Four tech trends that are shaking asset managers & family offices
It feels like AI and cloud computing have been around forever. And it’s true they’re not exactly new. But what has changed is that more and more new asset managers and family offices are adopting AI-driven cloud computing solutions. Why the change?
It doesn’t hurt that the technology has matured greatly in the past few years. The key driver, though, is changing attitudes among regulators. They no longer find AI, cloud and other new technology scary. Look at how active the Monetary Authority of Singapore (MAS) has been around blockchain!
As a result, new asset managers and family offices are ignoring the traditional desktop applications, which are popular among their more established peers. Instead, they are adopting cloud-based solutions, working with partners that do the same, and they’re pushing these solutions on companies they invest in as well. And they are reaping the rewards.
No more wet signatures and FedEx packages. Digital signatures take care of that. No more missing documents. Sophisticated document management systems tag and help organize all mission-critical information and even the less important stuff that it takes to get through an audit. Gone are the endless email chains and excel spreadsheets.
Task management technology and online accounting platforms now make it easier than ever to manage compliance and accounts. And just for good measure, the new cloud-based solutions give funds and family offices instantly, 24/7 access to key documents. It’s still not clear how much time and money is being saved. But a small-cap PE firm that recently made the decision to move all of its compliance to a cloud-based solution cut its compliance spend by 40%. And, to boot, it made it way easier to manage compliance as well, and transfer to the new solution took no time.
For asset managers and family offices still in two minds about whether digitization makes sense for them, here are four technology trends to keep in mind.
1. The days of non-cloud accounting technology are numbered
For asset managers and family offices, weekly schedules are generally crammed before the week even starts. Scrutinizing potential investment opportunities, following up with companies which you’ve already invested in, sitting in board meetings, coordinating co-investors and other shareholders; there are never enough hours in a day.
This is why new asset managers and family offices are opting against using desktop accounting applications, and moving from the get-go to cloud-based solutions such as Xero. The old ways didn’t make it easy for companies you’ve invested in to stay on top of their monthly accounts. The new ways do, and we believe that’s why we’re seeing asset managers (and their portfolio companies) adopt cloud accounting solutions in greater numbers.
Many major VC firms and family offices have in-house servers and VPN software to allow remote connections and shared folders. But, if you’re a new entrant into space, the reality is, you don’t need this depreciating technology. There are much better—and much cheaper—options available. For example, more investors are finding ways to make cloud-based accounting tools, such as Xero, work for them. Xero and other cloud-based solutions give you a clear, real-time view of key financial information from your laptop or smartphone, and it makes collaboration between funds, family offices, and their investments seamless.
But what about cybersecurity, I hear you say? Fear not! Cloud accounting firms use the same world-class security as the CIA. Think online banking but with a better interface.
2. The wonders of Optical Character Recognition (OCR) technology
While we’re on the topic of time-efficiency, traditional accounting practices require you to keep, and manually attach receipts or invoices. Tech accounting 1.0 requires you to scan your documents, and then manually fill in an expense form, print, or scan it. The time spent on your own company’s expenses using this methodology is already time-consuming enough. Add companies you’ve invested in into the mix, and that’s not a recipe for fun!
Today’s technology has completely minimized the hassle. Optical Character Recognition (OCR) technology reduces the time you spend on data-entry, so you can focus on areas that can create real value. Tools such as Receipt Bank use AI-powered OCR technology to instantly extract key details from images of receipts, bills and invoices. You could email, upload, or simply send the images to the server using Whatsapp.
Once the receipt, bill, or document has been captured digitally by Receipt Bank’s three OCR engines, your data — all of it accurate — is pushed to cloud accounting tools. You’ll never have to fill out expense forms again.
Gone are the days of manually balancing expenses – today’s technology makes it easier and faster for you and your portfolio companies to capture, track and manage finances. When combined with cloud accounting software such as Xero, data entry is minimized and, you receive financial information immediately and accurately.
3. You can now manage your cap table WITHOUT spreadsheets
One of the biggest worries fund managers face is maintaining up-to-date cap tables. In the past, most fund managers had teams of analysts working on internal, customized models and processes that required significant resources to update.
These days, investors are using online tools that can produce pro forma cap tables on the go. This shift to cap table management software provides investors with real-time, automated updates. On a single dashboard, they can now see everything, from when securities have been issued and funding round raised, to P&Ls and KPIs for each of the companies they’ve invested in.
Tools like Carta have made a huge impact on investors. They eliminated or significantly reduced the amount of manual data entry, and the number of formulas that need to be created from scratch. Investors no longer worry about the accuracy of their information. Analysts are now free to dig deeper into new investments, and value-add to the ones on their portfolio.
4. The platformization of back-office operations and compliance
As the number of technology tools and companies that asset managers and family offices have in their portfolio increases, using all the different tools intelligently becomes more and more challenging. Switching from one application to another a dozen times a day has a direct and material impact on productivity; not to mention the additional risk you face around data entry and missed deadlines.
The need to connect all these tools has become more important than ever. Hence the birth — and blossoming — of platforms. By drawing together and integrating different tools and technologies, they make it harder for things to fall between the cracks (a common problem with earlier systems that bolted together technologies that didn’t talk to each other) and they greatly increase both productivity and transparency. Where did that document go? Who is working on task A and when will they be finished? Adopt the right technology, and these are no longer questions you’ll need to ask.
Many companies today use workflow and document storage platforms, such as Zave, to handle their accounting, tax, and corporate secretarial needs. On top of utilizing AI to drive efficiencies in productivity and to increase transparency, Zave integrates with other tools such as Xero and Receipt Bank, providing its users with a seamless end-to-end solution. Perfect for the tech-savvy VC firm or family office that requires up-to-date and accurate financial information for both their own operations and those of the companies they’ve invested in.
In short, it’s no exaggeration to say we’re at a pivotal time for tech-enhanced productivity tools. The first wave of tools focused on consumer markets. Now we’re seeing big changes to enterprise markets. A VC firm or family office should still be focused primarily on increasing ROI for their investments, and one way to do that is to make sure that companies they invest in are well run from a back-office perspective. There are no longer any excuses for losing key documents or missing regulatory filing deadlines. And moving these workflows to the cloud not only frees time for entrepreneurs to better run their companies. It creates time for asset managers and family offices as well, making it easier than ever for them to select, monitor, assist and eventually exit the right investments.
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