My deep dive into the CFO Stack

Because of recent explorations, I’ve been diving deeper into the world of Fintech, specifically B2B Fintech & payments. It’s fascinating though I’m sure there’s a ton more to learn and absorb.

Here’s my attempt at summarizing some of the top lessons and “whoa OK I thought this about the world but it’s actually that about the world” moments diving into the Fintech rabbithole.

A company’s financial stack coalesces into 6 areas.

  1. Payments - how a company receives money from customers or sends money
  2. Spend Management - account for employee expenses or bill payments to vendors
  3. Payroll & Benefits - issuing compliant compensation to employees and contractors
  4. Capital Management - receiving and managing capital or treasuries to fuel growth
  5. Accounting & Reporting - managing & setting up compliant forms and reports for bookkeeping and taxes & for understanding the state of your company
  6. Financial Planning & Analysis - forecasting for the future with financial data from today

Invoicing is a massive billion dollar industry.

An assumption appended to this statement is the fact that invoicing is more than just issuing a piece of paper. It goes into a company’s books, which has downstream consequences.

For example, even if an invoice is issued, and put into a company’s books depending on certain accounting practices, that doesn’t mean money is passed over. That money, sitting in one account could be growing in yield or used for other things that become significantly profitable, even in that short period of time, for whoever has that money.

That’s why there are all these invoicing services per vertical (trucking, ecommerce, you name it!) and that’s why it’s such a huge undertaking.

Invoicing can fall under “company finances” & the payments category.

Invoicing seemed naturally to be clustered into “payments” infrastructure, which in a way it still is. To get from Wallet A → Wallet B, a payment must happen.

But the reason an “invoice” exists (e.g. get some piece of paper that indicates what is owed and when) is because a company must account that issued invoice into their books, whether they receive the payment or not.

It’s compliance, all the way down.

The reason why the chart above breaks down into more granular categories is because everything is funneled into the need to properly account for books and accounting, to stay compliant (& for good reason!)

For example: why do you need to understand whether a company spent on engineering vs. productivity software? Well, because the IRS will ask why your expenses were so large. Best to have that info upfront rather than retroactively look through your spend from months back at the end of the year.

Of course, there are other reasons such as knowing what you spend on to see how you can reduce spend in certain departments over others. But, as a whole, the financial management stack for any company is huge, forged forward with the need for compliant systems.

Crypto finances are a mess.

Further complicated by:

  • Breaking down exact cost basis of a transaction
  • Fragmented information (from various exchanges, wallets, blockchains+)
  • Translating block hashes into human-readable text
  • Massive amounts of transactions and data
  • Unclear & varied government regulation and guidance, per country, per state
  • No great software for XYZ use cases; not yet an equivalent of the chart above (hence, the massive opportunity!)