As technology gets increasingly useful, most company founders are encouraged to think about their tech stacks even early on. Basically, your stack is the grouping of software solutions you use at your company. It’s called a stack because, in an ideal world, those tools stack together to create a system that functions together to drive results at your business.
In the early phases, integrating your stack can be simple. Copy-pasting a Zoom meeting link into Slack is a perfect example of how many early-stage companies “link” tools together in their stack.
As your company grows, its stack generally does, too — and the complexity of the integrations between solutions does the same. Fortunately, founders usually have a few years before they need to work on any sophisticated connections. Most popular softwares have integrations already built in that can serve you well in your early years.
That doesn’t mean you should skip planning your stack, though. The decisions you make about the software you adopt today have the potential to impact your company for decades to come.
We’re not software developers. But we are specialists in helping startups structure their accounting to scale with their business. Leveraging that expertise, we wanted to share some tips on laying the right foundation for your fintech (financial technology) stack.
The first building blocks
Rakesh Shah, who works as a fractional CFO for a wide range of companies, has advice: “Start off as you mean to go on. It will pay dividends years down the road.”
By this, he means carefully selecting and thoughtfully deploying fintech tools you plan to use long-term. For the vast majority of startups, the first component you lay down in your fintech stack should be accounting software. So we’ll use that as an example here.
As you choose and implement your early fintech tools, starting off as you mean to go on means focusing on these three areas:
#1: The right solution
At an early-stage company, there generally isn’t a ton of financial data to load in or a lot of accounts to sync. Still, it’s a lift to get a new accounting software deployed. It only makes sense to invest this time and energy if you’re confident the solution will support your company long-term as it grows.
Be choosy about the software you deploy. Most companies offer demos so you can see how the solution works and explore its uses at your startup. Take the time to get to know your choices before you pick an accounting software.
Specifically, steer clear of two common pitfalls. Don’t just choose the most popular option, and don’t choose the cheapest one, either.
While price and size are considerations, the needs of your specific startup are certainly as unique as the products or services you offer. Looking at large, established software providers does show you what a robust tool can do, and looking at cost-effective solutions can help you extend your runway. But make sure you’re exploring at least three options to find the right mix of functionality and budget-friendliness to suit your company long-term.
To help you get started there, we compared a big established player in the game — QuickBooks Online — against Wave, which offers a free accounting software platform.
#2: The right processes
It’s not enough to pick a tool and let individual employees run with it. If everyone is using it differently, you can end up with a mess. From duplicated data to missing receipts, your accounting software can quickly become more of a headache than a help.
As a result, it’s critical that you deploy processes alongside your accounting software.
First, you start by training your employees on the software. If people need to upload receipts for their expenses by a certain date each month, for example, host a staff meeting where you show everyone how to do that. Also, publish a step-by-step guide on your intranet that they can access later if they need a refresher.
As Shah advises, “Put the pieces in place so they can scale with you — and so your team can learn them.”
As you establish processes to support your accounting software, think through the roles and responsibilities at your company. Who owns what in the tool, and how do you make sure they know how to manage that well?
#3: The right data
It’s tempting to let your accounting software function as a data lake, assuming that all of the financial details about your company are getting stored there so you can recall them as needed. But if your approach is to simply dump data into the tool, your lake can quickly turn into a swamp.
To keep your accounting software successful as you scale, clean data matters. Beyond that, a clean data pool makes it easier to integrate that software with other solutions as you build your tech stack further.
Good data can be as simple as avoiding duplicate data, but it can broaden to encompass your financial processes. You want all of your data to use the same revenue recognition model, for example.
Finance Alliance has an excellent resource on data cleaning that you can reference for more guidance here.
Added emphasis as AI changes fintech
Artificial intelligence (AI) has a wide range of use cases that can make founders’ lives easier. You can use it to explain complex tax regulations to you, for example, or as an assistant that boosts your productivity.
Right now, fintech solutions are in their early stages of deploying AI. But as this ramps up, AI should have a wide range of applications, from automating the sending of invoices to detecting fraud. Ideally, it will even support founders in their financial planning, specifically assisting with forecasting.
But to do all of this well, AI needs to learn from your data. And if your data isn’t clean and easily accessible, your benefits will be limited here. In other words, starting off as you mean to go on with your fintech stack sets you up to make the most of AI.
And we can help with all of this. For advice on good-fit solutions for your specific startup and help creating and actioning good processes to support clean data in your fintech, talk with our team. As accounting specialists with an emphasis on supporting startups, we work hard to keep our finger on the pulse of fintech.