Keeping Startups Alive Through FinTech Consolidation

Starting a small business is hard. Keeping it alive is even harder, which is why so many startups call it quits after just one year.

According to Swapnil Shinde, co-founder and CEO of small business financial management software company Zeni, running out of cash is the top culprit for young company failures. Even as the B2B FinTech industry booms, with a growing number of digital platforms available to help entrepreneurs manage their finances, startups continue to struggle to reach longevity.

All of the FinTech solutions in the world cannot guarantee success. Indeed, according to Shinde, the more platforms that an entrepreneur adopts, the more complex managing finances can actually be. Startups are in need of tools that can streamline financial management across a variety of functions, from spend analytics to payroll to accounts receivable (AR), Shinde told PYMNTS in a recent interview. It’s only when consolidation of financial management is achieved that entrepreneurs can access true visibility into the financial health of their firms.

FinTech Frustration

There’s no arguing that innovation in the B2B FinTech space has opened up the door for smaller businesses to embrace automation and sophisticated technology once reserved for larger corporates. But just because the tools exist doesn’t mean that entrepreneurs’ financial woes are over.

“A startup might not even know which tools to use,” Shinde explained, nothing that every company is different, so every entrepreneur must choose the solutions that best fit their unique needs.

Even with platforms in place, financial management workflows often occur in silos and across a variety of different professionals. There may be an accountant who handles bookkeeping, but even then, said Shinde, a holistic (yet retroactive) view of company finances only comes to light at the end of every month.

Then there are payroll platforms, accounts receivable (AR) and accounts payable (AP) flows, and expense management tools. On the human talent side, there are also part-time professionals, perhaps even a CFO, to oversee various aspects of these financial flows. The result is often too many moving parts that muddle the financial picture. “The landscape becomes highly fragmented,” Shinde noted. “There are too many tools, and too many finance experts.”

Consolidation Is The Key

Several characteristics of this financial management strategy lead to a lack of clarity for business owners. In addition to the silos that separate systems — forcing entrepreneurs to manually toggle between portals and enter data from one system into another — the legacy of the month-end close means business owners and their finance professionals only obtain a historical view of finances once a month.

Consolidation of these solutions is key to achieving not only a holistic view of finances, but a real-time one, too. As Shinde noted, startups want one platform to manage all of their finances. It’s the viewpoint of Zeni, which recently announced the launch of its artificial intelligence (AI)-powered financial concierge service for startups. The solution links business owners to an integrated platform that consolidates financial flows, including spend, payments, accounts and more. At the same time, the tool connects firms to dedicated teams of finance professionals to provide guidance and deliver insights based on real-time data.

For startups, this approach to financial management offers the potential for a streamlined view of finances. But for the business finance industry overall, it could reflect the growing trend of data integration and connectivity that is breaking down the barriers that have historically separated various financial functions from each other.

Looking ahead, Shinde predicted that those barriers will eventually fall for good. “I definitely see a future where all of the must-have services consolidate into one platform, thus making it super easy for startups,” he predicted. “And I think it will happen sooner rather than later.”

He pointed to other areas of business management, like the CRM (customer relationship management) system and tools like business management software Notion, which provide solutions that reach beyond a single service. The time is now for financial solutions to do the same. “There is this complexity around the finance world, and it’s about time we take it seriously and simplify it for the world of startups,” he added.