Having spent 20 years heading SVB's fintech sector, and now as Liquidity Group's N. America CEO, I've often come across some tools that growth-stage startups should embrace to get the job done. I’ve found that the role of CFOs in growth-stage startups extends beyond traditional financial management. The pressure is not just to be precise and effective but also to build a workflow that reduces company workload without compromising quality. In fact, for many industries, fintech included, modernizing the CFO's tech stack has become a prerequisite for success.
The smart, modern CFO's tech stack should not only include tried-and-true methods but also embrace innovative tools. These tools should streamline financial tasks and support data-driven decision-making. This includes advanced solutions for everything from financial planning and risk management to spend management and capital table management.
Let's explore the tools that should be in every CFO's tech stack.
Out With the Old
As businesses grow and mature, their financial infrastructure becomes more complex and requires advanced tools to efficiently manage financial operations.
"A good sign you need to update your CFO's stack is when your team is doing manual tasks repeatedly or if more of the time is spent on gathering data rather than driving insights," said Rose Punkunus, CEO of Sudozi and a former CFO for Uber.
Remember that a lot of common technologies we all loved a few years - or decades - ago are no longer useful today. You should avoid:
- Manual Data Entry: With the rise of Optical Character Recognition (OCR), voice, and even AI-based content ingestion, manual data entry is a relic of the past. Stamp it out when you see it.
- Legacy Systems: Older financial software that doesn't support API integrations can hinder growth and scalability. Do an audit of your current systems and find stuff that just doesn't work anymore.
- Paper-Based Invoicing: Not only is it environmentally unfriendly, but it's also less efficient and prone to errors. If there is paper anywhere in your compliance chain, remove it.
- Isolated Financial Tools: Tools that do not offer cross-software integration can create data silos, making combined financial reporting a challenge.
"Say we're talking about the procurement process. If the finance team is routing requests to different people for approvers, it's probably time to get some workflow automation instead of having your finance team re-route emails," said Punkunus. "In a data-gathering situation, if you're constantly downloading the data from one place and creating new pivot tables in Excel, see if there's an FP&A tool that can help consolidate the data sources so the team is spending more time deriving insights or re-forecasting."
Financial Planning and Analysis (FP&A)
A crucial element in the CFO's tech stack is FP&A software. Solutions like Adaptive Planning lead the way by enabling CFOs to generate accurate financial forecasts, analyze cash flows, and make strategic decisions based on real-time data. These tools help identify trends, anticipate risks, and provide financial stability by supplying actionable insights.
Other favorite modern tools are Tableau and Looker. These are powerful data visualization tools that allow CFOs to extract actionable insights from financial data. They can pull data from multiple sources, offering a comprehensive view of the company's financial health. If you're looking for something for a growth-stage startup, Cube Software has entered that niche fairly recently.
Two key components of modern FP&A tools are standardized databases and custom quantitative tools. Standardized databases make sure that data is consistently structured, enabling accurate analysis and comparisons across different periods or business units. This also makes it easier to pass that data on to partners and potential investors. Quantitative tools are essential in interpreting and analyzing complex financial data. We now recommend creating a position akin to a CTO of finance - a programmer dedicated to revenue growth. This CTO for the CFO should have the skills necessary to manage modern AI models and, more importantly, understand the vagaries of financial reporting.
Effective risk management is more than just identifying, assessing, and mitigating potential risks. It's about having the right software to automate these processes, guaranteeing regulatory compliance, and protecting the company's financial well-being. Therefore, it's essential to consider solutions specifically designed for the needs of late-stage startups.
One of the primary benefits of effective risk management in late-stage startups reduces potential financial losses and the protection of the company's assets. CFOs need to analyze the financial risks faced by their organizations and implement strategies to mitigate these risks. This could involve implementing internal controls, insurance policies, or contingency plans.
Furthermore, a proactive approach to risk management can help CFOs identify potential opportunities that may arise from managing risks effectively. For example, by using AI tools like Datarails to analyze market trends and emerging risks, CFOs can identify areas of potential growth or new revenue streams. As they anticipate and respond to risks, CFOs can position their startups to take advantage of commercial opportunities that competitors may overlook.
Real-life examples that highlight the importance of risk planning. Companies with a strong risk management culture could navigate the COVID-19 pandemic more effectively by having contingency plans in place. These companies minimized disruptions, adapted quickly to changing circumstances, and even found new market opportunities.
Risks are piling up on the horizon, and without the right tools, a bump in the road can turn into a real crash.
Streamlining CFO Duties
Modern CFOs handle myriad responsibilities that extend beyond traditional financial oversight. Innovative solutions are necessary for efficiently managing spend, capital table, stock options, expense reimbursements, and cash. Tools like AirBase for spend management, Shoobx (recently acquired by Fidelity) for cap-table management, and Arc for cash management are transforming how CFOs operate, enabling a more strategic approach to financial leadership.
Managing payments and expenses efficiently is a game-changer for startup CFOs. Platforms like Brex and Ramp are revolutionizing this space, offering greater control over company spending and significantly reducing business costs.
Next, we come to payment and expense platforms like Stripe, Square, and Expensify. By having complete control of inflows and outflows and reducing the costs of doing business, the smart CFO can reduce their bottom line. For travel expense management, TravelPerk is a useful tool for tracking overseas spend.
Mastering spend management is essential for any organization focused on sustainable growth. AirBase presents itself as a remarkable solution, offering capabilities that extend beyond traditional expense tracking. This platform integrates the entire non-payroll spending procedure into a single, coherent system, encompassing everything from initial requisitions to final reconciliations.
Automation plays a crucial role in freeing up capacity for finance employees to focus on more strategic work. By automating manual tasks such as data entry, reconciliation, and reporting, finance professionals can redirect their time and energy towards analyzing financial data, generating actionable insights, and providing strategic advice to the executive team. This shift allows CFOs and their teams to contribute more value to the organization by driving financial stability, resource allocation, and strategic planning.
One company that we've been looking at, at least from a CRM standpoint, is C3.ai. Because customer revenue is the key driver of a CFO's success, adding AI and automation to the invoicing process, the customer acquisition pipeline, and even the sales funnel is now vital.
“While modeling and spend management is now table stakes, we’re focused on core accounting automation using generative AI for our clients,” said Arman Zand, CFO at Zeni, an AI-powered accounting tool. “This is rapidly becoming standard practice and falling behind and neglecting to embrace cutting-edge tools means higher costs and more manual work for your teams.”
CFOs are also integral to the HR process. In a competitive landscape, middle-market companies can compete for talent against large corporations by focusing on purpose and offering accelerated career advancement opportunities. Middle-market companies can emphasize their unique mission and values, appealing to individuals who seek meaningful work and a sense of purpose. Additionally, by providing clear paths for career growth, middle-market companies can attract individuals looking for rapid advancement and the opportunity to take on greater responsibilities. Add in a smart payroll system like Gusto and you've got a well-oiled engine running at peak performance.
Making Data Work for You
While many executives will grab one or two new tools, it makes sense to try nearly everything. Why? Because we won't know what we're missing. Exploring tools that make data management more accessible and our jobs easier just makes sense.
"In the current market, the ability to quickly access and interpret real-time data isn't just convenient; it's critical to a company's survival and growth," said Ron Daniel, CEO and co-founder of Liquidity.
The modern CFO must not just manage data but turn it into an actionable strategy. They must also use tools that support their current staff. Look for tools that streamline your work, not just replace headcount with so-called AI advisors and other tools. The hybrid model of humans and software will always win.
"As a CFO, you improve your stack when there's a repeatable part of the process because this allows you to deploy your team members to the frontier of new challenges and tasks," said Punkunus. "CFOs are expected to manage more and more data to help drive revenue forecasts and strategic decisions for the company, and you just can't waste human capital resources on your team doing manual, repetitive data tasks."
Dan Allred is Liquidity Group’s North America CEO. Allred is a fintech professional and spent two decades at Silicon Valley Bank (SVB), most recently as a Senior Market Manager and Head of the National Fintech practice. He is also a member of the board of directors for FS Vector and an advisor for Modern Treasury.