Transforming Accounting from a Compliance to a Competitive Advantage by Sasha Orloff | Wednesday, July 11
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Hello friends and startup enthusiasts,
From starting my career in finance over two decades ago, to scaling the FinTech world through ten years of startup experience, I’ve witnessed transformative changes that have reshaped the industry.?
And one thing holds true, embracing technology and automation is imperative, and failing to do so creates clear winners and losers.?
The last two companies I founded scaled to over $100M. Of the many lessons learned and mistakes made, the one that stood out the most is how accounting can either be your competitive advantage or eventually becomes your downfall.?
As with any analysis, the value depends on the accuracy of the data - garbage-in means garbage-out.?
Let's break it down in simpler terms.?
If you start with lousy data, you'll end up with lousy results. That's why accounting steps in as the solution to the "garbage in" problem in financial analysis. It's all about organizing and reviewing financial information, so companies can make informed decisions about things like investing, funding, and managing expenses.
For decades the accounting process has been very manual – data silos, decades-old accounting software, begging engineers to help move data – this process usually takes weeks, and is prone to errors.?As a result, we made decisions the old-fashioned way – debates that resulted in the loudest voice or the most senior person in the room making the decision.?
Now with the emergence of platforms like Plaid, API-native finance solutions, and the advent of autonomous accounting, the industry has unlocked a new level of data-driven insights, available in real-time.?
Turns out, we can have the best of both worlds – financial data and debate.
Data-driven decision-making is now possible
Many first-time founders, myself included at the time, fail to recognize the significance of knowing the true financial health of your business. It’s easy to get distracted with closing the next deal or locking in the next candidate, without truly understanding your business drivers, or how investors value your business.
I reflect back to the time when I was building my previous companies, LendUp and Mission Lane. There would be moments when I needed quick insights for myself, an investor, or a board member.
Most of the time our accounting team was still in the weeds trying to wrap up the month-end close. The lack of real-time financial insights, because so much time was spent on mundane tasks like data entry and categorization, can cause a company to lose sight of critical insights that point to their company’s financial health.??
The end result is typically making important financial decisions without data, which can result in the final decision being the loudest voice or the most senior person in the room.
This was not just a one off problem, but one that I found again and again, As I interviewed 100+ founders and CFOs and it turned out to be extremely common.
The power of real-time data?
Over time we’ve witnessed some obvious shifts in the market, but the most notable and impactful on data was the introduction of the cloud and its impact on major machine learning and analytics processing. We’ve since watched new API-native technologies come in and rival the seasoned veterans in the space. We are seeing Stripe replacing Chase Paymentech, Gusto and Rippling replacing ADP, Ramp, and Brex replacing American Express, and Mercury replacing legacy banks.
What do all of these modern companies have in common? They all built APIs. And APIs allow data and data sharing to become available like never before.
These platforms now play a critical role in providing reliable and accessible data that fuel automation and innovation in areas like accounting software. These data pull essentially mimic “data streaming” which makes real-time financials possible. Pair this vast amount of data with the power of AI and machine learning, and you have an intuitive platform that creates financials instantly and cuts down the amount of human effort needed to create and gain insights from financial data.
Data, automation, and AI
“Quick” Books and Netsuite solved the accounting garbage-in problem through a series of multiple manual steps. This creates multiple opportunities for accidental human error or even fraud. We know this to be true as there are up to 4 review steps in validating the accuracy of financial statements – bookkeeper, accountant, auditor, and auditor of auditors.
But times have changed, and so have software capabilities.
By combining modern software, the availability of streaming finance software, and metadata, we can now use advanced AI algorithms and automation to achieve unparalleled financial clarity. Modern accounting solutions can even generate financial statements fully autonomously, that can cite the source data directly. What that means is informed decision-making, risk management, compliance, and resource optimization are now within reach, ultimately driving business success, now available in real-time.
No business should have to make important decisions based on stale and outdated financial data. With modern-day advancements, autonomous accounting is now possible, and accounting can be a competitive advantage for every company.?By embracing this powerful combination of data and automation, businesses can achieve unprecedented financial clarity, make informed decisions with data, and drive their organizations toward success.
Here's to a future where autonomous accounting becomes a cornerstone of financial management and propels businesses to new heights.
Rooting for you,
Founder & CEO at Puzzle, Empire Startups Contributor
The Empire Startups Contributor Model is a chance for writers and thought-leaders in the FinTech space to share their ideas and expertise with our ever-growing audience. Our model is is merit-based and does not offer monetary compensation.
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