In Hong Kong’s dynamic economy, small and medium-sized enterprises (SMEs) play a pivotal role, serving as the backbone of growth and innovation.
However, amidst their significant contributions, SMEs often find themselves grappling with the complexities of financial management.
The traditional approach, characterised by a patchwork of disparate tools and systems, can lead to inefficiencies, errors, and a lack of a comprehensive financial overview, ultimately hindering their ability to make informed strategic decisions and achieve their full potential.
As the fintech revolution gains momentum, forward-thinking leaders are recognising the need for innovative solutions that can streamline financial processes, empower SMEs with real-time insights, and enable them to focus on their core business activities.
In this context, Fintech News Hong Kong spoke to Davis Chan, the co-founder and CEO of KPay Merchant Services Limited, to delve into his insights on the challenges faced by SMEs and the transformative potential of fintech in reshaping the landscape of financial management.
The fragmented reality of SME financial management
Davis began by shedding light on the fragmented reality of financial management for SMEs.
“Many SMEs find themselves juggling multiple tools and systems for payments, invoicing, and data management. This disjointed approach often leads to time inefficiencies as businesses spend valuable resources navigating between platforms. Moreover, the reliance on manual data entry increases the risk of errors, which can have far-reaching consequences, from inaccurate financial statements to misguided strategic decisions,”
said Davis.
This fragmentation not only hinders operational efficiency but also obscures the bigger picture.
“SMEs often struggle to gain a holistic overview of their financial health, as data remains scattered across various systems. This lack of visibility can impede their ability to make informed decisions, optimise cash flow, and seize growth opportunities,”
Davis pointed out.
The cost of inefficiency: Insights from KPay’s study
KPay’s recent study highlights the significant inefficiencies in financial management for SMEs in Hong Kong.
“55 percent of SMEs in Hong Kong remain bogged down by outdated manual bookkeeping, relying on spreadsheets and even paper for their financial records. These inefficiencies hinder their financial health and growth potential,”
Davis revealed.
The study further quantifies the impact of these inefficiencies, revealing that manually entering data into spreadsheets consumes a crippling amount of time – over 2,298 hours annually for some businesses.
Davis explained that this valuable resource could be better invested in core business activities that drive growth, such as sales, marketing, and customer service.
The study highlights the error-prone nature of manual data entry, with nearly half of the merchants citing manual data entry errors as a major reason for seeking alternatives.
These errors, Davis added, can lead to inaccurate financial statements, which can result in costly mistakes in decision-making and hinder the ability to make strategic investments and optimise operations.
The power of unified platforms
In addressing these challenges, Davis emphasised the transformative potential of unified financial management platforms.
“The key lies in embracing a streamlined approach that consolidates all essential financial functions into a single, user-friendly interface,”
he explained.
By eliminating the need to switch between multiple tools, SMEs can significantly reduce time inefficiencies and minimise the risk of errors.
Unified platforms, like the one developed by KPay, go beyond mere consolidation, leveraging automation and intelligent workflows to simplify complex processes.
“Features like automated reconciliation, bill payments, and real-time analytics can transform the way SMEs manage their finances, freeing up valuable time and resources that can be redirected towards growth-oriented activities,”
Davis elaborated.
Empowering SMEs with real-time insights
One critical advantage of unified financial management platforms is their ability to provide SMEs with real-time, actionable insights.
“When financial data is consolidated into a single platform, businesses can access real-time insights that enable them to make informed decisions, identify trends, and optimise their financial strategies,”
Davis said.
These insights can be transformative for SMEs, empowering them to make data-driven decisions across various aspects of their business.
Real-time visibility into cash flow, for example, can help businesses better manage their working capital, identify potential shortfalls, and make proactive adjustments.
Similarly, by analysing sales data, SMEs can identify their most profitable products or services, optimise pricing strategies, and allocate resources more effectively.
Addressing the HK$160,000 annual burden
KPay’s study reveals that SMEs in Hong Kong spend an average of HK$160,000 annually on financial management.
“The main cost is attributed to reconciliation time, which is over HK$100,000, while the remaining costs are related to pay-out handling and locating & verifying sales revenue,”
Davis explained.
Unified platforms like KPay offer the potential for significant cost savings. By streamlining financial operations with automated workflows and real-time analytics, our platform can reduce manual processes and errors.
“This can significantly lower financial management costs, potentially saving SMEs a substantial portion of the HK$160,000 they currently spend annually,”
said Davis.
Overcoming the resistance to change
While the benefits of adopting unified financial management platforms are clear, Davis acknowledged that change can be challenging for SMEs.
“Many businesses have grown accustomed to their existing processes and systems, even if they are inefficient,”
he explained.
There can be a natural resistance to change, especially when faced with the pressures of daily operations. To overcome this resistance, Chan stresses the importance of simplicity and user-centricity in platform design.
“The key is to create platforms that are intuitive, easy to navigate, and require minimal training. By focusing on user experience and providing comprehensive support, fintech companies can help SMEs embrace change and realise the full potential of streamlined financial management,”
he said.
The future of SME financial management
Looking ahead, Davis envisions a future where SMEs are empowered with the tools and insights they need to thrive in an increasingly competitive landscape.
“The fintech revolution is not just about digitising processes; it’s about transforming the way businesses operate and make decisions. By leveraging cutting-edge technologies like artificial intelligence and machine learning, we can create platforms that not only streamline financial management but also provide predictive insights and personalised recommendations,”
he added.
Davis believes a shift towards ecosystems and partnerships will characterise this future.
“No single platform can address all the needs of SMEs,”
he acknowledged.
The key lies in building an ecosystem of partners and integrations that can provide a comprehensive suite of services, from financial management to supply chain optimisation and beyond.
KPay’s role in shaping the future of SMEs in Hong Kong
As a prominent player in Hong Kong’s fintech landscape, KPay is actively contributing to this transformation.
“Our unified platform, powered by Airwallex’s innovative technology, is designed to streamline financial operations, reduce manual errors by 90 percent, and provide SMEs with real-time insights,”
Davis explained.
By leveraging cutting-edge technologies and focusing on user-centricity, KPay aims to be a long-term partner for SME growth in the region.
With a growing presence in Hong Kong, Singapore, and Japan, KPay is dedicated to continuous improvement and platform expansion.
“We understand that the needs of businesses evolve as they scale, and we are committed to providing a comprehensive suite of solutions that address the evolving challenges faced by SMEs. In fact, we aim to grow our merchant base tenfold within the next three years,”
said Davis.
Future for SMEs in Hong Kong
As SMEs in Hong Kong navigate the challenges of a rapidly evolving business landscape, the need for innovative financial management solutions has never been more pressing.
Davis Chan’s insights, backed by the findings of KPay’s study, underscore the transformative potential of fintech in streamlining operations, empowering SMEs with real-time insights, and enabling them to focus on growth and innovation.
By embracing unified, data-driven platforms, SMEs can not only overcome the inefficiencies of traditional systems but also position themselves for success in an increasingly competitive world.
As fintech companies like KPay continue to push the boundaries of innovation, the future of SME financial management looks brighter than ever. It promises a new era of efficiency, insights, and growth for businesses across Hong Kong and beyond.
Featured image credit: Edited from Freepik