For small businesses there's never been a better time to go digital

Businesses that respond best to the changing UK regulatory landscape will reap the rewards of a technology-led mindset

Britain is a nation of entrepreneurs, innovators and pioneers, and in order for those small business leaders - the very backbone of the economy - to prosper in such turbulent times, it is imperative they adopt a technology-first mindset.

Last year, small businesses numbered 99 per cent of all UK private-sector businesses and, according to McKinsey, bold and tightly integrated digital strategies will be the biggest differentiator between companies that succeed and companies that don't.

With the cloud computing market predicted to hit near £500 billion by 2025, thanks in part to the need for increased automation, those companies who are slow to adopt digital strategies will see dampened revenue growth. Meanwhile, those in the top quartile will capture disproportionate gains and the biggest pay-outs will go to those that initiate digital disruptions.

Staying ahead in a changing landscape

Technology has driven significant and wide-reaching change in how we conduct business, and both businesses and consumers look set to gain from a new wave of digital innovation and a transformative UK regulatory landscape.

How businesses alter their operating models in response to the new landscape will set them apart. By adopting digital-first thinking, businesses gain the ability to out-manoeuvre those that are behind the technological curve.

Take open banking for example - which is setting new standards for the industry and unlock a world of potential and increased options for small businesses. In 2016, the UK Competition and Markets Authority (CMA) ruled that the country's nine largest banks must allow licensed startups direct access to their data giving them the opportunity to provide new services.

Increased transparency of data will help small businesses to resolve key issues such as more astute money management, access to capital and pinpointing successful growth opportunities.

By empowering better lending decisions and added convenience to payment processes, the open banking directive will provide increased efficiency, to help reduce costs and improve access to financial services and crucially, fundraising platforms for UK small businesses.

Another opportunity to catalyse digital adoption is HMRC's Making Tax Digital (MTD) initiative, which came into force in April 2019. It requires VAT registered businesses with a turnover above the threshold of £85,000 to keep digital records and submit returns digitally to HMRC.

The main impact will be the way that businesses need to track, record and submit their taxes to HMRC, but the good news is that digitising even a small amount of back-office processes can bring huge benefits and financial gains. And The Productivity Payout: UK Small Businesses and the Digital Economy, a report by behavioural economists Volterra Partners, demonstrates that once businesses adopt technology to become MTD compliant, further digital uptake is likely to occur, driving increased levels of productivity by enabling better cash flow and human resources management, and freeing time for more productive activities such as sales, marketing or training.

World of opportunity

For UK's small businesses, implementing a digital-led mindset has the potential to open up a world of opportunity and deliver a significant productivity boost. UK small businesses - those with 10-49 employees - have the potential to see a cumulative increase of £3.8 billion to their annual turnover, according to the Volterra report.

Looking to the immediate future, small businesses need to kickstart their use of technology to stay on the front foot. Demand for computing power will continue to be a major focus as the pace of technology accelerates and more and more software is being used to operate on a cloud-native basis. This, combined with the increased near-seamless mobile connectivity through the rollout of 5G networks will make the business potential of cloud even greater.

Companies that understand the broader business landscape around what technology can do to make their lives easier - against the backdrop of changing legislation and innovation - will be the ones that thrive and prosper.

Chris Evans is VP and country manager at Intuit QuickBooks UK