After Excel — Finance tools for the modern CFO
Innovations in technology have helped businesses revolutionise the way they work. Every department from Sales to HR to Marketing — even Compliance — has dedicated software to help them be the best they can be. Finance teams though? The vast majority are still heavily reliant on Excel and the power that comes with the trusted Alt-key. And although I am the first to wax lyrical about the power of Excel, the core functionality — an intuitive calculator — has remained basically unchanged since the 80s. Financial software is still in its Atari-era when everyone else has moved onto the PS5.
In the meantime, the Finance function hasn’t stood still. CFOs in particular aren’t what they used to be — and that is a good thing. The stereotypical bean-counter has been superseded by the Strategic CFO, who has come out from the back-office to take their rightful place as the right-hand person to the CEO. They should be recognised as true executive partners, charged with building maps of the future and providing challenges to the C-suite, rather than just reporting on the past. To do this successfully, CFOs work closely with all parts of the business to surface insights that might only be available when all the pieces of the business puzzle are gathered in one place.
In the world of venture-backed companies, this role is never more necessary than today. Valuations are under pressure, funding is harder to come by, and hitting your numbers is more than a ‘nice to have.’ Being on top of the numbers has never been more important: to make it through this bear market, CFOs have to get out in front.
However strategic a CFO may be, it takes the right toolkit to empower them to stand at the heart of a business and plan for the future. Excel remains king for so many, from start-ups through to billion-dollar companies. It takes a lot to break Excel. When it does happen, it is usually a consequence of scale — version control, layers of permissions, multiplying integrations and simple human error combine to break the ‘Master Sheet’. But when it does happen, unravelling Version_Final_471 and undoing good work to undo the damage is extremely painful, not to mention unproductive.
There is, after all, a limit to Excel. Atari was only ever designed for the single-player and unfortunately so was Excel. Many try to overcome this by allowing others to access the model to enable the all-important collaboration across functions. Yet when something inevitably goes wrong because there are no granular user access controls to stop someone from accidentally breaking a formula, there is also no audit trail that might help you diagnose who did what and when to reverse the damage. And that’s if you do spot the error — Excel can’t help you flag anomalies meaning you might do more work that needs to be undone until the error is eventually spotted. Indeed all this could be avoided if Excel could integrate with data sources directly, but alas.
When Excel can no longer handle the demands placed on it, big firms turn to enterprise solutions like Adaptive Insights and Anaplan to help them plan for the future. These are heavyweights — but that also means serious up-front costs, long build-out times and learning curves. This type of solution is simply out of reach for many companies inevitably leading many to stay with Excel longer than they should. Doable but not enjoyable.
“There must be something for these companies” I hear you cry. Enter the new breed of FP&A solutions.
To say the CFO is integral to the modern firm is more than a compliment: it is a recognition that strategic finance is marked by its integration throughout the business empowering everyone to feed into, and take responsibility for, financial objectives.
Take a fast-growing company with big growth plans. Demand for their product is so strong that they decide they need six new sales staff. A good CFO understands that these productivity hires will take time to come online; she agrees the timeline with HR and Sales and bakes this into their financial forecast.
However, the hiring market proves more competitive than anticipated, and together with a visa issue for one incoming exec, resourcing the sales department takes longer than planned. Furthermore, Marketing notices that their conversion pipeline has changed, placing even more strain on sales forecasts. Suddenly, the ability of the company to deliver against its plan is at risk. In their separate departments, these situations are fairly ordinary. Without bringing the data together, it’s hard to understand the compounding impact these events have on the financial forecasts and it might only get picked up once the forecast has been missed.
To navigate this kind of challenge, the modern CFO needs to be supported by technology that can:
- Enable true collaboration across the business without the risk of corrupted data;
- Integrate financial and operational KPIs to get a true picture of the business;
- Continuously reconcile real-time data with the budget for a consistently up-to-date picture of the business;
- Proactively surface red flags to enable the business to course-correct before they miss their numbers.
This infrastructure sheds new light on the company’s performance, powered by raw data from different functions collected in real-time. Red flags can alert Finance, HR and Sales that forecasts are at risk, whilst AI-driven insights would suggest adjusting both hiring and marketing strategies. By combining operational and financial metrics, these three teams can collaborate on the necessary pivot in real-time, rather than wait for the quarterly post-mortem — resulting in better outcomes all around.
Are we there yet?
The opportunity here is huge. Anyone who can bring this vision to life can be the control panel for the Finance team and CFO, democratising access to a strategic finance function for businesses of all sizes. This isn’t just a pretty front-end for Excel, this can provide the value a business needs and prompt a move away from Excel sooner rather than later. This means FP&A tools won’t just be for the enterprise, they’ll be for everyone — making this a massive market.
Unsurprisingly, a number of players have spotted this opportunity and are well on their way to delivering on the vision. Dedicated strategic FP&A solutions like Causal, Abacum and Pigment are all growing fast whilst tackling this problem from a variety of angles. We are excited to see where these different products end up and given the potential size of the market, there could be space for all of them and then some more.
Someone may well be building the future winner in this market already. We love investing in businesses that solve real problems like this as well as helping our own portfolio companies tackle these kinds of challenges (you can read about the sales exec hiring tool we built to help them here). We would love to start a conversation with anyone working on this puzzle today; if that sounds like you, drop me a line here.