The technology industry runs on three letter acronyms (TLAs) – from ERP, to CRM, from HRM to TCO we’re programmed to work in three letter chunks. While this might seem to some as mere techno babble, these acronyms do help us define and give shape to the industry within which we work. I’m seeing the emergence of a new area and wanted to make a start at refining it.
Several years ago, companies like Mint (since acquired by Intuit) and Wesabe (since shut up shop) defined personal financial management, a class of applications that give us some insight into our personal finances and help planning for future events. The genesis for these apps came from the realization that looking back at a series of bank accounts or a tax return was all very well, but it would do nothing to help individuals get a picture of their ability to afford their life a eek, a month or a year into the future. Hence PFM apps that drew insight from past events to create a view of the future.
A similar situation is starting to emerge in the business space. Business Financial Management (BFM) applications are starting to become apparent that aim to give businesses this same forward-looking view of their finances.
My interest in this space originated from my couple of decades experience owning and running small businesses and appreciating just how critical cashflow management can be – no matter how complex the accounting system a business uses, it’s still very much a backwards facing application that can do great things at showing how a business has done in the past, but is very limited in terms of forward looking value. My interest was also extended after I was appointed to the advisory board of billFLO, one company operating in this space.
The way I see it there are three distinct areas that a BFM application needs to cover off:
- Aggregation/Automation: This is the nuts and bolts of the application, ensuring that the app can get the right data in. This is where services like Yodlee, integration with banks and credit cards and machine readability of invoices comes in but aggregation is much more complex for a BFM than for a PFM, there are many vehicles for receivables and payables; bills, invoices, timesheets, expense reports, credit cards etc, and within a business multiple people can spend or generate income on behalf of the company
- Presentation: To draw conclusions, an application needs to show the data in a way that makes sense for small business. Nice dashboards with graphical representations of future trend are key here
- Actionability: This is the crux. the application needs to provide something for the user to do with the data. For example if I’m the business is in a cash crunch, there is an opportunity to connect it to an appropriate invoice financer or banking institution
So there’s the description of this new class of business – it really is a growing trend, joining billFLO are companies like 60mo, BizzeeBee, Indinero, Profitably and PulseApp. I’d be interested to hear readers thoughts on this growing trend and the sector as a whole.