What to consider with your Finance Tech stack / accounting softwareMar 17, 2023
In today's rapidly evolving business landscape, having a the right software tools has become more important than ever.
For larger businesses this generally means finding and implementing a huge piece of kit such as an ERP.
For smaller business whereby an ERP is still too expensive, it's getting together an efficient Tech stack.
The right tech stack can help finance leaders streamline their operations, reduce errors, and improve decision-making.
For a start-ups or fast growth business, it also helps you to be more efficient with a small team and resources. Gone are the days of a team of 5 accounts juniors, when you can have one Finance Manager doing it all!
I want to give an overview of finance tech stacks and their importance, as well as tips for building a well-rounded tech stack for your business.
If you want to know what my Finance Tech stack is, then click here and it will be emailed to you.
What is a Finance Tech Stack?
A finance tech stack is a set of software and tools that you use to manage the day-to-day operations. A well-rounded finance tech stack should include all the necessary components to help your team to perform effectively and efficiently.
The components of a finance tech stack may vary depending on the size and complexity of the business. Some common tools that a finance tech stack could include are:
- Accounting software: The general ledger is the backbone of any finance tech stack. It allows businesses to manage their financial transactions, invoices, and payments, and generate financial reports. This is the obvious one!
- Budgeting and forecasting tools: These tools help businesses plan their financial future by creating budgets and predicting future financial outcomes. There are a few competitors out there. I haven't found one that has totally nailed it yet, but I'm looking forward to one that does.
- Financial reporting software: Financial reporting software allows businesses to create and share financial reports, including balance sheets, income statements, and cash flow statements. They also help with consolidation (thank heavens!) and board reporting. Again, some room for improvement here, however they are much better than consolidating in excel as a minimum.
- Financial operations software: This area has exploded and there are many tasks that can be automated and just as many options! There is payment processing software allowing businesses to accept payments from customers online and process payments to vendors. Invoicing software both in the receipt and data input of invoices as well as producing invoices, particularly for subscription based businesses or credit control. There are also expense management tools that allow you to track and manage employee expenses, including receipts and approvals. Payroll software automating the payment of employees and calculated taxes. Just to name a few.
- Business intelligence tools: these tools allow businesses to analyse and visualise financial data to identify trends and make data-driven decisions. If they are implemented well and have a strong data / BI team to support them than these are brilliant.
- Equity management software: This software helps businesses manage the CapTable by keeping track of all the investments or grants and the necessary reporting required. Excel can get very confusing after 1-2 rounds + employee share options!
- Customer relationship management (CRM) software: CRM software helps businesses manage customer interactions and track customer data. Generally sits with the marketing / sales team but the finance team can interact with this tool a lot, depending on the company.
These tools not only ensure efficiency but they can also help ensure that financial data is accurate, secure, and easily accessible.
Simplest Tech Stack
Not every business needs a complex and comprehensive finance tech stack. For small businesses or start-ups with basic accounting needs, a simpler tech stack may be more appropriate. The simplest finance tech stack typically includes:
Online Accounting Software – basic General ledger such as Xero and QuickBooks online. These tools can manage payroll, employee expenses, sales invoicing, and accounts payable. There will become a point when the transaction volume gets too big and an investment in a tool is warranted. However, to start with there isn’t a need.
Invoices / Payment tools - Ability to take payments online from customers, such as Stripe or PayPal. Or make simple payments – such as Spendesk or Brex.
A company can then always upgrade from here, again once the complexity or volume warrants it.
Building a Finance Tech Stack
When building a finance tech stack, there are some of the most important things to consider when selecting finance software and tools:
Cost: Some finance software and tools can be expensive, so it is important to select tools that fit within your budget.
It’s also worth considering the total cost of all the tools, especially with smaller businesses. Right now in early 2023, most finance tech stacks include multiple tools that plug into the General ledger. Each individual tool may not be overly expensive on their own, but once you add them all up, it can get quite expensive.
Integration: It is important to select software and tools that integrate with each other to avoid duplication of effort and to ensure that data is easily accessible across systems. I have found this to be particularly important when looking at cross functional software. For example, HR tools & Payroll. CRM tools & Sales invoices, etc.
Scalability: As your business grows, your finance tech stack needs may change. It is important to select tools that can scale with your business needs. Often, I find that the General ledger is the first thing that needs upgrading and therefore all the tools associated with the general ledger – so it’s worth being mindful of this when selecting what you want to use.
Security: Financial data is sensitive, so it is important to select software and tools that have strong security features to protect against data breaches.
User-friendliness: The software and tools you select should be easy to use and require minimal training to ensure that your team can use them effectively. This is particularly important if you have a very small team. I have worked with really large teams and we could afford a Technical Accountant (what a dream!), however, most fast growth businesses don’t have this luxury and therefore simplicity is key.
Time: Implementing a new piece of kit can be very time consuming! Ensure that you have the right resources available and try to schedule most of the heavy lifting around month end and year end (as well as holidays!)
Most In-Demand Tech Stack
As the finance industry continues to evolve, certain tech stacks have become more in-demand than others.
Most accounting software is now Cloud-Based and at the smaller scale, it’s almost unheard of loading software onto the team’s laptops. Some large high street bank still requires you to do this, but it’s starting to look very dated.
With the relatively recent launch of ChatGPT, AI and Machine Learning Tools are becoming more of a reality than fiction. It has existed within Accounts payable for a while, with AP tools that can read your invoices and input the data captured into your General ledger. This area is going to grow rapidly and I discuss this topic in "Are robots going to take over our jobs?!"
Trying to encourage non-finance teams to approve or interact with accounting software is always a challenge, but I have found that if they have a mobile app, it’s more likely. Particularly with virtual cards, employee expenses and approving payments.
One of the biggest areas of growth and will continue to be will be around Data Analytics and Visualisation. Again, this is much easier if you are working for a bigger company and an ERP, have business intelligence teams or Technical Accountants and a bigger budget. However, these tools certainly can help you make sense of complex financial data, and provide insights into key performance indicators and financial trends. I think these will become more and more important than what they already are to get that competitive edge and for the finance team to continue to add value to business and commercial decisions. It’s much quicker than using Excel charts.
Payment processing – gone are the days of just bulk bank transfers that take 2+ days to get to the recipient. We have seen an influx of payment solutions and I hear of a new one every week, whether that be a new card, FX solution or a banking option. I think this area will consolidate over the coming years and we’ll have a few clear winners. Let’s see.
By having a well-rounded finance tech stack is crucial for businesses today, regardless of their size or industry. Particularly important for fast growth businesses who are trying to keep up with the pace and the impending volumes with not many resources!
The right tools and software can help finance teams streamline their workflows, gain valuable insights, and better manage financial risks. It can also help businesses make informed decisions, improve operational efficiency and drive growth.
Here you can see my Finance Tech stack.
- Get your FREE Guide: Stepping into the role of Finance Director or CFO
- Follow me and let me know what challenges you are having right now.
- Register for the mini-course, Upgrade your Management Accounts and get noticed by the business
- Work with me in the new / aspiring FD course and includes Q&A sessions where we can discuss all of your questions and how to apply your learnings to your current role.