reveals that three million SMEs are still burdened by manual reconciliation processes when managing their finances, spending the equivalent of three working weeks every year bookkeeping. For many small businesses, spreadsheets are the default choice. This is especially true for new business owners.

Despite their accessibility, spreadsheets weren’t made to hold a year’s worth of financial data, nor were they made to replace professional accounting tools. In 2012, J.P. Morgan Chase lost over $2 billion due to a spreadsheet error when a single miscalculation was fed into other calculations. For SMEs, one wrong data entry could have serious financial complications.

The risk of manual bookkeeping

Nearly 90% of collapsed SMEs consider poor bookkeeping an influencing factor in their demise. Like every other manual process, entering financial data by hand is a risk. Inaccurate data caused by human error can either undervalue a business or cause a higher tax liability, prompting SMEs to make uninformed decisions about their finances.

Aside from being error-prone, manually managing finances isn’t sustainable. While SMEs can download statements in a spreadsheet format directly from their bank account, they still need to import that data into their designated bookkeeping sheet. Open banking enables SMEs to pull their financial data directly from their bank account, eliminating the need to download and reconcile statements.

Millions of hours spent processing payments

Bookkeeping isn’t the only admin challenge SMEs face. Invoices, salaries, bills, and taxes; SMEs have to make a lot of payments regularly. Some businesses even need to make thousands of payments a day which is incredibly time-consuming for those with limited resources.

For years, only medium to large scale companies with access to corporate banking accounts have been able to make bulk transfers. With no other choice but to process payments by hand, SMEs spend around 137 million hours a year initiating individual payments, costing them time that could’ve been better spent elsewhere.

Reimagined bookkeeping for SMEs

A proliferation of fintech solutions has completely transformed the way SMEs manage their finances, empowering them to step away from the spreadsheet and embrace new tools to streamline their once-manual processes.

Open banking enables SMEs to automate bookkeeping by connecting their bank accounts to get a holistic real-time view of their paid and outstanding invoices. Moreover, they can automatically map their financial data and initiate one-click payments, freeing up time to focus on their business.

Denario, an integrated payment management platform for SMEs and freelancers, is one fintech company leveraging open banking technology to reimagine the bookkeeping process. With Denario, SMEs can:

  • Automatically capture bills and receipts from various sources
  • Process payments using a number of different methods and modalities
  • Reconcile bookkeeping entries across all bank accounts
  • Gain more visibility into their cash position

Another fintech simplifying bulk payments for SMEs is Comma. With Comma, SMEs can push payments for invoices from their accounting platform to their bank account, reducing the time it takes to process multiple payments by 77%.

Powering bookkeeping innovation

By opening up access to financial data, open banking unlocks new opportunities for the bookkeeping platforms serving SMEs. Embedding open banking into their solutions enables customers’ to view and analyse their transactions in one place rather than piecing together their financial data like a jigsaw puzzle.

When data is derived from the customer’s bank account in a standardised way, it’s raw and difficult to work with. Open banking goes beyond gathering account data by cleaning it up and delivering it in an enriched format. Financial data delivered in this way can be used immediately, saving SMEs up to 15 hours a week on bookkeeping.

For the three million businesses still relying on spreadsheets, there’s a plethora of open banking-enabled bookkeeping tools at their fingertips to simplify the process.


In the year that HMRC’s Making Tax Digital (MTD) initiative has come into effect, we're finally taking the first significant step towards paperless and digital first tax collection. Find out more how accounting software providers can utilise Open Banking.


19th May 2021

3 min read

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