February 22, 2022
3
MIN READ

How to Buy Software? 4 Secrets CFOs Need to Know

Finance

The tools you buy as a CFO impact almost everyone in the business. Here are some tips to make the right decision.

Scaling your business can be a bit of a mixed bag. New customers, markets and team-members bring new opportunities – but they also require you to upgrade or completely rethink your ways of working. 

Pivotal to that is your tech stack. It’s no secret that the role of the CFO is changing, and research shows that technology is playing an increasingly important part in it. That means that as you outgrow startup solutions, you’ll need to think carefully about not just what you buy next, but also when and how. 

We talked about when to buy software in our last blog – the pinch points that tell you it’s time to invest in more sophisticated tools. Here, we’ll talk about how. 

Laying the right foundations internally is important to help ease your transition to a new tech stack. SaaS can be challenging for scaleups to manage: while the business model makes it easy to find, buy and trial new software, it’s often at the expense of proper business planning. That’s a problem. Without careful thinking about the wider people and process implications, exciting new software can quickly lead to wasted investment, team tension and even compliance risk.

So, what do CFOs need to think about before they begin their search? Here are 4 steps to ensure the software-buying process goes as smoothly as possible.

1. Get C-suite buy-in

Your first job is to educate the wider team – and especially founders – about why you need new software. When senior leadership hasn’t come from a Finance background, it can be difficult for them to grasp exactly what’s wrong with what you have. If things appear to be running smoothly and there’s a level of familiarity and trust with current tools, you might encounter resistance to changing them. 

Pushing forward with new purchases without taking the time to educate can do more harm than good. For one thing, tools bought without team buy-in are unlikely to see much uptake. Worse, if you’re perceived to be wasting budget, it could cause concern about margins, and the scalability of the business overall.

It’s up to you to communicate the need for new software in terms your leadership team will understand. Explain that yes, you can currently calculate deferred revenue in a spreadsheet – but that doing so may not be very accurate, sucks time from more strategic work, and may even expose the business to risk.

Once you’ve found a tool you like, do your homework. Present back a detailed business plan that encompasses both value adds, like the uplift to existing processes and how it will help teams be more strategic. Try to predict costs, including cumulative costs over time and at what point you’ll need to upgrade again.

Doing so will make it easier to get your request approved. More importantly, it will build the trust that’s critical to growth: businesses with shared purpose grow faster, have higher profitability, and outperform the market by 5-7% annually.

2. Look for ways to “hack your stack”

Upgrading from startup software like Xero to midmarket and enterprise software like Sage or Netsuite is a big jump. Don’t do it before your business is ready. If you don’t have a clear and urgent need identified, and haven’t got the resource and process in place to manage it properly, you’ll only exacerbate your existing problems.

Integration with heavyweight software isn’t easy. By the time all’s said and done, costs can reach anywhere from $50-100k. Implementation usually requires the support of specialist consultants, and ongoing management can become a full-time job. Those are costs few scaling businesses can afford.

Instead, look for ways you can hack your current tools to add capacity and functionality. It’s common practice among scaleup CFOs to outsource some work to external partners, who already have the software needed to run core processes. They can do much of the legwork and send outputs back to you for review, saving both money and time.

Likewise, you can usually find ways to support existing tools with spreadsheets and a bit of manual effort – though be warned that this is a stopgap, not a long-term solution. Or, you could consider using several lightweight point solutions rather than an all-in-one tool. This can buy you time until you really need, and are in a position to support, enterprise tools.

3. Find international partners

If your search for new software has been prompted by international expansion, then you’ll not only need to look for the right tools, but also the right partners.

As you enter new territories, you’ll likely encounter challenges with one or more of tax planning and risk, payroll, financial accounting, and operations. In fact, 51% of CFOs say that legal, HR, or tax compliance challenges have been a substantial barrier to implementing their international strategy. 

Working with international partners can help speed up and smooth out your go-to-market: they already understand all the local nuance, and will have the right processes, software and relationships in place to execute efficiently and at scale. It means you don’t need to a) become an expert in or b) repeat processes and work across every jurisdiction. 

Finding partners you can trust is critical. Alignment across both culture and technology will ensure you get the right levels of access and communication for your business, and can consolidate easily across all your global systems. Talking to peers to learn from their experience and  get recommendations is a good place to start.

4. Make sure software meets the needs of all users

We’ve talked before about the human cost of poor software-buying decisions. A key step in the software-buying process to ensure you’re not working in isolation, and have the buy-in of the other teams or people that will be using tools.

That might include other departments, who will have their own ideas about critical functionality and buying criteria. For you, new HR technology might only need to manage payroll processes for additional headcount across new geographies. But for your People team, it might also need to offer tools for recruitment, employee engagement and career planning.

It could also include direct reports. As your team grows, you’ll need to set different levels of permission, access and control for each person, depending on their specialism and seniority. Ensure whatever software you’re considering offers enough flexibility to avoid potential compliance issues later, especially as more people start moving up or moving out of the team.

A scalable approach to buying software

Adding new software is a long-term decision with a lot of downstream implications. As the operation nerve center of the business, the tools you buy as a CFO impact almost everyone – both for better and for worse. Scaleups are already overburdened with SaaS, and as you grow, those repercussions can become significant. 

Before you jump into buying new software, step back and ensure you’ve thought through all the potential knock-on effects: financial, organizational and cultural. While you’re at it, take stock of the software your company currently uses, and look for ways to get better visibility, control and reporting. It will make understanding where need exists and adding new software much easier as you grow.

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