Today I want to talk about some of the issues that early-stage Fintechs run into as a matter of course, and how we at FintechForce go about solving those issues for them. I won’t be able to cover them all, but hopefully there’ll be enough for you to get a feel for it.
I started working in the financial services sector back in 2002, right on the heels of the ignominious collapse of the dot-com bubble. In other words, I started working in Fintech before it was cool – or even had a name.
In 2013, I finally jumped ship from public accounting firms and started working in Fintech proper, consummating the happy marriage between my extensive knowledge of finance and many years of experience working with financial service institutions and technology companies.
What I soon realized, though, was that my path was by no means a typical one in the ecosystem. This brings me to the first common pitfall of fledgling Fintechs, namely overplaying the tech side of the equation. You may have the slickest UI in the world, but if the back-end isn’t doing what it’s supposed to in terms of the fin component, the whole thing can shift massively off-balance.
For this reason, one of the first things we do is work on internal controls over financial reporting and in particular over cash transactions. At times this means making sure that our client does cash account reconciliations every single day. Many companies simply use an omnibus account with tons of cash moving every which way, and eventually find themselves mystified by the underlying treasury activity at their own enterprise.
Put another way, it’s crucial to first understand every transaction in detail, and then build a platform capable of effectively tracking this activity at the transaction level. This way, you’ll know exactly what’s happening and have no problems with regulatory compliance and reporting.
Speaking of compliance, another issue that we regularly see is that Fintechs either don’t pay enough attention to regulation during setup, or fail to account for new (emerging) regulatory frameworks. By and large, this is further complicated by the difficulty of figuring out who their regulator even is. Sometimes, it’s best to just focus on who the regulator is likely to be tomorrow, and prepare accordingly.
The last thing I want to mention is the importance of understanding cash flows and making sure there’s plenty of operating capital. Unfortunately, it’s not always as straightforward as it may seem. A mistake that we see time and again in the ecosystem is Fintechs starting to worry about capital the very moment it becomes necessary. The problem with this is, of course, that last-minute capital is much more expensive.
In order to avoid the high cost (or worse, an abrupt end to the venture altogether), you need to map out your cash runway as clearly as possible, including specific amounts, timelines, and sources of funding. Our task here is helping Fintechs to figure out which types of capital they need, where to get it, and which investors to pick (by the way, our good standing with investors makes this process a lot smoother than it otherwise would be).
Okay, so all that sounds great, but how do you get Fintechs to trust you in the first place? These are highly sensitive issues we’re talking about here, after all. And we do need unfettered access to all information to do our job properly.
The resistance to this comes from two main sources: 1) having a team of outsiders start mucking about in your company’s business can feel overwhelming (even though contracting the fractional time of 10 or so people is far easier and less expensive than hiring a bunch of new employees); and 2) private companies typically like to hold their operations rather close to the vest.
Our experience shows that building trust usually comes down to adding value, communication, and delivery. The first one we’ve already covered. And the secret to the second was unlocked many years ago by… teachers, actually. Teachers normally do everything three times – first, they provide an overview of the material; next, they give their spiel; and finally, they summarize what’s been said to reinforce retention. This approach is incredibly useful in building trust with clients. As for the third element – delivery – the good old “under-promise and over-deliver” rule of thumb is as good as any.
So, in keeping with the whole teacher thing, here’s a neat little summary of the key takeaways:
- Fintechs often put too much emphasis on the tech while neglecting the fin (e.g., failing to put in place effective transaction level controls and performing regular cash flow reconciliations)
- They may not pay enough attention to regulatory compliance, which gets them into hot water sooner rather than later. This is also, in part, related to the previous point – a back-end incapable of tracking daily operations leads to reporting issues (and a general lack of focus)
- Cash runway modeling can at times be haphazard in the ecosystem, forcing startups to raise expensive last-minute capital
- Fintechs aren’t always super excited about giving an outside contractor full access to their business (including financial) information. Building trust requires precise communication, (over)delivery, and capacity for adding tangible value
As I’m sure most of you would agree, interviews are essentially conversations, albeit slightly more one-sided. And conversations are regarded by many to be an artform in itself. For a conversation to succeed, both parties must be aware of, and creatively respond to, countless verbal and bodily cues. Most of these still matter during an interview. Mastering it can help anyone land a good job or, if they’re already on the hiring side, select the best colleagues.
My training and experience as a Limbic Leadership Coach has taught me that most of what people do, they do subconsciously. Rather than being in control at all times, the conscious mind is actually continuously pushed “from behind” by subconscious drives (e.g., beliefs and values) that coalesce by the time we’re 6-7 years old and remain largely unchanged ever after. Not having any direct access to these drives, however, the conscious mind simply observes what you’re already doing and comes up with a somewhat (or even totally) false, yet plausible narrative: “I did that because X”.
With that in mind, it should be clear that posing straightforward questions during an interview, and taking your interlocutor’s self-report as reliable, simply won’t do. The better approach is to ask them to give you 2-3 challenges they had to face at work in the past and might have to face in your company – actions really do speak louder than words.
For this to be valuable, though, you have to really dig into that problem and, more importantly, the way in which the interviewee approaches problem-solving. Two of the key questions that I rely heavily on are:
- “And then what did you do?”; and
- “Why did you do it that way?”
Given enough time, variations of these two, as well as other, questions (e.g., “What was the result?”, “What do you think you did well?”, “What would you do differently next time?”) can give you a fairly distinct outline of how someone approaches problem solving in general. In other words, their personal style of problem solving. No value judgment should be involved at this stage – the interviewee isn’t wrong to be solving problems in this or that way. After all, someone’s personal style is part of who they are as a person, and no one is the wrong kind of person. By this I mean that when a judgment is finally made, it relates only to whether the person fits the company’s needs – leaving their very humanity intact.
Interview-by-problem-solving can also yield a good sense of the interviewee’s capacity for self-reflection. Now, the ability to self-reflect is important here for at least two reasons:
- Knowing oneself implies knowing one’s values and goals, and having a (more or less) coherent view of the world. Apart from being of general value, this can make it much easier to determine if a candidate is the right one.
- As you can probably imagine, greater awareness of one’s own thought patterns and ability to roll with the punches, so to speak, are both highly sought-after qualities in pretty much any type of employee. Job-specific competencies can always be learned, whereas the power of self-reflection takes more sustained practice to properly master.
As you go deeper and deeper into the interview, people will react quite differently. Some will be willing to go along with the process and reflect on their own ways. Others will just plainly state what they did, as if that’s the only conceivable way of solving that particular problem. Yet others may even get angry with you (“What’s with the mind games? Is this some kind of trick!?”).
The important thing is to always be open and honest about what you’re doing. You want to get a picture of who the interviewee is as a person, beyond their skills and professional qualifications. As I’ve suggested, awareness of one’s own thought process, ability to take on varied perspectives (and, I would add here – the desire for growth) are ultimately more important than a strict competence fit.
The last thing I’ll mention is this. I often have the manager listen to the interview. This is because it’s usually easier to think about the person being interviewed in a broader sense when you’re not the one asking the questions. There may be some things that I’ve simply missed. Or some connection that I failed to make at the moment. So it’s always good to have someone detached from the interview process who can provide some fresh insights.
And that’ll do it for this article. Hopefully, this gives you at least some idea of how to come prepared for an interview with us. Aside from retracing your steps through a practical challenge or two, and giving some thought to how that unfolded, I suggest you, as it were, “come as you are”. I love talking to people, so honesty and openness will go a long way!
I look forward to hearing from you!
As the Head of HR at FintechForce, I’ve been thinking a lot about the different ways of finding the right people for the job. When I say “job”, though, I don’t just mean a specific position at the company. I also mean our team and the core values underlying our culture. After all, work isn’t – or at least shouldn’t be – just a means to an end. It should also be an opportunity to embody one’s vision of the good life.
Let’s start with recruitment. What matters most to me in the interview process, apart from a candidate’s necessary skills and experience, is bringing out their own unique approach to problem-solving. Being a certified Limbic Leadership Coach, however, I also know that up to 98% of everything we do is subconscious by default. Besides, our values and beliefs are formed at the age of 6-7, and mostly remain stable afterwards. So how does one make the subconscious itself become conscious?
This is where the months of training I underwent with a clinical psychologist come in. What I’ve learned is that getting at the root is best done by asking interviewees to bring up 2-3 challenges they’ve faced in the past. Probing into a real-life event is highly revealing of how people work and how self-reflective they are about their work – something that can’t be said of abstract speculation on a hypothetical problem.
For this to work, the interview has to be honest and non-judgemental. Everyone has a different way of going about things, and one isn’t necessarily better than the other. To the extent that I do judge, it’s only from the standpoint of whether the candidate is a match in terms of competence and culture, not whether they are a good or bad person.
We seek to extend the same care and consideration to our existing team members, as well. It’s really exhausting to be in a situation where you can neither be authentically yourself, nor feel any connection to those around you. With this in mind, our aim is to build a culture that reflects who we are today, allows for future change, and makes work a means for growth and self-actualisation, rather than something alien imposed on us arbitrarily.
In practice, this means allowing people to decide how and when they’re going to deliver their results. Most of our team members are parents, which makes this even more important. Some need to drop off their kids at school in the morning or pick them up in the afternoon, but then hop back on in the evening once the kids are in bed. No matter the reason, you can just block off some time and do your thing without having to explain yourself or feel guilty about not being around for a bit.
It also means encouraging connection on a human level. This can be noticing when someone’s down in the dumps. Or voluntarily sharing about the joys and hardships of one’s personal life. Or even simply letting others know about your scheduled time off. We call this “Noticing and Naming”. One might say, e.g., “I noticed that you gave us an update that you’ll be away for a couple of hours. That was really helpful because it made it easier for me to manage my workflow”.
Last but not least, we do “Friday All Hands”, where we spend part of the time checking in on the pulse of the team, or sharing our weekend plans or something fun and interesting that happened during the week This enables us to really see the human person behind the “co-worker” label..
So these are just some of the ways in which our work culture has been unfolding, and we’re already developing a slew of new programs (stay tuned!) that will hopefully allow us to clarify things even further and give even more distinctive shape to how we do things at FintechForce.
Accounting is difficult
It’s more difficult for startups.
And, unsurprisingly, it’s probably the most difficult for fintech startups – companies that can start with stellar tech while having their fin play catch-up.
Our customers, by definition, are all expanding extremely fast in a fast-changing field. If they’re succeeding, and thankfully most of them are, they are expanding. Under such conditions, their accounting needs also grow large, and they become more complex when, for example, there are multiple entities in different countries and transactions in lots of different currencies.
I have been working as a contract CFO for about thirteen years now. Helping someone get their financial ducks in a row always made me happy.
A year ago, I realized that what I’m really good at is building people’s companies. And so I started a business to do precisely that and to bring other people along to offer multiple services to fill those complex accounting needs. After all, fintech startups need more than just planning and advice, they need hands-on support with AP, AR, Payments and other day-to-day stuff.
Knowing all this, of course, I saw an opportunity for my success, but a big part of it is also the success of my customers — really wanting them to be successful.
I like working with these companies because they’re truly dynamic people. And the work is anything but boring. To be frank, I haven’t done a boring day of work in 15 years.
Fintech startups struggle with the accounting that is specific to their business.
With products like loans or insurance or payments, the accounting that they do for those individual products tends to break.
Unfortunately, the data that supports their accounting is almost always an afterthought. It’s commonly a “build product first, grow customer base second, think of the details later” kind of approach. Their investors rarely agree with the sustainability of such an approach, and that’s where outside help comes in.
When we go in and try and help a new client out of a jam, it almost always starts with getting the data right. And once the underlying data is resolved, the accounting starts to become easier.
The secret is that accounting is basically like Maslow’s pyramid.
At the base of the pyramid are really smart and capable people. If you don’t have those, you don’t even get to start. The next level up is data and accounting policies. And then the next level up after that is the actual accounting.
If you try and do accounting, and you don’t have the data, and you don’t have policies, and you don’t have good people, you end up with really terrible accounting. And above accounting can be planning and pricing and the interesting stuff for founders.
We have so many clients that just want to go do the exciting stuff and need us to take care of everything below it. And so what we do is we try and offer the base of the pyramid on day one, and then help them build the other layers.
What we think about as a business is how can we help people with their data and their policies? How can we help them with two layers instead of just one?
In a nutshell, what we provide is outsourced financial management, including payroll, AP, accounting, strategic finance, and a whole list of necessary services.
Ultimately, that means FintechForce is providing leadership, which takes time and commitment to deliver.
So, generally speaking, for the younger clients that are smaller, we try and stay out of their way and just do the accounting. We wait until they get a little bigger before we recommend spending more time providing leadership — in part because the finance team is responsible for building projections and being objective.
We have to think about the safety of the business.
And if you’re a startup, you don’t need safety, you need to go all over the place and find out what is perfect and what works and what sells. So, we try not to push or restrain too much early on. But as they grow, it’s clearly an element that is needed.
And we do the work for our clients through all the stages for half the cost that they could. We might have seven people working for a client, and each of those seven people is an expert in their domain, whether it be payroll or accounts payable or reporting or reconciliations.
So, we try and keep things at a very high level in terms of quality by having a large group of specialists each working on their particular part, which is not something a company could ever replicate in-house.
I mean, at the end of the day, I think that I’d like to look back and say that our company made a difference in offering affordable financial services to companies, to people. And I’d like for a smart bunch of accountants to be part of the solution instead of admin overhead.