A finance tech stack is a group of financial tools and software used to optimize the financial processes within your company. It’s called a stack because it usually consists of multiple tools and software that specialize in the wide-ranging financial processes such as accounting, payroll, operations, invoicing, forecasting, etc. There’s no one tool that covers all your financial processes, so you will typically be working with a handful of software platforms within your stack.
Your finance tech stack is there to make your life easier. Instead of doing all the financial processes manually and filling out countless excel spreadsheets, your finance tech stack automates the nitty gritty details and saves you and your team time. With all the time saved from manually inputting data entries, your CFO and finance team will be able to focus more on financial strategy instead of being bogged down by technical or repetitive tasks.
Your tech stack automates a lot of the manual work, reducing human error which is common while filling out excel spreadsheets. Within the SaaS business model, revenue recognition and the subscription-based contracts can be complex. Once your company starts growing and implementing up-sells and cross-sells, it becomes even more tricky. This is where your financial tools and software will come in handy to avoid any human pitfalls.
Your tech stack also increases efficiency as you scale your financial department. Instead of hiring more headcount once your transactions start increasing, you’ll have tools and software that can do the extra work that those new hands would normally do. Software can be pretty costly, but in the long run, these tools will save your company a lot of money and resources that would have otherwise gone toward new hire salaries.
There is no one-size-fits-all tech stack. Just because one company uses a certain tech stack filled with certain tools and software, does not mean that your company should incorporate those same tools and software. In fact, if you do, you’ll quickly see your company struggling to survive with wasted time and money.
Every SaaS company should tailor their tech stack to their specific needs and what is relevant for them in the stage that they find themselves in. A recently founded startup that is still testing out if they have any market potential will have vastly different needs than a company that is ready to go public.
Here’s a simplified outline on what your finance tech stack should consist of as your SaaS company evolves:
At this early stage, your transaction volume is low and you are just figuring out if your product has any market fit. However, you still need to start building a base for your financial tech stack. Here, incorporating a cloud-based accounting software should be your main priority. All the technical financial processes such as bookkeeping, payroll, accounts payable, etc. will be automated and save you time and resources so you can keep your focus on developing your product. Some of the most common SaaS accounting software platforms are QuickBooks and Xero.
You’ll also want to start investing resources into invoicing and billing technologies in preparation of your sales increasing as your company grows. Similarly, you’ll also want to start looking into revenue recognition technologies that will keep all your revenue in compliance with Generally Accepted Accounting Practices (GAAP). Your early stage finance tech stack is crucial as it is the foundation for your tech stack before your company can scale.
During the growth stage, your company has found market fit and is beginning to scale. With that comes increased transaction and sales volume that makes everything finance much more complicated. Here, you’ll want to invest into payment and subscription management tools such as Stripe and Chargebee to keep all your deals and payments in order. You’ll also want to invest in CRM tools such as Salesforce or HubSpot. With more deals being closed and more cash coming in, you’ll want to start implementing technologies to manage all your company expenses as well as the commission plans for your sales team.
As you scale, you should also start incorporating tools and software for SaaS dashboards, reporting, and forecasting as these tools will help you make data-backed decisions for your company’s future. As you experience hypergrowth, automating your financial models will allow you to organize all your data into manageable information. At KPI Sense, we aggregate your data into consumable dashboards, reports, and forecasts so you can get the answers you need, whenever you need them.
Once you’ve hit the late stage, your finance tech stack should be solidified. Any and all financial processes should be automated as much as possible to make your finance team’s lives easier. Your company is done scaling and starts to focus on your existing customer base to drive profits. You’ll start focusing on up-sells, cross-sells, and upgrades which makes all your financial processes much more complex. Therefore, you’ll want to make sure all your tools and software are up to the challenge. Specifically, you should invest in a stronger accounting and revenue recognition software and tools that can incorporate all your contracts. Your accounting software like Xero and QuickBooks may need to be upgraded to more complex ones such as Oracle or Netsuite.
Overall, in this stage you’ll want to look at all your tools and software and either build more automation layers on top of them or even migrate to new tools that hold all the capabilities that your company needs.
Remember, your finance tech stack evolves as your company evolves. You shouldn’t go straight to using complex tools and software right from the jump. Those higher-grade tools will be too complex for your needs and will do more harm than help. Start simple as your team will need to learn how to manage all the tools at the pace that your company is going. However, you should always be thinking one step ahead, invest in tools that are adaptable as you grow to avoid data migration in order to implement a new tool. Get tools that you can use for the long run and have the ability to build layers of automation as your company grows.
However, implementing a new tool to replace an outdated one is not always avoidable. In fact, you’ll probably find yourself more often than not implementing a new tool as your company grows. When this does happen, make sure to be diligent in your data migration during implementation in order to avoid more time and money wasted if things go south.
It’s also important to note: one of the biggest areas we see companies stumble in regards to their tech stack is actually quite simple: Reading the instructions! While you may be eager to jump right into things, you could be missing out on important features or filling in form fields incorrectly, leading to complications and errors down the line. Take advantage of any tutorials, lessons, and other instructive materials provided with your onboarding (and beyond). If you find yourself in need of a team familiar with financial tech tools to help you make sure everything is in the right place and get your finance function in good shape, give us a shout!
Lastly, one of the most important things to keep in mind when investing in new tools and software for your company’s needs is to try to integrate as much as possible. If a potential tool can integrate well into your finance tech stack, it will make your finance team's lives that much easier. Integration within the tech stack will make automation run even more efficiently and be more beneficial for your team to be more strategic versus technical.