The Rise of the Financial Engineer

As part of Solutions Review’s Contributed Content Series—a collection of contributed articles written by our enterprise tech thought leader community—Matt Stapleton, the COO at Spiff, explains why today’s financial professionals are starting to look more like financial engineers. 

Despite a strong love for spreadsheets, finance professionals have historically not been early adopters of new technology. That said, recent tech changes have accelerated the adoption of the finance stack, and the image of a finance department working through stacks of paper is one from yesteryear. 

Yes, finance is pushing the envelope when adopting new, innovative technology. One only needs to look at the financial technology (fintech) market to understand how much tech adoption is happening in finance departments nationwide. One out of every five investment dollars from venture capitalists is going to fintech funding, and even with investment slowing down due to the economic downturn, there is little doubt about its continued growth. 

What’s spurring adoption from a team that has typically been slow to do so? Over the last decade, three things have happened that have turned finance teams upside down: 

• Digital Transformation
• Globalization
• The “death” of the spreadsheet

Those three trends have created a need for the finance engineer, who, like other emerging ops roles, must understand the high-level systems architecture across the company and the appropriate links to their systems to provide helpful, structured data. Ultimately, it becomes the responsibility of financial engineers to intricately understand the finance tech stack and create business processes that drive the intended results for the business. 

Digital Transformation Drives New Revenue Models and Business Complexity 

The evolution of digital technologies has had an impact on every business. Those who couldn’t ride the wave and embrace digital are no longer here. Those that did—and that continue to innovate and drive further digital adoption that simplifies work processes, drives new revenue growth, and enables consumer and business buyers to do things previously unimaginable—continue to thrive. 

Salesforce, in many ways, shaped the future of finance. It united sales, finance, marketing, and other relevant business stakeholders in one place. Its growth can be attributed to its flexibility because not only does it unite teams, but it enables a lot of other integrations, including many integrations that support the finance team, including:

• Accounting platforms
• Enterprise Resource Planning (ERP)
• Payment processing tools
• Revenue recognition and automation tools
• Payroll and compensation management
• Human resources platforms
• Spend management tools

While the power of these systems trumps the manual or partially automated processes of the past, it’s also become a giant headache for finance teams to understand how these platforms work together and take advantage of the power they provide. 

Globalization 

Digital transformation has forged a new era of globalization driven by the global economy. SaaS Software has empowered business-to-business (B2B) and business-to-consumer (B2C) to reach buyers worldwide. When a deadly pandemic shut down the world and forced us to turn our homes into our workplaces, businesses could use digital technologies to enable global workforces to operate and perform smoothly. 

While digitalization drives greater opportunities for businesses to expand their reach and for employees to work from anywhere in the world, it poses massive challenges for finance teams. Finance must be smart on compliance and labor regulations wherever they do business. They must understand hiring and compensation laws; for bigger companies, that means layer upon layer of compensation plans. For some, it means thousands of compensation plans that are being managed globally. 

Unbundling of Spreadsheets 

The flexibility of the spreadsheet has allowed finance teams to tackle various projects quickly in a highly custom way. While some business processes shifted away from spreadsheets quickly (CRM and ERP solutions come to mind), other platforms have taken longer to provide the flexibility and auditability necessary to overcome a finance team’s purpose-built model. However, after decades of slow growth, it’s official: spreadsheet usage for business processes is declining. 

We’ve reached the post-spreadsheet era, where finance teams can increasingly move beyond spreadsheets, which can no longer provide the scalability, auditability, and advanced automation that cloud-based software offers. Success in this new world involves understanding why spreadsheets have been so successful—arguably the most critical technology ever developed—and how to build on those strengths with today’s technology. It means extending the computational power of spreadsheets to work with big data sets and leveraging finance data effectively to make decisions that impact the business today and in the future. 

It also involves thinking like an engineer to address the challenges of digital transformation and globalization and helping the modern business drive success. 

The Role of the Finance Engineer in Driving Future Growth 

Finance professionals need to become proficient in the post-spreadsheet era to build solutions that scale in line with the rest of their company’s connected systems. That means that they need to develop and orchestrate a lot more automation. They will need to think like financial engineers. The particular areas where finance professionals are beginning to grow are: 

• Systems thinking 
• Recognizing that spreadsheets don’t “play nice” with other connected systems 
• Finding ways to automate spreadsheet-like math and logic in new real-time spreadsheet replacement systems like Spiff 
• Understanding how to visualize logic and interactions quickly and efficiently while operating complex models 
• Managing complexity at scale 
• Centralizing financial math and logic in one place as opposed to repeating it at multiple levels 
• Identifying the right places to centralize math and logic–aligned with your “systems of record.”
• Learning how to manage and deploy changes 
• Advanced versioning tools to track changes at granular levels 
• Using testing tools to ensure you are identifying introduced errors
• “Diffing” tools that allow you to compare before and after change effects 
• Branching tools that will enable you to build new models and compare them to existing models without actually “going live.” 
• Automation 
• Working with tools that ingest data from other systems of record in a seamless way 
• Recognizing the tremendous predictive and prescriptive potential of large datasets and leveraging machine learning 

As isolated spreadsheets phase out, finance professionals are beginning to look more like financial engineers. They are building fault-tolerant, automated systems that leverage inputs from other systems of record as well. The good news is that spreadsheets were the first real low-code / no-code platform built. So, they provide the foundation needed to succeed in the post-spreadsheet era.