CFO Chapter 3: Digitally Transforming Financial Tech Stacks
Since the dawn of technology – long before AI became mainstream – it has been accompanied by a warning that it will make people redundant in their jobs. However, in reality, technology plays a supporting role in a variety of professions. When it comes to CFOs, digital transformation in fact possesses the potential to elevate their role. That is why it is now integral for financial leaders to have a comprehensive, scalable tech stack.
In this CFO Chapter we will therefore explore the benefits of digital transformation, what makes a tech stack specialized to the finance function, what should be considered when acquiring software, how the future of fintech will shape tech stacks in years to come, and much more.
What is a CFO’s tech stack?
Every core department within a company will have their own tech stack. Put simply, this is a collection of software, apps, platforms and tools which operations within a company use to carry out their business and analyze performance. Some tools might cross-over between departments yet each tech stack will be unique overall. For the finance function of a business, CFOs manage and maintain their tech stack.
A CFO’s responsibility over a financial tech stack is thanks to their unrivalled expertise and responsibility to manage the financial operations of a business. To ensure that these are enacted effectively, a CFO’s tech stack should work to collect, analyze and optimize an organization’s financial data.
What does a CFO's tech stack need to fulfil?
A modern CFO has a growing amount of responsibilities. In addition, the sheer amount and variety of data which is now available to businesses is continually increasing. As a result, a CFO’s tech stack must be able to stretch itself in multiple directions without being spread thinly.
Considering the duties of a CFO, their tech stack should therefore be seeking to provide digital solutions relating to the following operations:
- Data Acquisition and Storage – the foundation of any CFO’s activities should always be based on data. Without data, business is operated on a whim.
- Accounting – despite CFO’s roles becoming more forward-looking, there is no getting away from their traditional responsibilities. However, effective technology can now take care of reconciliation and other repetitive accounting activities.
- Payroll – providing monthly wages is easier said than done considering the various factors which go into it like taxes and expenses. For finance functions looking to make a positive impact on their business though, it distracts their time from other tasks.
- Payment Processing – in difficult times, CFOs will spend a lot of time seeking ways to cut costs. However, they will never be keen for other businesses to think likewise! Finance teams need to keep money coming in as well as stopping leaks. Payments’ move to a digital arena means that leveraging technology is one of the best ways to achieve this.
- Spend Management – return on investment is always at the front of any finance manager’s mind. As a result, whilst other leaders will invariably have a better understanding of what expenditures will guarantee this for their departments, CFOs always remain gatekeepers of a business’ money overall.
- Dashboarding, Analytics and Forecasting – a quality tech stack will help CFOs take positive measures but in the world of finance, action is only half of the game. The other half is talking, or in other words, reporting. Proper budgeting, forecasting and reports are vital considering the investment it can generate.
Why is it important to get a CFO tech stack right?
Implementing a good tech stack versus one which is inappropriate for a business can make or break not just the tenure of a CFO but the business they are working for too. Consideration of the outcomes of two contrasting tech stacks (one properly designed for a business’ needs, and one not pieced together with careful thought) really highlights how true this is:
- An effective financial tech stack will alleviate a CFO and their team from manual data acquiring, handling and enriching. This won’t eliminate their responsibilities, it will elevate them. Through a high quality tech stack, CFOs will shift their focus from the past to the future, complementing their evolution into a strategic role. Overall, a tech stack such as this will allow the finance function to drive their organization forward by acting on real-time data whilst being supported with other forms of technology which is designed for the modern payments landscape.
- An improper financial tech stack will likely consist of outdated, clunky technologies which cause the financial function of a business to experience arduous tasks. Rather than alleviating finance professionals from manual procedures, these will continue to be a common occurrence. Consequently, not only will time be wasted but they will also not have the ability to flexibly manipulate data without the intervention of development teams. Ultimately, they will find themselves closed off from opportunities due to not having technology which can keep up with the rate of modern transactions and being forced to spend most of their time on back-office due diligence activities rather than new initiatives.
What to consider when building a financial tech stack
Compiling a high-quality tech stack which suits a business’ needs is easier said than done. Often people believe that in the world of a CFO, money is the simple answer. However, in reality this is rarely the case due to there always being more factors to consider. When it comes to piecing together a tech stack, the same is true.
To create a tech stack which reflects a business’ requirements, here are some of the main things to consider:
- Budget – yes, as mentioned, there is more to selecting a tech stack than money; however, it will ultimately play a deciding factor. Yet even a budget isn’t simply determined on monetary terms. In fact, when adopting various pieces of software, implementation and training must also be considered. Each of these could maybe incur additional costs dependent upon the software provider but they will always result in time expended. For some companies, time could be more important than money spent. If so, consideration should therefore also be placed upon whether an application will take a long time for staff to get up and running with. Such an outcome could cost them dearly by having a detrimental effect on their other responsibilities.
- Integrations – accruing various pieces of technology, with each of them having a different purpose might sound like a jumble; however, this only applies to dysfunctional tech stacks. By building a tech stack, financial leaders should be aiming to solve problems, not create new ones. To avoid a common headache of technology users, CFOs should therefore always triple-check that whatever they add into their tech stack possesses the capability to operate alongside their other applications, allowing an automatic sharing of data between all parties. If this is not the case, masses of time will be lost attempting to achieve what their tech stack should deliver by default – a complete picture of their financial data.
- Customization – “no business is the same” is a cliché for a reason – because it’s true. Fortunately, the beauty of most pieces of modern technology is that they can be applied in a variety of ways. However, this shouldn’t be taken for granted. As mentioned earlier, tech stacks should solve, not cause problems. Similarly, they should adapt to and fit in with existing financial processes rather resulting in new ones having to be forged. Technology which can be tailored to specific customers will therefore always be the best fit for any tech stack.
- Expansion and Growth – ultimately, the application of a tech stack will in the long term be to drive organizational growth. Whilst most pieces of software within a tech stack are in some way built with this in mind, no matter whether it is via identifying new opportunities or improving efficiency, not all are designed in a way which takes into account this becoming a reality.
It would be bittersweet for a company to outgrow their tech stack prematurely. Even in the early days of fleshing out a brand new financial tech stack, it is therefore always best for a CFO to evaluate the ability of their chosen software to scale with them. Moreover, if CFOs are able to select applications which they can guarantee long-term partnerships with, this could in the future see them achieve cost-saving through exclusive loyalty schemes.
- Objectives – when in the midst of deploying a brand new tech stack, CFOs should always be mindful of what they wish to achieve. Not only will this keep them accountable, it will also ensure that they think critically when reviewing what software to adopt.
- Security and Compliance – introducing a host of new technologies into a business is a complex activity. Unfortunately, often things can go wrong during implementation or even afterwards. Moreover, whilst offering numerous benefits, contemporary technology is also more susceptible to hacking, especially if it is hosted online.
Every financial leader appreciates that the data they operate is highly sensitive. As a result, when selecting software for their tech stacks, CFOs should always consider both the security credentials and support services of their potential acquisitions should the worst happen.
Tools every CFO should have in their tech stack
Critically reviewing what it is that you’re seeking in a financial tech stack will leave you with the best possible answers. However, what you seek from a tech stack in your ideal world might not be readily available.
Nevertheless, there are many amazing pieces of technology currently on the market which not only have tremendous reputations and out-of-the-box capabilities, but also have the ability to be molded into your ideal vision. Below are therefore some of our top picks across the key areas of every CFOs’ tech stack:
- Reconciliation – the foundation of any CFO’s work is accuracy. As such, the core of their tech stack should therefore also be supported by a robust piece of reconciliation software. In our modern era, any piece of reconciliation software which a CFO seeks should also be automated to eradicate mistakes and reduce manual work.
An exemplary example of automated reconciliation software is Aurum. It possesses an unrivalled matching rate, an ever-growing list of APIs, is hosted offline away from the threat of hacks and is supported by an outstanding team of professionals. With Aurum, CFOs gain a secure piece of software which is designed to be built bespokely for every client and implemented quickly.
- Data Visualization – upon confirming that their data is in fact correct, financial leaders are always keen to put it to good use. In 2018, McKinsey outlined that data visualization was an area which was emerging as having the most promise for finance’s digital transformation. Getting data visualization right is therefore a big deal.
With that in mind, a reputable option to recommend for companies of various sizes is Tableau. From analyzing accounts receivable to monitoring expense data, Tableau is able to provide real-time visualizations which no spreadsheet could ever deliver. With such insights, finance teams are able to take charge of their metrics and plan strategically, rather than being reactive.
- Payment Processing – there are endless amounts of metrics which should be visualized for analysis but one which no CFO can ignore is the money their business is generating. There are many ways to assess this, with one contemporary way being the application of accounts receivable software like Chargebee. However, what businesses will really thank their CFO for is finding ways to increase the money they are able to take.
How companies do this typically varies depending upon their business model. However, Stripe vow to enable payment processing for e-commerce, SaaS, marketplaces and more. By employing Stripe with its vast amount of APIs, compatibility with over 135 currencies, and dynamic checkout page, CFOs have a way to instantly make it easier for their business to take payments from a wider range of consumers.
- Payroll – for a company to bring in money, there is no getting away from them expending money first. One source of outgoings which is both regular and extremely important to keep a company operating smoothly is that of renumeration for their employees. It is therefore something which can’t fail.
Unfortunately for financial leaders, it is a lengthy process which can sap resources away from initiatives which could even increase employees’ renumeration! This is why the likes of Gusto now exist. With an easy to use interface and a brilliant feature of automatically calculating taxes, vacations, expenses etc. relative to earnings, Gusto reduces both human error and time when it comes to sorting payroll.
How to keep your tech-stack futureproofed
Investing in technology is rarely a low-cost expense in monetary terms. Plus, in the worst-case scenario, adopting the wrong software could be costly in terms of security breaches, time lost and staff morale. CFOs should therefore always review their tech stack choices with one eye on the long-term future.
Considering how rapidly technology advances, it is difficult to know whether financial products will still be as effective as they are today compared to in 3 years’ time. Just think about how often a new iPhone is released! However, the tech world can also be relied upon to provide an infinite amount of clues about what is in development. With that in mind, here are some of the hottest rumors regarding fintech currently which can help CFOs future proof their tech stack:
- A single source of truth – wherever data can be found it is leveraged, so much so that it is the source of AI’s continued development. As a result, it now seems that every application provides a way for data to be analyzed. This is great but it does result in disparate data sources, making it difficult for any finance professional to build a complete picture of their business.
Alongside the growth of data is therefore that of APIs. This trend is making it less important for individual pieces of software to provide first-class data visualization, with the responsibility instead falling on large data warehouses which can extract information from various sources. In the future, a high quality single-source of truth within a CFO’s tech stack is therefore likely to compensate for the data visualization abilities of other applications.
- Keeping up with movement of money – transactions across the globe have always spun at a fast rate but in our modern economy with new payment systems, it is reaching new speeds. This makes good reading for businesses who are seeking additional consumers; however, it is already putting a big strain on back-office accounting staff.
A core responsibility of this profession is to deliver a clear picture of finances, which reconciliation plays a massive role in. This procedure is important not only to the internal business so that they can forecast with accurate numbers but also to auditors and regulators. Consequently, as more technology emerges to increase the rate of payments, accountants will be faced with a higher volume of increasingly complex transactions to deal with. Innovation in financial technology is therefore fueling itself with the importance of automated reconciliation software like Aurum becoming something which no business will be able to ignore.
- Crypto taxes – although cryptocurrencies are often billed as an independent way of trading which try to keep bureaucracy to a minimum, taxes still apply. Given the novelty of cryptocurrencies and the reputation of taxes being complicated, crypto taxes aren’t the easiest to comprehend.
However, if cryptocurrencies continue to become more commonplace, it is likely that in the future more businesses will begin to accept them as payment. To offset the complex tax rules which come with them, CFOs should therefore also be seriously thinking about adding crypto tax software to their tech stacks.
In the next CFO Chapter we will be taking a step back from technology and entering the real world of geopolitical relations and supply chains. You can find out more about this chapter plus the others which will feature in 2023 by clicking here.