The CFO role is in a period of evolution, as its responsibilities shift past traditional finance, accounting, and reporting duties and toward a mandate of strategic, forward-thinking leadership. As financial executives balance these responsibilities, the Enterprise Resource Planning (ERP) systems that support finance teams must evolve as well. This is happening at the same time that artificial intelligence is transforming large-scale companies, and turning them, function by function and stack on top of stack, into automated enterprises. Finance is next.
The next generation of ERP systems—powered by AI/ML—will transform the way that future finance teams work, and here at Foundation Capital, we are excited to explore opportunities in the ERP space, especially automation solutions for the CFO and finance team. We recently made our first investment in the space and are excited to meet more entrepreneurs innovating across the ERP landscape.
Next-generation ERP systems must enable finance teams to handle increasingly complex processes with greater speed, accuracy, and efficiency. There are a number of challenges that companies must navigate in the current ERP landscape: systems that are insufficiently flexible to address business’ specific and changing processes, the necessity of bolting on a conglomeration of ERP systems under one roof, and the costly implementation process of replacing an entrenched ERP with a new one.
Entrepreneurs have a great opportunity to solve these and other challenges with AI-enabled ERP. There are multitude of paths to explore, and we are particularly optimistic about a few areas of opportunity:
- RPA: Robotic Process Automation (RPA) automates the routine and manual processes that can dominate a finance team’s daily activities, freeing up the team to focus on more strategic problem solving. RPA is a critical tool for businesses, and we expect RPA to continue to transform manual back office processes in the future. Cross-border invoicing is an example of one of the manual and costly processes that RPA can transform. While many solutions exist for business localization, there is an opportunity for RPA to automate the cross-border invoicing process. RPA can transform this, and a host of other similarly manual processes, in the future.
- Financial planning and analysis: In order to lead financial planning, CFO’s need access to accurate data in real time. Yet many businesses endure long waits for reconciliations, and month-end close processes can slow CFO’s down from integrating the latest data into their planning. We expect next generation ERP solutions to shift reconciliation closer to real-time and bolster their predictive capabilities, enabling CFO’s to better plan for various financial scenarios.
- Financial analytics: As businesses deploy additional tools tailored to specific needs, financial analysts often spend a greater amount of time pulling and harmonizing data before analyzing. New ERP analytics tools can handle this problem by integrating disparate data sources and synthesizing the information into actionable insights, equipping financial analysts with the information needed to make decisions instead of bogging them down in process-related tasks. These tools will increase financial analysts’ productivity, speed, and accuracy.
- Data piping: Finally, there is an opportunity to improve and automate companies’ internal data flows. In order to reconcile financial models or transaction reporting, many companies rely on information from not only ERP systems but also warehouse management systems. This often requires a third party to automate internal data flows and ensure that the company’s data piping can support multiple data inputs from complex processes. For vertical ERP solutions in particular, there is an opportunity to bolster data management connections.
These are only a few of the ways that the next wave of AI/ML-based ERP can transform a finance team’s work, based on my on-the-ground conversations.
At Foundation Capital, we are always looking to partner with early stage founders who are passionate about addressing enterprise challenges and are looking to build next-generation ERP. If you are building an ERP solution, especially in the financial automation space, we would love to hear from you.