Ivan Ong
Inflation has reached historical highs and is dominating business decisions for companies globally. Today, as CFOs become more integrated in margin-generating activities, the CFO stack has come front and centre of decision making as companies look to adjust business practices in order to compensate for inflationary pressures. CFO tools will be re-evaluated in this market climate, and finding the right wedge is key for start-ups looking to break into this space. At AFG, our conversations with many finance teams, across varying company sizes, have revealed the following takeaways that we believe are pressing enough needs for CFOs to prioritise:
1. Forecasting accuracy: Many companies we’ve spoken to often run into challenges of forecasting cashflow, particularly if not a subscription-based company. The workflows involving cashflow forecasting for many companies are still very manual, often entailing bulk data downloads multiple times a day from ERP systems, and running static analysis on them. As forecasting informs downstream decision making, we see opportunity for better predictive modelling that caters to both large and small companies, enabling better accuracy and pre-emption around a company’s financial position.
2. Excel still the lingua franca: Despite more advanced tools out there, many finance teams still default to Excel to process a portion (large or small) of their financial planning and analysis. Whilst being a flexible platform, Excel does have drawbacks vis a vis versioning, collaboration, and real time updates. There is an opportunity for start-ups to layer workflows on top of Excel that address these gaps or better yet, build an end-to-end solution that negates the need for Excel all together.
3. Integrations: Given the plethora of tools within the finance stack, start-ups looking to break into this space would need to build for seamless integrations when it comes to data collation and aggregation from the various systems. There is currently no platform that does this well. Finding the right entry point where the pain point is the most acute would be key for early adoption.
“In order to thrive in a difficult economic environment, CFOs need to make more effective technology investment decisions that provide greater business process automation and enable them to be more pre-emptive to potential challenges and opportunities.”
4. Quarterly closings: The financial close process by its nature is a challenging task. Both large and small businesses have a multitude of accounts to track and reconcile and this becomes more difficult with scale. A tension usually exists between speed and accuracy. The reality is that the process of preparing financial statements is still very manual due to a host of factors such as disparate systems, poor quality/missing data, under-supported teams etc. There are tools that currently solve for streamlining the process, however, tend to be costly and clunky. The most pressing issues we uncovered were on data reconciliation and standardisation. There is opportunity for start-ups to introduce a trimmed down set of workflow tools to address and streamline these pain points.
With all that has unfolded in the last few downturns, CFOs are very aware of the need to increase their resiliency. In order to thrive in a difficult economic environment, they need to make more effective technology investment decisions that provide greater business process automation and enable them to be more pre-emptive to potential challenges and opportunities. Despite the progress made in this space to date, the market opportunity still remains huge providing lots of headroom for start-ups to grow and nurture.
About AFG Partners
AFG Partners is a Fintech VC fund investing in Enterprise and B2B Fintechs addressing the critical needs of financial institutions and corporates in Asia. Investing across payments, banking & lending, asset management, capital markets, and insurance, among other segments, the AFG team has helped scale companies that are solving industry pain points, enabling workflows, and providing critical infrastructure to the largest financial institutions down to SMBs.
