Building a financial ecosystem for SMBs with ForwardAI

To Nick Chandi, Co-Founder and CEO of ForwardAI, SMBs represent a massive segment of our economy—as well as a drastically underserved one. ForwardAI offers a single API that connects accounting platforms to banks, lenders, and fintechs looking to offer services to SMB clients. It has also recently launched a cash flow forecasting tool for SMBs. Chandi argues that interoperability and real-time data can create more informed and scalable advisory services for SMBs, can help banks and others to make faster lending decisions, and thereby support fledgling companies through volatile periods. 

The company also recently published a white paper titled “Rising small business expectations and the evolving roles of financial service providers.” ForwardAI found that most financial service providers offer neither funding advisory nor cash flow forecasting services to SMBs, standing in stark contrast to the rising expectations of business owners in North America. 

In an interview with The Financial Revolutionist, Chandi outlines the market need ForwardAI addresses, describes the competitive dynamic between accounting platforms and banks, and envisions the future of SMB financial advisory services. 

This interview has been edited for length and clarity.

The Financial Revolutionist: Why are SMB accounting APIs the market need you decided to address?

Nick Chandi: Great question. The genesis is the experience I had with small businesses while helping them with their PPP loans when the pandemic hit. (For background, I’ve been working in the accounting industry for over 20 years and founded one of the largest IT consulting companies in Canada.) I worked with hundreds of businesses to help them with PPP loans, and what I found was that many of our customers were looking for more help than the PPP was able to offer—and any time we tried to reach out to a bank, they took days and weeks and sometimes months to respond. 

With the cash flow crunches SMBs were experiencing, banks were taking far too long to offer loans, and they made decisions based on outdated data like credit scores. Banks didn't have any visibility on the real-time cash flow of their customers, whether the businesses still had people on payroll, and so on. A few fintechs were very active during that time, like Fundbox, and they had direct connections to accounting systems to help make lending decisions. So we decided to build a technology to make it easier for businesses to share their financial data with banks so that they can make faster decisions. 

So the genesis revolves around early-pandemic PPP loans. Have SMBs’ needs changed since then? You recently launched a cash flow forecasting tool, which suggests needs have shifted or expanded. 

Data suggests the war in Ukraine and inflation will soon have an effect on the B2B, SMB side. If you look at the average orders or average invoice size, they're more or less about the same. But volatility will trickle from the consumer space into the SMB space as well. 

Was the cash flow forecasting tool something you built specifically due to customer feedback?

We built this cash flow forecasting tool because we knew it would help accountants provide advisory services, and we’re seeing strong interest from players in the financial domain as well. SMBs are underserved by their banks, and they don’t receive proactive advisory services. 

And in addition, bank clients have signed up for ForwardAI’s cash flow forecasting tool and they’re now offering it to their customers. It's an opportunity for the bank to provide targeted marketing offers based on real-time data that is being fetched from the accounting system.

Small business clients receive something in return as well, because when they agree to share their accounting or financial data with a bank, they get something in return that is of huge value. They can see where they will have cash flow gaps and plan accordingly. Eighty-two percent of businesses fail because of cash flow problems, and many of these businesses were profitable but failed because owners couldn't foresee upcoming cash flow gaps.

How competitive is this space among banks?

Banks and other financial institutions are recognizing that if they're not offering these services, then someone else is going to do it. Whether you look at QuickBooks or Xero or Sage Accounting, they're trying to become a bank. They offer services similar to those at banks. So the move is towards keeping the eyeballs on the platform, keeping them engaged, offering them more and more products on the ecosystem so that they never leave your platform.

How do you balance working with competing parties—both accounting platforms trying to be banks and vice versa?

It's pretty common in the industry to work with other companies who offer competing products. There are millions of businesses that could be helped with these kinds of advisory services. So that's the kind of problem we are trying to solve.

Where do you see ForwardAI in the coming years?

I believe data from these systems will become ubiquitous. Businesses’ data will flow from one platform to another. I believe our technology can help fintech companies and our partners build simple solutions to complex problems faced by SMBs. 

Any final advice for The FR’s readers?

You should always be focused on creating value for your customers. There will always be challenges in the early days. We built our previous business without any salesperson, and our business came through word of mouth. Those kinds of things can happen if you want to build a scalable, great business, where the lifetime value of your customer is very high. Pay very deep attention to the services, how engaging you are with your customers, and keep them engaged.