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The Benefits of a Real-Time Business Finance Future

Michael D. Selfridge, Chief Banking Officer, First Republic Bank
October 30, 2021
The Benefits of a Real-Time Business Finance Future
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The following conversation is between Michael D. Selfridge, Senior Executive Vice President and Chief Banking Officer at First Republic Bank, and Wayne Chang, Co-Founder and Co-CEO at Digits. Michael Selfridge is an investor in Digits.

Here’s what we’re covering:  

  • With 82% of business failures due to cash flow mismanagement, business leaders often need more clarity around budgets, quick answers to simple questions and real-time financial data.  
  • But how can entrepreneurs get real-time answers to their financial questions that can help them run a more efficient enterprise?  
  • Digits is delivering a “living model” for finance that offers instant answers to financial questions — and offers of-the-moment financial visibility.    

For individuals outside an organization’s finance department, business finance can be a black box. There’s never been a living, real-time model for business finances — one in which simple questions like “How much cash do I currently have in the bank now and what is my cash forecast based on my business activity?" can be answered with ease. 

“If you’re a business, you have operating accounts, you have asset management accounts, you have investments, you have debt,” says Wayne Chang, a serial entrepreneur and the Co-Founder and Co-CEO at Digits. “There’s no great way to have a single look at it.” 

And since up to 82% of business failures are due to cash flow mismanagement, the lack of real-time visibility into business finances can be hugely detrimental to an organization’s ability to thrive. 

Wayne Chang encountered the problem during his time at Twitter — which acquired his last company, Crashlytics, in 2013 — and set out to create a solution. We recently sat down with Wayne to talk about the genesis of Digits and its mission to deliver instant answers to business stakeholders when it comes to their finances. 

A lack of in-the-moment visibility today

At Crashlytics, Wayne and his co-founder Jeff Seibert — who would go on to co-found Digits with Chang — had solved another black box problem: Giving developers insight into app and website crash statistics. As Twitter employees post-acquisition, they were charged with rejuvenating and redeveloping the Twitter developer platform . . . and they encountered unexpected challenges with budgets that opened their eyes to the need for real-time finance. 

“Twitter had a 1- to 200-person finance team, and Jeff and I were always being told things like ‘Hey, you’re over budget for this thing,’” says Wayne. “And we would respond with, ‘Well, we never even knew the budget to begin with because everything was so hand-calculated and hand-entered — there was never any full visibility.’” 

“That really contributed to us questioning why there are so many other areas of technology — web analytics or crash reporting — where you can get in-the-moment visibility, where you can understand things as they happen and make decisions as they happen. But in the area of business finance, there’s this inexplicably long lag,” says Wayne.

That long lag can result in more than just confusion about budgets. In a small firm, when someone overspends in one area of the business, that loss of money may reduce runway for several months. And unfortunately, there are few ways to proactively address such issues in business finance today. 

For example, there’s no ability for organizations today to receive alerts to let them know the account they usually run payroll from is running short (and that the business owner should transfer funds to cover it). It can take financial analysts and accountants weeks to understand the state of a company’s accounts and expenses and pass that information to the appropriate party. 

“In order to get an alert about your business finances that’s timely, all of the information has to be processed almost instantly for that alert to be actionable and useful at a high value. The problem is there’s generally a three-week lag.”

Digits, which Wayne co-founded in 2018, is on a mission to change that by making a living model for business finance possible. 

Reaching the advantages of real-time finance

With traditional finance tools and systems, industry averages for reaching the financial close (i.e., for gathering and collating the numbers to a point where insights can actually be derived) hover around 21 days, according to Wayne. With Digits, it takes just two seconds, a speed increase of about 1.8 million times. 

Part of the magic lies in Digits’ ability to parse through things like reimbursements in a way that lessens the finance department’s manual workload. 

“To get any type of actionable financials, the data has to be accurate. Unfortunately in business, financial data is messy, lives in a lot of different places and requires a lot of manual work to categorize, and then after all that work, find what you need to take action. Digits pierces through the chaos and gives you the information you’re looking for right in front of you. This took us years to build, but it’s revolutionary in its simplicity. Best of all, we’ve made it incredibly easy to use; so if you use QuickBooks, you need Digits.”

Making things highly intuitive and usable is part of Digits’ philosophy (just as it was for Crashlytics). And soon, Digits will be delivering answers even in advance of business stakeholders asking questions, as it expands into real-time alerts and other ways of being a “watchdog” for customers’ business finances. 

“Something as simple as . . . automatically detecting anomalies — things like fraud or a vendor you forgot to pay or accounts receivables for a customer that is past due,” says Wayne. “Rather than having humans find out three weeks later, [Digits] can just tell you, ‘Hey, this customer was supposed to pay last week and hasn’t paid yet. Maybe you want to go collect that.’ That provides immediate value, where the customer is converting AR and cash. ”

“We’re very excited to continue to knock down these kinds of use cases that everybody believes should be there, but just haven’t because the technology didn’t exist before, and now it does.”

The views of the interviewee of this article do not necessarily represent the views of First Republic Bank. This information is governed by our Terms and Conditions of Use.

First Republic Private Wealth Management offers access to private investment funds that invest in other third-party funds, which invest in nonpublic companies. It does not have discretion on which companies are selected as investments by the third-party funds. Accordingly, those third-party funds may have made, or make in the future, investments in the nonpublic companies included in the article.