How cloud-based solutions optimize back-office efficiency

With the rise of financial infrastructure powered by the cloud, it can be hard to imagine when ledgers existed only on paper. From the advent of Netsuite in 1998 to the integrated ERP systems of 2020, the rate of technological disruption has led to a continuous wave of innovation in the accounting and financial world. Now, more than ever before, there are a variety of ways for startups to streamline back-office processes, allowing them to dedicate more resources to growing their businesses.

Due to the current global pandemic, startups have undergone a major shift and employees have been forced to work remotely. The availability of integrated cloud accounting software and open APIs has shifted more traditional processes to the cloud for increased accessibility, security and efficiency. However, integrating systems and implementing processes that are set up to scale with growth, and not hinder it, can be challenging. As a result, startups can turn to cloud-based bookkeeping firms to optimize their technology stack and improve processes, saving time, lowering cost, and allowing leadership to focus on the front-end of the business.

Furey has evaluated practices related to accounting workflow, process, and strategy, creating a high-level guide for venture-backed startups to build a scalable back-office.

Moving towards optimization

While startups navigate a world of uncertainty to build and execute their ideas, it is critical for leadership to optimize where they can. Accounting operations, which include daily bookkeeping through month-end financial reporting, are oftentimes overlooked. Startups can ensure that the back office will never hinder growth by creating a structure of optimization that is powered by efficiencies and managed by the right team.

Cloud-based software is readily available to manage and expedite the bookkeeping process. Startups need to analyze internal and external processes to build a technology stack that fits their business.

In addition to saving critical time and resources, startups also benefit from reduced training and turnover. The right partner should have experts managing the use of cloud accounting systems with your data.

Startups can navigate new changes by adopting agile processes. Teams can quickly identify and agree on objectives when updating financial processes leading to informed management and investors.

Updating the back-office reallocates precious time and resources to critical activities. An optimization approach focused on calibrating processes, systems, and teams can lead to successful funding rounds and audits.

Creating a cloud-driven capability

As cloud capabilities evolve at a rapid pace, it is important to find the right tool to support each business situation. Xero and Quickbooks Online are examples of cloud-based accounting systems that help startups manage their bookkeeping processes. As simple as they are to use, these tools are also powerful, as they can integrate directly with critical operating systems. Your accounting team should be able to manage the necessary system integrations to implement efficient back-office operations such as accounts payable, accounts receivable, bank reconciliations, along month-end close.

Adopting a single tool to manage the core accounting workflow is the first step, but more is needed to build a streamlined back-office. Accounts Payable systems like Bill.com provide a comprehensive solution to managing vendors, making payments, and preparing for audits. Payment processors like Stripe or Square can easily integrate with your sales process, bank accounts, and ledger to automate critical accounting processes such as revenue reconciliation. It is possible that these automated processes need some human input, but they can be enhanced by leveraging workflow tools within G-Suite or Office 365.

As startups grow and operations change, it’s critical to continuously review cloud software tools and their integrations. In recent years many new tools have launched, such as Shopify or SaaSOptics. These systems directly sync between physical locations, virtual databases, payment processors, and accounting systems to enhance inventory management, e-commerce, and customer analytics. Selecting the right system with detailed, transaction-level reporting leads to more transparent and financial results with deeper impact.

Once startups have basic financial infrastructure established, other areas that require policies and procedures can be solved with the same approach. For example, sales tax compliance, expense management, and cap table management can be streamlined by leveraging the correct tools and implementing controlled processes. Avalara, Abacus, and Carta have built user-friendly systems with the required controls and reporting in place, providing operational stability come tax or audit season.

Leveraging your back-office

Across industries, startups can immediately begin optimizing existing back-office structures. Leadership should start by working with an outsourced accounting firm that focuses on high-growth startups for an in-depth review of both technology and process.

Systemizing processes relieve pressure by creating a strong foundation from which the back office can continue to grow. Documenting back-office policies and procedures, and highlighting roles and responsibilities for stakeholders across the organization helps to build a strong accounting/finance function. Systemization is achieved by continuously testing approaches and then sharing findings across related departments, such as expense management policies, approval workflows, new vendor onboarding, accounting policy, and financial reporting requirements. Implementing a monthly or quarterly review of systems and processes is critical to ensure that the back office keeps up with the company’s future growth.

Workflows can also be digitized under the right conditions. Integration tools like Zapier or the ability to work with open APIs help overcome the challenges of repetitive operational processes with end-to-end automation. For example, apps running in isolation related to order management, user analytics, and invoicing can be unified enabling the constant flow of information from one app to the next. This enables automation of both operational and reporting tasks, removing manual interaction.

Beyond policies and procedures, once startups hit certain inflection points, the overall structure of the accounting function can be fortified with the implementation of an ERP (enterprise resource planning) system. The systemization of policies and procedures serves as a dynamic manual for the back-office team, but an ERP like Netsuite or Sage Intacct is a more structured and comprehensive solution. While ERP implementations can be costly and time-consuming, moving from managing separate systems through integrations and workflows to an all-in-one ERP is necessary to keep up with growth.

Implementing new changes with agile thinking

Collaboration, learning, and iteration are the core principles of an agile model. Delivery teams can establish new processes and adjust frequently around progress monitoring. To eliminate the risk of investing too much time and resources while introducing improvements or new changes, ideas are treated as assumptions until validated. Validated learning allows teams to assess which assumptions are valuable and which ones should be discarded. Using a build-measure-learn cycle, where assumptions are validated through iterative testing, reveals which direction is most appropriate. This approach to innovation can be applied to developing the back office.

For example, when deciding to entirely digitize the Accounts Payable function, a startup is aiming to validate the assumption that introducing a new tool and workflow will save time, reduce cost and enhance results. Success metrics for the test will be defined around invoice processing time, cash management, and approval workflow efficiency. Results are then compared to pre-test assumptions to understand if the outcome was successful. In this example, implementing layered steps and reviewing incremental progress after each individual test results in rapid delivery of scalable processes and buy-in from all stakeholders.