It’s been over 30 years since the internet began to disrupt business systems and processes. It’s not a massive revelation to say that finance teams are using technology more than ever. And yet the pace of technology integration into the finance function has been slower than many other areas of a typical business. The lack of a modern finance tech stack limits visibility, resiliency, and agility.
A big part of this lag is that despite all of the advancements in software capabilities and data connectivity, banking and financial services companies are typically running on old and siloed IT infrastructure.
The complexities of the banking system and the amount of tech investment they’ve made over the past three decades has created a substantial amount of technical debt, making digital transformation within a bank challenging.
According to McKinsey, the average age of a traditional bank’s IT applications is 14 years, compared to a digital bank at just 3 years.
The end result is that it has typically been difficult for finance teams to access their banking data in an efficient way. Something as simple as a real-time cash position has required hours of manual work.
That’s all changing with the rapid growth of Open Banking APIs. It’s the technology that underpins almost every aspect of the modern finance team’s tech stack. There are now a huge array of software options that provide better access to data, and more control over how that data is analyzed and reported on.
In this article, we’re going to take a look at some of the most important technologies that every finance team should be looking to implement in their workflow.
The Changing Face of Finance
The use of APIs allows software platforms to talk to each other without the need to create a bespoke data connection between them.
APIs give banks the ability to improve their customers’ user experience, giving them far more flexible access to their financial data, without the risk associated with changes to their own tech infrastructure.
It couldn’t have come at a better time.
Finance and treasury teams are being expected to become more than just historical scorekeepers, tallying up numbers to present once a quarter. CFO’s and Treasurers have seen their remit widen to include involvement in the strategic direction of the company. They now also assist with stakeholder management and provide input on investments in technology and other avenues for growth.
The evolution of the role is being embraced, with a recent PwC Pulse Survey showing that 43% of finance leaders believe that establishing finance as a partner to the business is one of the top three priorities for the finance function in the next 12 months.
Data accessibility and flexibility is at the heart of this changing role. The right tech stack enables finance teams to easily analyze and report on data, without the need for manual consolidation of siloed information into spreadsheets and PDF reports.
Without API-enabled data aggregation, finance teams simply won’t have sufficient visibility, operational efficiency or collaborative capabilities that they need to meet the changing demands.
Recommended: Check out our recent episode of Fintech Corner featuring John Bolden, Treasury Director at City Storage Systems, as he shares how APIs are transformed his team’s operations and how this cutting-edge technology is creating a wave of new possibilities in finance.
6 Essential Solutions for a Modern Finance Tech Stack
Every finance team will be different, but there are a number of core tech solutions that leverage APIs and data visualization tools to enhance their capabilities and provide oversight of the company as a whole.
1. Enterprise Resource Planning (ERP) System
It’s worth covering ERPs first, because they act as the centralized hub for all of a company’s data. This isn’t just limited to financial data. Instead of just focusing on a single department or business process, an ERP system integrates data from HR, procurement, finance, manufacturing, supply chain, inventory management, customer services and more.
ERP systems can be big, unwieldy beasts. They offer a massive level of customization and the ability to integrate data from just about any system imaginable (including via APIs). But they also require custom setup and integrations, with dedicated infrastructure such as on-premises server hardware.
The bespoke nature of ERP implementation results in an average timeframe of 21 months for full setup.
This complexity and architecture means that ERPs are generally very expensive to implement and maintain, requiring substantial professional resources to manage it on an ongoing basis, on top of the costs of the software itself.
As a company scales these costs increase, with add-on modules each coming with their own subscription fees, and customizations require professional input at a substantial hourly rate. A full ERP such as SAP or Oracle Netsuite can cost a business well into six figures to implement and the same or more to maintain on an annual basis.
Depending on the size or complexity of a company, this may be a worthwhile investment or an unnecessary expense. For finance teams specifically, an ERP will offer modules that cover all of the tech stack inclusions we’ve listed below.
For companies that don’t have the need (or budget) for a full ERP system, there are a huge number of standalone providers that offer the same or better functionality for each part of the business process.
2. Payments Platforms
The right tech stack starts with the point of sale. Regardless of whether a company is a B2C operation making thousands of transactions a day, or a B2B enterprise business doing a much smaller volume of high value transactions, they need a platform to accept payments.
There are a wide range of solutions for companies of all sizes. These include specialist payment platforms such as Stripe or Adyen, as well as payments integrations into ERP systems such as Oracle’s NetSuite or SAP.
For finance teams, a payments platform isn’t just about collecting money. It’s also about collecting data on how and where that money is received, accessing features to help improve conversions and reduce fraud, plus the ability to scale to multiple channels and geographic regions.
APIs are the ‘pipes’ that connect this payment data to all of the other software in a finance team’s tech stack.
3. Spend Management Solutions
Where payments platforms provide the tech needed to collect money and gather payments data, spend management software does the same for expenses. These tools allow finance teams to track and control spending across the whole organization.
This can include large expenses such as vendor payments, office leases and subscription costs, down to individual expense items from the sales and marketing teams. Spend management tools also offer features to help limit spending and improve efficiency, such as setting and changing limits on corporate credit cards, and automating the employee reimbursement process.
The use of APIs allows the transfer of all of this data into an ERP system or accounting program, removing the need to manually track how and where money is being spent.
There’s a lot of variability in the solutions on offer in this space. Some providers such as Ramp focus mainly on corporate credit cards and employee expenses, others like Expensify which take a broader approach focused at smaller businesses, and sophisticated add-on modules to large ERP systems.
SAP, for example, offers three separate spend management modules for its ERP system. SAP Ariba for direct and indirect spend, SAP Fieldglass for external workforce management, and SAP Concur for travel and expenses.
4. Payroll Software
Payroll will be the largest expense for many companies. Giving the specific requirements of payroll, it makes sense to operate a separate platform for it. Many accounting software providers offer payroll functionality as an add-on, and of course there are modules for ERP systems for core HR and payroll functionality.
These platforms don’t just have to deal with sending payments from company accounts to an employee’s. They can also facilitate payments relating to benefits and automated tax calculation and withholding. All of these features speed up the payroll process and simplify the monthly close.
API functionality connects a company’s HR software to payroll to their banking portal directly. This allows for seamless data transfer and payments, so that your employees are paid what they’re owed, on time and with minimal manual input.
Some well known examples in this space include Gusto, Rippling, and ADP.
5. Accounting Software
The next pillar in a finance team’s tech stack is likely the first that would generally come to mind. Accounting software is an obvious requirement, providing core accounting functions like accounts payable/receivable, general ledger, and financial reporting.
Connectivity is hugely important for accounting software. Integrations via APIs can connect other software such as payments platforms and spend management solutions, to partially or completely automate a large proportion of the reconciliation process.
Standalone accounting software in this category includes Xero or Quickbooks.
6. Modern Treasury Management Software
Once that cash is in company accounts and reconciled, it’s the Treasury’s job to manage it effectively. The function can vary from company to company, but the one expectation that is universal is the need to be able to provide a consolidated cash overview at any given time.
Taking this a step further, modern treasury teams need to have the capability to pull data and build reports on cash holdings, across every entity and account within the business.
For example during the collapse of SVB and some other regional banks around that time, Treasury would have played a central role in quickly identifying a company’s exposure to at-risk banks, to guide decisions on where and how to move money to reduce risk.
An API-first platform like Trovata allows Treasurers to see all of their banking data in one place, with the ability to easily manage cash at both a corporate level, and within each individual entity.
There’s no need to manually login to each banking portal and then consolidate the data into a master spreadsheet. APIs feed the data directly into Trovata, giving users a real-time, 100% accurate view of company accounts.
APIs also facilitate the ability to make payments and maximize yield through efficient allocation of cash. Trovata also provides the ability to analyze and report on a company’s financial data, building forecasts and scenarios on future cash positions.
This enhanced overview is combined with the ability to dig into the details of past transactions. With AI and machine learning integrations combined with sophisticated tagging and advanced search capabilities, users can find transactions and analyze trends without the need to manually go through thousands of individual line items.
Building a Scalable Tech Stack
At the center of these new levels of connectivity across the entire finance tech stack are APIs. Even traditional, server based ERP systems offer API integrations with modern, cloud-native applications.
For companies looking to grow, the scalability of API-first, cloud native software offers huge advantages over legacy systems, with the ability to implement and update in days, rather than months. That saves time, and substantial amounts of money.
Trovata gives finance and treasury teams the ability to manage and analyze their cash position in a way that isn’t possible without the use of APIs. The platform acts as a central data lake for all your cash balances and transactions, connecting all of a company’s bank accounts into a single source of truth.
That’s every single one of your transactions, every dollar of cash in every bank account your company has, in real-time, on a single dashboard.If you’d like to learn more about how Trovata could transform your cash management, download our data sheet.
