FinOps tools: How mature is your tech stack?
Published on May 9, 2024
Finance operations - or FinOps - consists of accounting, financial planning, and analysis of a company's financial health. It often involves the revenue cycle, billing, tax compliance, and regulatory requirements, among many other processes.
Finance operations play a key role in making strategic business decisions to drive growth.
But FinOps are often riddled with a lot of labor-intensive and repetitive tasks. If done manually, these processes require juggling between multiple data sources, are prone to errors, and can be time-consuming.
And that's why you need a full, high-functioning FinOps tech stack. In this article, we'll examine what to look for as your build your finance toolkit.
The evolution of company FinOps
In the early growth stages, you may rely on spreadsheets for your day-to-day FinOps. But as you scale and your finance workflows grow more complicated, involving multiple functions, you'll soon be drowning in a million spreadsheets that are time-consuming as well as error-prone.
Relying only on spreadsheets as you scale ultimately leads to misalignment and missed insights.
Finance operations in the subscription business model play a critical role in plugging all the revenue leaks in the revenue cycle. In a rapidly scaling SaaS business, there are several complex FinOps workflows. Take processing refunds or reverse taxes, for example. And let's not forget reconciliation and revenue recognition for the recurring revenue model.
Traditional finance operations are just not cut out for that.
Signs you need to upgrade your FinOps tech stack
These are some of the telltale signs that your FinOps workflows are starting to develop cracks and inefficiencies:
Your current systems are hard to use and difficult to change.
You spend a lot of time reconciling asynchronous data in multiple spreadsheets.
It takes too long to collect and manage data for essential processes like budgeting and forecasting, and it's full of errors.
Reporting and analytics is a painful, repetitive, and multi-day process. You spend a lot of time correcting and reproducing reports.
If you identify with one or more of these telltale signs, then it's time you start re-thinking your FinOps tech stack.
Things to consider when choosing FinOps tools
Your FinOps tech stack should enable you to scale as you experiment and implement process changes across functions.
These are the things to keep in mind when choosing your FinOps tech stack:
Automation
Depending on your specific workflows, you can decide what to automate and what not to, but the automation should save time and let you focus on strategic decision-making. Automation also goes a long way in eliminating inconsistencies and plugging revenue leaks.
Take a look at how CircleLoop automated revenue operations to align sales and operations seamlessly.
Integrations
Finance teams have to extract data from multiple systems across functions, such as billing software, HRIS, spend management tools, and more.
Integrations play a vital role in seamlessly collecting all the information without creating new workflows each time or breaking existing workflows.
Compliance
As a scaling business, you want to explore opportunities across the globe. Your FinOps tech stack should enable you to do so without having to worry about regulatory requirements like tax and payment compliance.
Strategic alignment
Every business has goals and strategic initiatives to achieve those goals. The tech stack you choose should align with your strategic vision.
Think long-term and choose a tech stack that will scale with your organization's growth.
How to make your FinOps a well-oiled machine
So, what should an ideal FinOps tech-stack look like? Considering that FinOps teams work with multiple functions, the tech-stack should consist of the following:
Accounting software
Accounting automation software forms a central part of the tech stack—an accounting software tracks financial transactions and the business' general ledger.
ERP accounting systems help connect information from all functions and processes. They let you make timely and data-driven decisions. Xero, Quickbooks and NetSuite are some well-known examples.
Accounts receivable/payable management
Processing invoices is a time-consuming activity. AR/AP management software can manage complex workflows such as refunds and one-time add-ons. They also save time by reconciling a large volume of invoices.
AR/AP management software can also identify at-risk customers by assessing credit so that you can reassess your collection efforts and optimize your cash flow.
Tax software
Tax software determines taxes, helps in compliance, reporting, and tax data management. They often are supported by integrations with systems across functions to become the single source of truth for all things tax. As you discover new business territories globally, tax software should also support different countries and regions' tax compliance requirements.
Having robust tax software in place will help you breeze through audits and regulatory requirements.
Spend management
Spend management software like Spendesk streamlines vendor as well as employee spend requests and approval processes. They help you get visibility over spending across functions, and effectively reduce unnecessary spending.
Payroll management
Payroll management software organizes all the tasks related to employee payroll and tax filing. It's often integrated with the Human Resources Information System (HRIS). It automates all the micro-administrative functions that are involved in payroll processing and makes the process error-free.
Billing management and analytics
Billing management systems manage all the billing operations for your organization. For subscription businesses, billing management systems like Chargebee automate the recurring billing engine and tackle all the complex scenarios such as prorations, payment terms, and dunning management. A robust billing system becomes a liaison between the GTM functions and FinOps to plug any revenue leaks in your revenue cycle.
Billing analytics help you monitor the performance of your business with relevant metrics. It helps to surface trends and red flags that all functions should be aware of to ensure smooth sailing for your business.
Conclusion
Finance operations play a critical role in your revenue engine. It's time they moved out of spreadsheets.
Armoured with a complete tech stack, finance operations will enable your business to scale new heights.