The firm is an exciting automated smart business current account, built for the unique needs of freelancers and self-employed people.

It offers this group the accounting tools they need to manage taxes, stay on top of expenses and get paid on-time! 

The app-based company’s smart current account combines banking, accounting and tax services designed specifically for this area of the UK’s fast-growing workforce, including the so-called ‘gig economy‘.

Coconut launched its iPhone app for sole traders on 31 January 2018, and has since opened 2,500 current accounts with £10 mln payments processed.

In September 2018 it also pre-approved its first Android customer, and says it continues to build features to support sole traders; in addition, it is developing tools aimed at including in the future limited company contractors.

The company is backed by leading tech accelerator, Techstars, and is one of the ten winners of the Nesta Open Up Challenge; a competition which awards prizes to innovative businesses using new Open Banking APIs.

Who is Elaine Clark?

Elaine Clark created the Cheapaccounting.co.uk franchise, which was established to make small business accounting as efficient and cost effective as possible.

Coconut says she brings a wide range of experience to the firm, which will help it build additional tools perfectly suited for those accountants who support these customers.

Elaine Clark tells IMS StratNews:  “I’m really excited to be working with the Coconut team, as they build out the accountancy offering of their product.

“I think the convergence of banking and accounting will be more transformative than cloud accounting was 10 years ago; we want accountants to be able to harness the full potential of technologies like machine learning, to enable them to better service their clients – while also improving margins and allowing them to grow their practices.

“Coconut will soon allow them to do this in a single tailored product.”

Clark also adds that Coconut is building a community of accountants in a Facebook group called Coconut Partners: “In the same way that customers have been a driving force in the development of features, they aim to do the same with the accounting community”, she says.

What Coconut says

Sam O’Connor, co-founder and CEO at Coconut, says, “Coconut is bringing banking and accounting together to eliminate business admin for self-employed people and small business owners. But we want the accountants our customers work with to also benefit from real-time bookkeeping and rich data, because this saves everyone time and money.

“Ninety percent of businesses in the UK are owner managed and 90% of the growth in small companies since 2001 are non-employers.

“These businesses tend to have simpler requirements than bigger businesses, but the products out there are complicated and dated, so haven’t kept up with the shift in the market.

“We think that these businesses, and the accountants that support them, need access to the most advanced technologies, and Coconut will provide this in a tailored product.”

By Ingrid Smith, Inhouse Editor

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SMEs: New Legislation

The UK Government has decided to introduce laws that will support small businesses (SMEs) in their efforts to retrieve money from unpaid invoices.

Previous unfair contracts prevented small suppliers from accessing invoice finance; unbalanced contracts with larger companies prevented many SMEs from securing invoice finance from providers such as banks and other investors.

The new regulations were put to Parliament on 10 September, 2018, and are set to facilitate a £1 billion long-term boost to the economy, says the Department for Business, Energy and Industrial Strategy.

How it works

The laws form part of the Government’s modern Industrial Strategy, and are designed to build an environment where small businesses are better able to thrive. They will ensure that any contractual restrictions entered into after 31 December 2018, (with certain exceptions), can be disregarded by small businesses and finance providers, effectively preventing larger businesses from abusing their market position.

The exceptions relate to contracts for financial services; those agreed with consumers or those connected to the sale of a business.

The value of invoice finance is obvious: it allows a business to raise funds by assigning their right to be paid ‘receivables’ to a finance provider in exchange for funds – which is typically around 80 per cent of the value of the invoices.

The ‘advance’ is obtained within days, as opposed to weeks, allowing a small company to manage turnover without tipping into the red. The remaining 20 per cent (minus fees and charges) is then paid when the customer settles the invoice.

It’s important to note that Invoice finance is not borrowing; the supplier receives what is effectively an advance against a future payment.

This legislation addresses anomalies relating to purchase contracts that include terms preventing access to invoice finance. This is mainly due to suppliers’ lack of foresight, where they have negotiated poorly, ultimately leaving them in a weak contractual position.

The new laws will address these detrimental contract terms. 

Expert views

Small Business Minister, Kelly Tolhurst, says: “These new laws will give small businesses more access to the finance they need to succeed and will help ensure they have a level playing field from which to set fair contracts with the businesses they supply.

“The proposed laws come as a number of larger businesses stop their suppliers from assigning ‘receivables’ – the right to receive the proceeds from an invoice. This assignment is essential for invoice finance to operate.”

She states that restrictive contract terms are too often used by larger businesses to maintain a hold over their suppliers. Small suppliers then find themselves unable to negotiate changes to a proposed contract because of their lack of power in the marketplace, Tolhurst argues.

The minister views the UK’s 5.7 million small businesses as the backbone of the UK’s economy, “and central to our modern Industrial Strategy”, with more than 1,000 starting up every day.

CEO of the innovation tax specialist GovGrant, Luke Hamm, which has a spotlight interest on research and development, says he welcomes the revised regulations.

Hamm states, “We hear regularly from smaller suppliers who are tied into restrictive contracts with larger players, for example in the supermarket sector, and it is extremely difficult for them to negotiate changes in contractual terms.

The CEO has urged the Chancellor of the Exchequer, Philip Hammond, to prioritise small business in November’s forthcoming Budget, citing innovation and R&D as a policy areas that seriously require a boost.

Hamm says, “We need to prioritise innovation and industrial strategy … As the announcement on invoice finance shows, the government’s industrial strategy has its heart in the right place, but it’s still unambitious, and needs more imagination and drive.

“Aiming for 2.4 per cent of GDP invested in R&D by 2027 is mediocre; that’s where Germany is today.

“We’d also like to see more help for the smallest companies, where they are scaling up but opt not to draw market salaries. The scheme doesn’t allow for that.”

Hamm also highlights the importance of the forthcoming annual HMRC report on R&D tax credit statistics, which he argues will provide an important snapshot of just how widely the UK’s innovative companies, including SMEs, are making use of the government’s tax credit system.

by Ingrid Smith

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