Are you working for a fintech with an in-house payments system? You might be in trouble. Most successful fintechs arrive at a point where someone is asking why the numbers don’t add up, and no one is quite sure why.
The basic payment flows are usually not the problem. However, bounce backs, manual corrections, system timeouts, and fraud can all lead to situations where your system isn’t accurately tracking your money.
But here’s some good news. There’s a time tested concept called double entry accounting helps you track your funds and spot discrepancies. Here are four questions to ask yourself if you are wondering if you need to apply some accounting rigour to your payments engine:
- Does the system track your balance sheet position? Make sure you know the difference between a change in assets and liabilities. Moving money between your own bank accounts is very different from moving money for your customers.
- Are you clear on whose balance sheet it is you’re tracking? It can be your own, the customer’s, our a partner’s. You might want to track all of them, just keep them in separate balance sheets. If you’re mixing them up, you will get an inaccurate picture.
- Is your data structure appropriate? Integers for money, include the currency, always note down the timestamp for any action, and make sure any financial action is incremental and non-destructive.
- Does your finance team use system data for month end close? If the finance team is only looking at partner invoices and guessing the rest, you could be misunderstanding your margins or risks might be building up.
If your system can generate an accurate balance sheet at any point in time, it shows you your own balance position, the numerical inputs are reliable, and your finance team regularly use the numbers the system outputs, you’re in good shape.
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