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FinXP: How Fintech Can Transform the Way Businesses Deal With Expenses

In light of the global shift towards home working, even when the toll of the pandemic is being less severely felt, smaller businesses are finding it increasingly difficult to manage outgoing corporate expenses.

Jens Podewski, co-founder and CEO, FinXP
Jens Podewski, co-founder and CEO, FinXP

Here to discuss the challenges that SMEs currently face in this regard is Jens Podewski, the co-founder and CEO of FinXP. In this guest post for The Fintech Times, Jens details the pitfalls of externally managed corporate expenses, and how those at the back of the race can accelerate their growth through digital adoption. 

One of the most valuable outcomes of the recent fintech revolution has been to level the playing field for small and medium-sized businesses that had previously been unable to access banking services usually reserved for large corporations. Thanks to updated regulations and forward-thinking service providers, SMEs are now benefiting from all kinds of tools that help them to manage their money better.

For example, fintech is already helping many mid-sized organisations when it comes to accessing finance. Non-traditional lenders are now able to offer credit to these businesses, using innovative technology to process loan applications and assess creditworthiness. There are also a number of tools that make various back-office functions such as payments, invoicing, and payroll more efficient.

Expense Management Is Still Stuck in the Dark Ages

However, there are still many companies in this category that need help to rethink the way they deal with expenses. They still rely on an old model where staff are expected to make purchases with their own money, then file a claim to get that money back. Aside from the inconvenience this process causes the employee, it also means the business has no visibility on how much is being spent, where, or on what until the claim is filed.

The issue will have been brought into sharp focus by the Covid-19 pandemic. Thousands of businesses will have had to help their employees kit out their home offices during lockdown. Laptops, monitors, keyboards, mice, desks, chairs and so on, needed to be purchased so workers could remain productive. Many of these items will have been paid for by the employee, with the company reimbursing them at a later date. Other workers may have had to wait while the right equipment was sourced, procured and distributed — a process that will have taken up a great deal of time and energy at a moment when resources were already stretched.

Some SMEs have tried to get around this problem by using a single ‘company card‘ linked to the business’ account, usually in the name of a senior staff member, and used by various other employees as and when required. This can potentially cause delays in the purchasing process as team members need to go and ask for the card from whoever has it when they need to make a payment. A better solution, then, would be to look to fintech providers that could enable them to distribute cards to their entire team, not just one or two individuals.

Streamlining the Expenses Management Process

What’s especially frustrating here is that there is obviously a great deal of potential for businesses to drive efficiency and get a better view of how much they spend — and what they spend it on — if they were to overhaul this outdated system.

Large corporations, of course, can afford to implement bespoke company-wide card solutions that are managed by a big banking partner, giving them access to all sorts of data showing every minute detail of every employee’s spend.

These banks don’t traditionally target smaller organisations, as they don’t see it as a profitable market. But small- and mid-sized businesses need to get to grips with expense management. Rather than try and replicate the costly and complex software used by large organisations — as well as the high levels of servicing their banking partners provide — SMEs could instead look to dynamic fintech organisations to fill the gap.

Most dedicated expense management solutions would be inappropriate for many small businesses simply because they are designed for much bigger companies. They would be much better if they distributed company cards to all employees in order to take full control of their spending. They’d have full visibility on what was being spent, on what and by whom — all in real-time. Given that the number of purchases would be much less than a large corporation would be making, this would be relatively easy to manage in-house, rather than outsourcing this task to a banking partner.

They would be able to notice inappropriate or irresponsible purchases made by staff more quickly. There is also potential for SMEs to earn rewards from using these programmes, further driving efficiencies and lowering costs.

Fintech has already gone a long way to reduce the pain of financial management for SMEs. However, there are still some big problems that many of these organisations need to solve. Staff shouldn’t have to be using their own funds to make business purchases, nor should they have to wait to be reimbursed. They need flexible payment solutions so they can make purchases when they need to, using contactless-enabled cards or their mobile device. It’s time for the fintech revolution to tackle the expenses conundrum.

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