Every day, Gideon Melly simplifies the financial side of his business. Whether it's paying a delivery person, buying supplies, or paying workers’ salaries, he does it all through an easy-to-use app. And it's not just him; some of his trusted employees also use this app regularly.
When Mr Melly embarked on his entrepreneurial journey with Smartpoint Graphics, a company that specialises in creative designs in motion graphics, printing billboards, banners, digital marketing, and branding packaging materials, the financial aspect of his business was a different story altogether.
“When I started, I had many challenges managing the business finances, especially petty cash. I used to carry a notebook recording my expenditure, from paying a rider, buying a rubber stamp, lunch… and by evening, with such transactions going beyond Sh10,000, I would sometimes think I had lost some of the money,” Mr Melly recalls.
About a year ago, he started using Tende Pay, a digital platform that has been in the market, mainly supporting Small and Medium-sized Enterprises (SMEs) handle their petty cash needs.
Mr Melly now says the use of the digital platform has not only given him the visibility of petty cash burden on his business but also provided him with proper record-keeping, allowing him to track payments made even in months prior, giving an overview of his business performance.
“When I started using Tende Pay, I realised that I was even overspending on some small payments and they would trim my profits. I had to adjust such expenditures. Before that, I could not tell what my business finances looked like,” he says.
Today, to understand why he made a particular payment even months later, all he needs to do is revisit the transaction and read the purpose for which it was made, a requirement on the digital platform, and if one of his employees makes a payment, he can tell for what purpose.
It’s the same thing that Mr Collins Biwott, the finance manager at NW Realite Limited, has been doing for months now, being at the centre of accountability in the company he works for, where the need for petty cash has always been as constant as the accounting for it.
“You tend to realise savings out of prudent management of funds. You are able to account for and track every amount spent. It removes the burden of accountability for spending on other people,” Mr Biwott says.
The two SMEs embody a new shift that a growing number of companies are making in a bid to understand their business finances and operations, moving away from handling cash and operations manually in favour of digital platforms where they can track what is happening.
Struggling to stay afloat during tough economic times, many SMEs are increasingly expressing the need to be aware of their operations and cash flows to tell whether they are sustainable and seal any loopholes that come at a cost.
Ms Susan Akinyi, the commercial lead for corporate and partnerships at Tende Pay – a Nairobi-based digital payments platform – observes that there is a growing need among small businesses to automate their operations, particularly if they feel it helps them save costs.
Tende Pay now supports about 1,000 SMEs to automate their payments and operations, moving them away from manual cash handling, and detaching business owners from their enterprises as far as cash management is concerned. Many business owners mix up their personal cash and business income, which has historically obscured their view of how the business performs, a key ingredient to failure.
“We realised that many businesses are still doing things manually. What that means is that out of the 7.5 million SMEs in the country, most of them are still not digitised. Out of that number, very few are even using business tills and paybills, meaning many are using cash and cash comes with a lot of challenges; including misappropriation and improper recording,” Ms Akinyi notes.
She says on the platform, Tende Pay enables businesses to open accounts from which they are able to perform transactions such as sending money to M-Pesa, banks, buying airtime, paying bills and even salaries, while at the same time operations that support the running of business such as integrating businesses’ Enterprise Resource Planning (ERP) with the platform to have receipts of transactions paid digitally automatically reflect on a company’s system and keeping records on operations and transactions happen.
“We started with just petty cash, then realised that SMEs still need their management works, to understand how they are performing, their profits and balance sheets. That is how we added the ERP integration. We also added invoices when we identified the need to factor in the fact that the businesses are selling goods and services,” Ms Akinyi adds.
Over time, construction and real estate companies, schools, logistics firms, hotels and other businesses across different sectors have sought the service, to cure the headache of handling operations and cash flows manually.
“The service that most businesses are looking for is managing petty cash. If you have a restaurant, for instance, when selling food, it’s very structured in terms of how money comes in because someone will pay through a bank, swipe their card or pay through mobile money. But as a restaurant you will need to buy tomatoes, shop at the supermarket and settle other expenses, at which point money moves from your bank account, mobile money account heading elsewhere. This is the point where many SMEs are in need of a system beyond the bank to help them manage the payments and it’s what Tende Pay is doing,” Ms Akinyi says.
She recognises the reality that among many SMEs it’s difficult to separate the owner from the business a huge challenge for the businesses as it inhibits the business’ growth, and notes that a system that separates the two allows the owner to track business cash flows.
“All payments you make on behalf of the company become easy to track and it’s from such kind of decisions that you can tell whether you are really making money. If everything is mixed up together, it’s very difficult to tell the position of the business,” she says.
Less than 10 percent of Kenyan SMEs are digitized, and by March last year, Safaricom indicated that businesses operating Lipa na Mpesa till numbers were still less than 400,000.
Players in the digital payments sector see this as an opportunity, with Kenya estimated to have more than seven million Micro, Small and Medium-sized Enterprises (MSMEs), with just less than two million registered.
Making small margins, the cost of running digital operations, reliability of platforms and their ease of use is key to penetration of digital platforms into the MSME sector, for their automation.
Yet still, many businesses lose a lot of money in their operations where cash is handled manually, lacking proper accountability mechanisms, and sometimes costing close to half of business revenues, which eats into profits or sinks them into losses.
“The cost of doing business right now is high, looking at taxes, and charges across other platforms. Our strategy is to make small margins out of transactions, but go for the numbers,” Ms Akinyi notes.