The benefits of embedded finance – the seamless integration of financial services by non-financial companies into their digital experience to deliver new, innovative, and streamlined customer experiences – are typically viewed through a B2C lens. But the scope of this finance revolution extends beyond reducing the friction that impedes online financial transactions to breathing new life into ambitious businesses admin processes.

Embedded business management uses the banking-like services offered by nonbanks model to embed a different kind of convenient service into a business’s infrastructure: accounting tools.

Traditional accounting

According to research by salary benchmarking site Emolument, the accounting profession ranks fifth in a roundup of the most boring jobs. It might be yawn-inducing, but this crunching of numbers is vital to the successful operation of a business – and must move with the times to be effective. Traditional manual accounting processes have evolved during the digital revolution from physical books using a written ledger of transactions to spreadsheets. But even these electric documents can become confusing, time-consuming, and error-strewn – making them outdated amid the emergence of embedded business management.

As a business grows, its financial data evolves with it, becoming more complex and increasing in volume. Small and medium enterprises (SMEs) typically don’t have the resources to create a dedicated function to conduct laborious – but vital – accounting processes. This leaves them with three options: conduct them in-house when there’s time, exposing the business to errors and delays; outsource them to an expensive third-party provider, placing strain on tight budgets; or think beyond antiquated accounting methods by embedding them into the business infrastructure.

Embedded business management

Embedded business management empowers SMEs to focus on what they care about most without worrying about the admin, which is automated and consistent. This means less effort, less time and lower costs when running a business compared to using clunky manual processes. Unshackled from repetitive admin and time-consuming processes, business owners can use their resources more proactively.

This subset of embedded finance has many beneficial branches of its own: from embedded payroll that allows business owners to set a single pay rate, to embedded bank feeds that automatically appear in accounting software, to embedded accounts payable that automate purchase orders when stock levels hit certain limits.

These core functions are often delivered using an enterprise resource planning (ERP) cloud solution: a suite of integrated applications that collect, store, manage and interpret data to gain resilience and real-time agility – and position for growth.

Examples of popular embedded business management experiences that are helping to streamline SMEs’ accounting processes include:

• Clearbooks: intuitive online accounting software designed for UK-based small businesses, contractors, freelancers, and sole traders.
• Bench: APIs let financial institutions and SaaS partners embed their platforms with an integrated financial solution like bookkeeping and tax services, providing SMEs with actionable insights to grow their business.
• Tide: Limited companies save time with accounting integration, centralised invoicing and expense cards for easy expense management.

Embedded business management functionality is brimming with benefits:

• Saves time: manages time-consuming manual bookkeeping and accounting processes automatically.
• Convenient accounting: cloud-based software allows you to connect from an internet-enabled device from anywhere, at any time.
• Syncs financial data: siloed business data that’s stored across multiple platforms is synced via an API, so you can compile financial records quickly and easily.
• Improved accounting security: data is secured in the cloud under layers of high-end encryption algorithms, making your records easy to retrieve when you need them.
• Integrate with other business apps: integrates accounting application software with other apps like CRM solutions, reporting applications, and information management systems.
• Generates financial reports: built-in reports – such as your income statement, balance sheet, and cash flow statement – are automatically updated. This provides key insights and facilitates informed decision-making.
• Data accuracy: the software automatically refreshes your business’s financial statements and reports to reflect any changes you make, keeping your data error-free.
• Provides detailed insights: provides you with a transparent view of your business’s financial posture, helping you to produce focused reports and make informed strategic decisions.
• Streamlines tax filing: standardised financial statements and accurate data simplify the tax filing process and your ability to calculate available tax credits.

The future of embedded business management

Research by Bain Capital suggests that payments and lending will continue to be the largest embedded financial services but will be bolstered by the growth of adjacent value-added services, including tax and accounting. As the pace at which organisations transition to digital-first admin processes continues to accelerate, embedded business management functionality will become ubiquitous across the business landscape.

What’s next

Check out our final instalment of the embedded ecosystem blog series – Embedded value-added services – which will look at how nonbank financial services companies can embed things like insurance into their service offerings and how it’s become instrumental in increasing customer loyalty.

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