The earliest official accounting records are tax information engraved on clay tablets dating to around 3300 BC. These objects were discovered by archaeologists in Egypt and are believed to have been used by the Egyptians to monitor their pharaoh’s assets and uncover fraud.
The accounting system remains largely unchanged today. Basically, it is still an independent record of stocks and transactions. However, finance teams have since replaced clay tablets with technology and now have to manage a carefully curated selection of platforms. Every CFO’s technology stack includes software designed to manage financial activity, from payments, payroll and accounting to expense management, financial planning and analysis.
As the finance function continues to play a more diverse and strategic role within the organization and the volume of information collected increases, the technology stack becomes an increasingly vital weapon in the CFO’s arsenal.
In a perfect world, a tech stack should strike a balance between cost, functionality, reliability and scalability, but that’s rarely the reality. That’s according to Martin Edstrom, CFO of business services provider Paragon. “There’s no such thing as a perfect financial tech stack. It’s more about optimizing what you have and figuring out what works for you,” he says.
One size does not fit all
Andrew Kennard is the chief financial officer of VCL Vintners, a London-based online marketplace selling rare whiskey casks. For him, there is no one-size-fits-all approach to creating a technology stack. “Each finance function will have slightly different technology requirements depending on the size, culture and growth plans of the company,” he explains.
The perfect financial technology stack does not exist
Finance leaders are faced with an “overwhelming” number of tools to choose from and a limited budget, Kennard says. In these circumstances, it can be tempting to opt for all-in-one solutions, but he cautions against such an approach. “A technology stack will quickly become irrelevant if it doesn’t address the unique needs of the business,” he adds.
For example, VCL Vintners uses blockchain technology to record every step of the whisky process, from maturation to energy consumption. This means the financial system requires careful attention to consolidating data. By comparison, when Kennard worked in the fashion industry, most recently as CFO at Kanye West Ltd, he found it more relevant to use dashboards and visualisation tools to track sales. “The technology stack needs to reflect the mission statement of the company,” he explains.
As CFO of a global company spanning five countries, Edstrom must consider the needs of local management when selecting the right financial platforms. This meant sacrificing efficiency for greater operational freedom when choosing an accounting software vendor.
“Moving to a centralized platform would make life a lot easier, but it would take away our ability to operate autonomously,” he says. “As a finance leader, I have to think about how we operate, how we want to market, and how we incentivize people to use the technology we invest in.”
Finance functions tend to rely on disparate systems and technologies, making integrating new tools into existing workflows extremely difficult. For this reason, Edstrom believes the focus should be on incremental improvements rather than “massive amounts of innovation.” “Change cannot happen overnight,” he adds. “It’s important to have an end goal in mind and work towards it slowly.”
The Four Levels of a Financial Technology Stack
Evaluate your technology stack
As a company grows, its technology stack must evolve accordingly, says Julien Lafouge, CFO at fintech company Spendesk. Ensuring that technology is flexible enough to adapt to changing business needs is a challenge and is made even more difficult by the speed with which technology evolves.
CFOs need to look for the right balance between innovation and stability, Lafouge says. “It’s important to look beyond the hype around the latest features,” he adds. “You don’t want to have to constantly change tools, which can be extremely costly and disruptive to the team.”
Determining where the business is likely to be in five years and asking vendors for their product roadmap can help CFOs determine which tools are most compatible in the long term.
Equally important is knowing how to identify failures in a technology stack, says Vijay Padmanabhan, CFO at digital transformation company UST. This is something CFOs should constantly evaluate, he notes. Integration issues, slow performance, and security issues are some of the most common warning signs.
For Padmanabhan, ease of use is always the top consideration when making a decision about upgrading his tech stack. When it comes to automated tools, such as financial planning and analysis (FP&A) software, he emphasizes the importance of verifying data and balancing it with human judgment and intuition.
“Finance leaders must act quickly and abandon any technology that is not working as it should. Not acting quickly enough could be detrimental,” he adds.
Barriers to adoption
Despite the wide range of tools at their disposal, many financial professionals do not take full advantage of them. He says lack of training, inefficient processes and inadequate automation systems prevent CFOs from getting the most out of their technology tools. “If financial professionals used at least 50% of the capabilities of their tools, they would see a considerable increase in their efficiency,” adds Mr. Lafouge.
Poor data management is another common problem, says Kennard. “Businesses tend to have data silos where they have redundant or duplicate information that they cannot access. This means that businesses generate enormous amounts of unused information.
Before this, financial workflows like annual planning and quarterly reporting were managed in disconnected spreadsheets with no automation capabilities. This meant it took a lot of time to manually pull together information from disparate sources and make sense of it in a spreadsheet.
It is no longer enough to be trained in pure finance
Technological advances are further complicating matters and “fundamentally reshaping” the role of finance, according to Lafouge. “It is no longer enough to have training in pure finance. Applicants must have a certain level of engineering knowledge – or at least a desire to learn,” he says.
A study published by consulting firm Gartner predicts that, by 2026, 50% of all employees hired in the finance function will have a background in a discipline other than finance or accounting, largely due to rise of AI and automation.
Instead of spending their time and effort searching for the perfect technology stack, finance leaders should take a closer look at their own internal processes, skills and capabilities.
