Ledge, a leading automated finance operations OS, has released a finance industry report with new benchmark data that shows that finance teams at tech companies are forced to inefficiently scale their headcount to manage the heavy workload of their finance operations. Ledge’s research found that as businesses mature from early to late stage, finance team headcount grows at a rate of 3.5x, a whopping 20% faster than all other combined functions of the company.
Ledge’s findings underline that tech companies are more dependent than ever on skilled finance professionals to manually wrangle complex and high-volume finance operations, even in the midst of an unprecedented accountant shortage. The number of CPA candidates is the lowest it’s been since recording began, and 87% of businesses say they find it increasingly hard to recruit accountants they need. Bloomberg doesn’t mince words when it says “the accountant shortage threatens capitalism’s future.”
That’s because finance operations have never been more onerous or complex. The rapid adoption of digital payments has supplemented the traditional payments stack with a plethora of new ways to pay and be paid, and transaction volumes have simultaneously skyrocketed. PwC reports that there has been a 42% increase in global cashless payment volumes, and it’s expected to further increase by more than 80% by 2025, from 1 trillion transactions to almost 1.9 trillion.
This transformation in the payments space has created insurmountable challenges for finance teams at fast-growing businesses, who rely on spreadsheets and manual processes to manage massive volumes of payments data that is fragmented across disconnected silos. 40% of finance teams’ time is spent processing transactions and 48% of finance teams report that fragmented data is the largest impediment to them closing their books.
Ledge’s finding that finance teams grow 20% faster than the rest of the company reflects this strain – the increased complexity and workload forces tech companies to devote more and more manpower to their finance operations just to stay afloat.
Ledge CEO and co-founder, Tal Kirschenbaum, said: “While the digital payments space has seen considerable innovation, most finance systems and processes haven’t changed in decades. Finance professionals still overwhelmingly rely on Excel to manage their finance and treasury operations, stitching together an unbelievably fragmented stack of banks, PSPs, billing systems, databases, an ERP, and more. Highly skilled finance professionals at leading global enterprises still lack the automated tools they need to efficiently report on the most basic metrics like cash position and revenue. As our research indicates, these teams are instead forced to increase headcount with manual processes that dramatically increase the risk of material losses, expensive audits, compliance issues, and other challenges.”
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For this benchmark research, Ledge calculated the finance department staffing ratios of 120 private SaaS companies and online marketplaces in the US, from early to late-stage funding. Additional findings of the report include:
- Finance teams in early-stage marketplaces are 3x bigger than those in early-stage SaaS startups, signaling that online marketplaces face incredible complexity with their finances from the start.
- For SaaS companies, the pain of finance complexity sets in at later stages of growth, when the size of finance teams increases by 50% as they mature from early to later stage.
- While headcount costs for the rest of the business increase by 3x as businesses mature from early to later stage, finance headcount costs increase by nearly 3.5x
Commenting on this, Similarweb VP of finance, Sivan Peri, said: “There is a perfect storm of demand for finance professionals far outpacing supply, and it’s a real crisis for businesses.
“Accountants are the backbone of companies. CFOs are dependent on them to handle a deluge of transactions, and the stakes are very high – you’re risking compliance issues, the potential of huge material losses, and customer relationships. But accountants are leaving the profession in droves and the pipeline of new accountants is running dry. Rather than being able to focus on strategic and high-impact work, highly educated finance professionals are bogged down in repetitive and painstaking tasks like manual reconciliation – it burns people out and is unsustainable. It’s time for finance leaders to find a totally new solution, such as turning to automation and AI for routine operational work.”