The new world of financial technology — often referred to as fintech —leverages the traditional functions of finance with the benefits of artificial intelligence to get ahead of business decisions.
This is the world where a close study of massive amounts of data can produce better outcomes. Or as Big Commerce CFO Robert Alvarez described it, it’s monitoring inputs with an eye on improving the outputs of a company.
There’s a point where a company realizes that outputs only go so far, Alvarez said. Then the era of big data and big commerce gave companies insight never found in a copy of QuickBooks and on a couple of Excel spreadsheets. Alvarez calls the philosophical shift “focusing in on the top of the funnel” during BigCommerce’s regular business meetings.
“No matter what initiative we have, we do our weekly business reviews, and we spend 5 percent on output metrics and 95 percent of that 45 minutes we have with one another to look at input metrics,” Alvarez said. “Input metrics are the early warning system of the business. If you have five strategic metrics, you have to really get down to what activities are driving those outputs.”
This approach to business finance aligns accounting with the decisions that matter most. It also puts the functional leaders on the hook to deliver the results because they really understand, day-to-day, what their team members need, Alvarez said.
“This is the Amazon model, the Amazon way,” Alvarez said. “Even as big as they are, the executives are spending two to three hours every Monday looking at 200 pages of input metrics across every segment, every division of the business.”
The trick is providing companies with the tools, and the computing power, to slice and dice data in a useful manner. Consero CEO Scott Tynes says the introduction of cloud computing has put many of these large-scale resources, from automation to customer-relationship management, in the hands of small- and mid-sized companies. A small Austin startup can use the same fintech solutions that some of the biggest companies in the world can use. Consero eliminates the overwhelming technology landscape for growth-stage businesses by combining the best-in-class finance & accounting tools into a single login with access to all financial information. Graphical dashboards give executives a simple way to monitor business results and take action where needed. Consero’s software incorporates AI and machine learning to ensure all financial information is not only accurate and up to date, but is produced in the most efficient and automated way possible.
“There are literally hundreds of these (fintech) companies that didn’t even exist 10 years ago,” Tynes said. “The finance and accounting functions are sitting there, trying to figure out, ‘Which one of these do I take? How do they all work together?’ And, ultimately, ‘How do I get the reporting that I want out of it?’ That pace of change is going to continue to increase.”
The ultimate goal of fintech will be the ability for any member of the company leadership team to pull the same reports once the sole domain of the company accountant. Tynes calls that company accountant — the only one with the key to the balance sheet — “the wizard in the box.”
“The problem with that scenario is that it creates a key point of failure. You’ve got all these systems and those systems that were built for finance and accounting professionals,” Tynes said. “They’re not built for business executives and the head of sales. So those people don’t feel comfortable going into a general ledger to get the answers.”
Private equity firm Strattam Capital invests in high-potential companies in the business IT market. Principal Kyle Reesing calls the expanded access to data sets and fintech applications a blessing.
“We’ve been buying lower mid-market companies with a hundred to 200 employees,” Reesing said. “Looking back 10 years, we couldn’t afford this technology. It was too expensive and the total cost of ownership was too high for our portfolio of companies. And the risk was too great. Today, we can go and get a bunch of interesting technologies on a cheap basis.”
Hemanth Parasuram, managing director of private equity firm Virgo Capital, echoed Reesing’s enthusiasm for advances in fintech and said he expects even more dramatic advances in the years to come.
All this new power for fintech allows a chief financial officer to get ahead of the curve, said ESO Solutions CFO Jennifer Mabe. It moves finance from basic accounting to forecasting and modeling. The wrong fintech tool simply results in organizational misalignment, or functions within the organization that are not contributing value, Mabe said.
“For instance, in the cash cycle, if you don’t have a single streamlined system process tool, then it’s going to be very disjointed,” Mabe said. “You see in your reporting that your (days of sales outstanding) creeping up. You see issues with your cash collection.”
This is not information that lands on a balance sheet, but it does indicate potential problems upstream, Mabe said. When you can anticipate such lags, it can make a real difference when it comes to booking recurring expenses and setting a go-live date on a contract. It turns the finance team into a key component in the company’s decision-making process.
“We need to get ahead of that before it actually pops up on the finance side,” Mabe said. “So if you’ve got a tool for this and a tool for that — rather than some different spreadsheets with some manual calculations over here -— you’ve got a lot of gaps in the process that would be solved.”
SourceDay, which produces purchase order management software, uses between 20 and 30 different statistical analysis software, or SAS, products on a daily basis, said CEO Tom Kieley. That might actually outnumber the number of employees at SourceDay, but they’re easy to manage and they add true value. But it doesn’t mean all the fintech choices have been right, especially early on in the company.
“When we were a younger company, we were trying new things and just trying to make things work with a few people, right?” Kieley said. “Now we have bigger resources and teams that will vet each product. What really happens now is that when we need a process we put out an RFP to make sure we know what’s out there and we’re picking the right solutions.”
The goal is to put the right solution, using the right data, into the hands of not just the chief financial officer, but also any member of the company leadership team. Consero imagines a day when a CEO can offer an Alexa-like command to produce specialized finance reports. At Consero, the beta model is known as Simon, Tynes said.
“Simon, you can effectively think of him as the Alexa of the finance department,” Tynes said. “So you want to know, ‘Hey, how much salary did such-and-such make last month or last quarter? How much revenue did we do on this product? Or how much does customer XYZ owe us in accounts receivable? And those answers are all real time. They’re not on a spreadsheet within your email that’s already three days old.”
Understanding company performance at a glance is essential to finance and Consero brings that to our clients on a daily basis.