Optimising your start-to-scale business’s tech stack For financial operations
The transition from the bootstrapping phase to a scale-up venture is one of the most significant moments in a business's journey, and it often requires an overhaul of several systems.
The first of these is often the financial operations. At the start-up phase, a business's financial systems needs can be met with some downright primitive solutions. Excel spreadsheets are not even out of the question. However, as the business grows, the increasing complexity of its financial function requires a more efficient and scalable system, both as a matter of compliance and as a way to drive efficiency for the finance team while minimising the risk of human error.
This doesn't necessarily mean you need to find a tech partner and undertake a grand technology transformation. Since you'll be effectively starting to build the stack from scratch, it should be a relatively straightforward project that your internal IT resources will be able to handle by working with the finance team.
Some of the main considerations when it comes time to build a financial operations tech stack include:
Establishing Efficient Accounts
The foundation of financial efficiency lies in the setup of streamlined accounts. Businesses that enter a scale-up stage must ensure their accounting systems are capable of handling rapidly increasing transaction volumes while providing clear visibility into financial health. "Cash flow problems" are the fourth largest reason that early-stage companies fail, and this often has to do with the decision-makers losing track of how the sudden increases of money moving into and out of the organisation are affecting it.
Adopting a well-regarded and feature-rich cloud-based accounting software can offer real-time financial data, facilitate remote collaboration, and integrate seamlessly with other business systems – it can help finance teams identify and flag cash issues before they harm the company.
Payroll Systems That Scale
The payroll system needs to be flexible and scalable so that it can manage the expanding team. It should accommodate different employment types, tax jurisdictions, and benefit schemes. Perhaps most importantly, it needs to avoid the risk of error, which the automation of payroll processes can do. Statistics suggest that as many as one in three companies make a mistake every pay run and that 41 per cent of employees have to discover these mistakes themselves. This can be a particularly impactful risk for a scaling-up company to manage without the support of automation.
Reporting Processes for Informed Decision-Making
The third priority when searching out a tech stack to support the finance team is to find technologies that assist with accurate and on-demand financial reporting. Businesses that are in the scale-up stage are going to go through rapid change, and the leadership team needs to be able to access good quality data in as close to real-time as possible to better inform their decision-making. The right technology solution can help the finance team establish reporting processes that provide insights into cash flow, profitability, and other key performance indicators and make it easily (but securely) accessible to stakeholders and designed to support both strategic planning and day-to-day management.
Selecting an Optimal Tech Stack
In addition to addressing the above business imperatives, the ideal tech stack should:
- Integrate with existing systems to create a cohesive ecosystem.
- Automate routine tasks to increase efficiency and reduce the risk of human error.
- Scale with the business, accommodating new markets and complex financial scenarios.
- Comply with regulatory requirements, safeguarding the business against legal and financial risks.
Dangers of Getting it Wrong
Financial processes are a key factor to attracting investment. There are significant risks in getting it wrong, including:
- The business may not be able to properly substantiate its numbers (i.e. potential overstating of profits and net assets);
- If there are questions raised around financial management, this can lead to doubts around management's ability across other business areas and/or increased scrutiny in those other areas; and
- If your potential investor believes financial processes are "failing" at current business size, then this is an indicator that detracts from the business' perceived ability to scale.
This is why it is important to carefully evaluate every application and tool that you bring into the financial systems stack. If there are any incompatibilities or conflicts, or the business lacks access to the technical capabilities of a well-resourced IT team, it can be difficult to address the challenges and eliminate the risk of those incompatibilities causing damaging errors.
Startups that are proceeding into scale-up growth do need to prioritise the optimisation of their financial operations. For many businesses at this stage, it is the first meaningful investment into operational technology. By finding the right mix and then leveraging that technology to establish efficient accounts, scalable payroll systems, and insightful reporting processes, the finance team can be instrumental in establishing sustainable growth and success in the competitive landscape.
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