📝 usncan Note: When Financial Software Doesn’t Pay
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Unrecognizable mature man counting USA one hundred Dollar bills. High angle view. Horizontal composition. Image taken with Nikon D800 and developed from RAW format.
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Software is expensive. In an era when enterprise software budgets run (in most developed countries) into the trillions of dollars, organizations are understandably cagey about their technology expenditure and board members will all have an eye on the bottom line right now, especially given the lure of new AI services. Of all the C-suite suits tasked with managing tech spend, while the CIO and CTO will have a lot of influence, the buck usually stops with the chief financial officer.
While one would hope that financial software itself would be among the most cost-efficient elements of any given IT stack, it’s often a case of the pennies not looking after the pounds quite as they should. When a business needs to handle payments, billing, procurement, corporate expenses and plain old wages, many organizations find that (as a result of mergers, departmental fusions and fissures, or simply as a result of sloppy long term strategic architectural planning) they are running separate disconnected software systems for each function.
Too Many Cooks On The Books
A UK study of 500 financial decision-makers suggested that one in two financial teams complained that their company used too many software tools. The tech sprawl bedevilling payment applications in particular underscores the breadth of the problem. A Harris Group survey suggested that many firms use ten or more systems to manage payments, with some still performing a degree of payment operations manually. The propensity to adopt specialized software for every sub-function of the finance function appears to be acute… and AI may well exacerbate this situation.
“Conventional wisdom suggests that more technology equals greater sophistication,” said Hristo Borisov, CEO of Payhawk, a spend management software company known for its centralized and automated payment systems. “But that thinking has led to technological sprawl that’s not just frustrating, but also expensive. Finance professionals spend countless hours switching between incompatible tools, reconciling discrepancies and building manual workarounds… and that time that could be spent on strategic analysis and decision support.”
In terms of live operations, fixing flaky financial software can be especially troublesome. Software engineers are understandably reticent to stick a screwdriver into deeply embedded financial software systems i.e. nobody wants to be the one who hits the wrong fuse and corrupts the whole system; a breakdown at this level could mean an organization fails to meet the specific regulatory requirements that this software layer has to deliver on and, fundamentally, a real melt down might mean that employees don’t get paid.
“A system from 2002 doesn’t interact well with a system from 2024. Another application from 2014 makes things even more difficult. Soon, coding requirements, application programming interface integration and various fixes can grow beyond manageable limits,” states professional audit and tax consulting services company PWC on its systems integration strategies portal.
How Many Credits Cards Do You Have?
Rather like the fact that most people have a selection of credit cards in their wallet, Chris Horymski and Samuel Mountjoy (writers at credit report and financial health tools company Experian) say that their company estimates the average American carries 3.7 these days), many companies use one software package for handling travel expenses, one for corporate procurement services, another for payroll and so on.
Payhawk’s Borisov has said that if financial information lives in disconnected databases, getting a centralized source of truth is almost impossible. “Without a single source of truth, the finance team cannot adequately plan, enforce spend policies, or really flag anomalies,” he said. “Rather than work as strategic advisors to the overarching business, the finance team becomes just another system integration challenge in the wider architectural firmament of the business.”
Financial accounting software company bluQube says that migrating from an old financial software system is rarely a case of “lift and shift” such that clean data arrives in its new home. The company suggest that data inherited from legacy systems is often outdated, riddled with duplicates, inconsistencies, or poorly structured coding frameworks. “Project timelines are often set with the best intentions but not enough realism. Key phases like user acceptance testing, training, or integrations are compressed to meet external deadlines, often tied to financial year-ends or contract expiries,” notes the team.
Getting rather personal, the bluQube team actually call out weak leadership and the need to assign a dedicated implementation leader and deputy when new financial software is being brought online.
Revlon, Make Up A Number
Citing an erroneous $900 million payment made to cosmetics company Revlon by Citibank back in 2020, Dimitri Dadiomov co-founder and president of payment transactions infrastructure company Modern Treasury, says it is technology that’s the problem i.e. it’s not a case of human operatives with sausage fingers hitting the wrong key.
“Although $900 million is an astonishing number, Citibank is not alone. In 2018 Deutsche Bank accidentally wired an exchange at $35 billion – $5 billion more than the bank was worth at the time. The worst “fat-finger” mistake I know of happened in Tokyo in 2005, when a trader filed a share order worth $617 million and sent it to the exchange. These types of errors happen all the time, and they’re entirely the fault of software, not people,” wrote Dadiomov, on his company blog.
Financial systems and ERP software company FinanSys says it has seen successfully run financial software stacks and those that are anything but. It draws its experience from a market where it works as an implementation partner for products including Infor SunSystems and Oracle NetSuite.
“When [an organization] is using outdated accounting software, it slows down the entire operation of the business and not just in a mild manner. The lag is so severe that sometimes the flow of information backfires and it can actually mislead [business] decisions, like cutting staff costs to keep up with revenues or overstocking inventory,” notes the company.
Can AI Save The Day?
Looking to a hopefully brighter future then, can AI-based financial software fix the problems that organizations typically have with broken application integration issues, poor quality data leaking into live operational accounting systems and the fragmentation that exists when financial software becomes outdated and obsolete?
Short answer: no, obviously not, AI is not a magic wand.
Longer answer yes, AI is really good at actions like automated data mapping (defined by data product company Nexla as the processes involved in matching data fields from one or more sources to their related data fields in a destination) which makes data and application service integration less prone to mistakes. When AI and machine learning algorithms identify and match data fields from one application or data repository to another, fewer things break.
Every vendor in this space will want to convince us that it can deliver an intelligent and unified overlay veneer that fixes the issues related to fragmented systems. But there are no silver bullets when it comes to silver dollar issues, so prudent advice here would be question that term “unified single source of truth” because it will come up a lot. You can bank on it.
