How SMB CFOs Transform Their Businesses with an Effective Financial Operating System (Financial OS)

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At Fluent Ventures, we believe one of the macro trends in technology is the ability for small businesses to be more competitive by “renting” scale. They will be able to do this across multiple vectors – operations, procurement, distribution etc. One example, is in the way they manage their finances.

In recent years, the evolution of financial operating systems (Financial OS) has marked a transformative shift in the financial landscape, especially for small and medium-sized businesses (SMBs) – and a salient example of this broader shift. This is not just for the CFO, but for the finance team and the founder.

Financial OS platforms—such as Ramp, Mercury, ZenBusiness, and Xepelin—are rapidly emerging as powerful tools for SMBs, enabling them to manage complex financial processes and make informed decisions with efficiency and ease. These platforms embody a new era in financial technology, integrating various essential services under a single digital roof and thereby reducing complexity, enhancing automation, and unlocking new revenue streams for businesses. They often combine multiple (and not always but sometimes overlapping) products together like a bank account, corporate cards, spend management, bookkeeping, financial ledger, financial statements, financial performance and profitability analysis, budget and forecast. 

—> Read on for more, or if you want two random AI generated characters to banter about it, check out the podcast voiceover.

The Evolution of The CFO Financial Operating System

The concept of a Financial OS did not appear overnight; it is the result of several waves of innovation within the fintech industry. Each wave built upon the last, creating a more sophisticated and user-centered approach to financial services. Initially, internet-based services disrupted traditional financial models, giving rise to early digital banking and payment solutions. The mobile revolution then enabled the unbundling of financial services, which provided SMBs with tools like mobile payments and on-the-go financial management.

Source: Bessemer Venture Partners

Today, we are witnessing a “rebundling” of these previously separate financial services into cohesive platforms, packaged to fit the distinct needs of SMBs. We crudely simplify it into four waves (building on what many have already written about).

Source: Fluent Ventures

Financial OS systems have brought these advances together to offer industry-specific and deeply embedded tools that provide financial visibility, automation, and greater operational efficiency. This shift is not just a technological leap; it is a strategic evolution that prioritizes customization, scalability, and the specific pain points of the underserved SMB market.

Crucially, financial operating systems are not fintech product alternatives to bank. They are rather software driven solutions that embed a variety of self-reinforcing products together.

Case Studies: How Diverse Financial Management & Financial Operating Software Business Models are Empowering SMBs

To understand the impact of Financial OS on SMBs, it is helpful to look at specific case studies of companies at the forefront of this evolution.

Mercury, Ramp, Xepelin, and ZenBusiness each exemplify distinct applications of Financial OS, demonstrating how these platforms address core financial needs in innovative ways.

1. Mercury: Revolutionizing banking and cash flow management & reconciliation for startups

Mercury is a banking platform specifically designed for startups and small businesses, with a focus on providing a seamless digital banking experience. Mercury’s Financial OS centers on offering robust, user-friendly tools for cash management, risk management, and cash flow visibility. Mercury combines traditional banking services (checking and savings accounts) with modern tools like automated expense tracking, virtual and physical cards, and cash flow analytics. Its integration with software commonly used by startups allows businesses to consolidate financial management.

2. Ramp: Building a comprehensive spend management and accounting software platform

Ramp focuses on helping SMBs control expenses and optimize spending through an integrated financial platform. Ramp has redefined corporate spending by combining a corporate card with automated expense management and robust analytics tools. Ramp’s Financial OS includes corporate cards with real-time tracking, automated receipt matching, and an expense management system that can identify potential cost savings. It also offers customized spending policies and automated categorization of expenses. Ramp helps small business owners generate an accurate financial picture, create basic finance processes, review fp&a accounts, and save on data entry.

3. Xepelin: Tailoring financial operations, accounts payable, accounts receivable workflow for Latin American SMBs*

Xepelin, a Financial OS provider based in Latin America, caters specifically to the financial needs of SMBs in this region. The platform offers solutions for cash flow management, lending, and accounting, which are particularly valuable given the unique regulatory and economic environment in Latin America. Xepelin integrates cash flow management, embedded lending, and accounting tools into a single platform, making it easy for SMBs to manage finances, meet compliance requirements, and access credit. The company tailors its product offerings to local markets, addressing specific regional challenges. By understanding a company's financial operations, Xepelin can provide appropriate loans at the moment they are required.

4. ZenBusiness: Comprehensive business formation and financial management*

ZenBusiness initially began as a business formation service for small businesses, helping them navigate the complexities of starting and registering a new venture. The company has since expanded into a full Financial OS, supporting SMBs with a range of tools from formation and compliance to financial management. ZenBusiness provides an all-in-one platform that includes business formation, accounting, invoicing, and compliance management tools. This holistic approach allows small businesses to manage all aspects of their operations from a single platform.

Components Of A Financial Operations System And Why It Matters for SMBs

For SMBs, financial OS offer key services:

Improved Cash Flow Management

Many Financial OS platforms, like Ramp, prioritize cash flow management tools. They consolidate expenses, analyze spending trends, and provide real-time insights into cash flow, helping SMBs to allocate resources more effectively. Real-time financial data enables business owners to make quicker, more informed decisions that can prevent cash shortfalls. They help streamline financial data and tracks financial metrics.

Integrated Lending and Credit Options

The traditional lending market has often underserved SMBs, leaving them struggling to secure the necessary capital to grow. Financial OS providers like Mercury are bridging this gap by embedding credit and lending options directly into their platforms. This allows businesses to access loans and lines of credit without the typical obstacles, improving cash availability and reducing the time and effort required for financing.

Increased Operational Efficiency

Financial OS platforms help SMBs automate repetitive financial tasks such as invoicing, payroll, and expense tracking. By reducing the manual workload, these tools allow business owners and managers to focus on growth and strategic planning rather than day-to-day financial administration. For instance, Xepelin provides accounting and financial management services specifically tailored to Latin American businesses, helping them manage finances more effectively in a complex regulatory environment.

Enhanced Data Insights and Risk Management

The integration of advanced analytics and risk assessment tools into Financial OS platforms has democratized access to valuable insights that were once reserved for larger enterprises. SMBs can now leverage these insights to make data-driven decisions about risk, creditworthiness, and operational investments. Platforms such as ZenBusiness, which initially focused on company formation and business registration, have expanded to offer a full suite of financial management tools that support compliance, governance, and growth strategies. 

The Benefits of a Unified Accounting Software And Finance Stack For CFOs

I have argued that the best fintechs benefit from at least one, and often multiple, of the “3 Ds”: Data, Distribution, and Delivery advantages. Arguably, financial operating systems (Financial OS) enjoy all three, creating a potent combination that makes these platforms indispensable for SMBs.

Data advantage from financial planning and analysis

Financial OS platforms are designed to aggregate and analyze a wealth of financial data that was previously siloed or inaccessible. By centralizing data on spending patterns, cash flow, creditworthiness, and other metrics, Financial OS platforms provide SMBs with a level of insight that was once only available to large enterprises. This data advantage allows businesses to make smarter, faster decisions. For instance, a platform like Ramp uses its data-driven insights to help businesses optimize their spending and identify areas for potential savings. Similarly, Xepelin uses its data to make better and faster underwriting decisions.

Distribution Advantage by being part of the workflow

Financial OS platforms leverage multiple entry points and cross-sell their services across their customer base. A user may start using ramp for their corporate cards, and expand towards bill pay over time. ZenBusiness starts by offering customers formation, and as customers need additional services, easily integrates them into their single pane of glass.

Delivery Advantage from combining multiple key components together

Financial OS platforms excel at delivering a seamless, integrated experience that brings multiple financial services into a single interface. This “one-stop-shop” approach not only simplifies financial management for SMBs but also enhances user experience and loyalty. By integrating functions like accounting, payroll, lending, and expense management, these platforms eliminate the need for businesses to juggle multiple software solutions. For example, Ramp combines corporate cards with spend management tools to streamline expense tracking and approvals in real time. ZenBusiness integrates everything from compliance to invoicing, allowing SMBs to manage all their financial and administrative needs without leaving the platform. This level of convenience is a key differentiator, as it allows SMBs to focus more on growth and less on navigating disjointed financial systems.

Source: Fluent Ventures

In combining Data, Distribution, and Delivery advantages, Financial OS platforms are more than just tools—they represent an entirely new infrastructure layer for SMBs. This combination creates a powerful network effect: as more businesses adopt Financial OS platforms, the platforms themselves become smarter and more valuable, enhancing their ability to serve a broader array of needs.

The 3 Ds reinforce each other in a virtuous cycle. Data insights fuel better service delivery, wide distribution attracts a larger user base, and streamlined delivery makes it easier to gather and leverage more data.

The Path Forward: The Financial Operating System and the Future of SMBs

As Financial OS platforms continue to evolve, the range of services they can offer will only expand, driven by emerging technologies such as artificial intelligence and machine learning. This evolution will make financial management increasingly predictive and personalized, equipping SMBs with the tools to anticipate financial challenges and optimize their operations in real-time. Financial OS is not merely a tool; it is becoming the central nervous system of modern SMBs.

The next frontier for these platforms lies in further industry specialization and expansion across international markets. For example, as demonstrated by companies like Xepelin, which focuses on Latin America, Financial OS providers are increasingly addressing the specific regulatory, operational, and financial needs of distinct regions. Flychain, a portfolio company, is executing the Xepelin/Ramp playbook for healthcare, and Prax (another portfolio company) is building ZenBusiness for solo practitioners.

For SMBs, adopting a Financial OS may soon become essential, as these platforms prove themselves indispensable in navigating the increasingly complex and competitive business landscape. With financial operating systems, SMBs can build a more resilient foundation, ready to seize new opportunities and thrive in a dynamic global market.

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*I was a former investor in both Xepelin and ZenBusiness at my previous firm