It's one of modern life's most commonly misunderstood and mishandled resources.
Billion-dollar companies have been built to harvest, exploit, or protect it.
Laws are repeatedly introduced to regulate or control people's access to it.
It often feels like an abstract, ethereal catch-all word that we use to define how Meta knows what ads to serve me on Instagram. Data is the thing that my iPhone is supposed to be encrypted to protect. Data is as universal as it is confusing and as misunderstood as it is practically useful.
Too many small businesses are unequipped to understand their own financial data or what to do with it, the way it flows through our bank accounts, accounting platforms, and the story beneath the murky surface!
Understanding and leveraging our own data as business owners can transform the way we build.
It can mold our understanding, revolutionize our processes, and help us build faster and more efficiently than ever before.
Welcome back to The Profit Plot, a podcast where we help small business owners unlock the story behind their profitable business by unpacking one complex financial topic at a time. I am your host, Jeremy Millar.
In 1999, an article called "Fragmented Future" was published in Print Magazine by Darcy DiNucci. Darcy wrote, "The Web will be understood not as screenfuls of text and graphics but as a transport mechanism, the ether through which interactivity happens."
This became the defining vision for what would be coined "Web 2.0" at the turn of the millennium. And what a vision of the interconnected future it was!
The web as we know it today is built primarily around interactions between various databases or websites through an Application Programming Interface or API. Developers leverage APIs to create highways of data that can move seamlessly from one platform to the next.
On February 7, 2000, at a technology-focused business conference produced by International Data Group, Salesforce launched its API, opening up access to automation to their CRM software for enterprise-class businesses. Shortly after, eBay launched an API. A few years later, Amazon Web Services was released.
Businesses could now build resources using data from Amazon, or track sales engagements and cycles by creating on top of Salesforce's existing resources.
The release of open APIs created new possibilities for developers to leverage data previously siloed in one platform or another. The opening of information super-highways allowed data to pass from one platform to the next, creating an interconnected future.
Within a decade, social platforms like Facebook and Twitter popped up; digital resources shifted from being housed in onsite data centers to platforms like Amazon Web Services; mobile websites became increasingly ubiquitous.
APIs, interconnected resources, and information super-highways are great for scrolling on TikTok and being able to sign in through Google securely, but what does this have anything to do with financial data?
The concept of data is often referred to in general. Data refers to any measurable piece of information. Data is a measurement of something, whether an activity, a quantity, or a quality. Data points are used by organizations to guide decision-making by providing relevant and insightful information that can help tell a story.
Financial data is no different. The amount of money in your bank account: that's a data point. The number of times you've ordered something from Amazon this week: another data point. The salary you pay your employees: another set of data points!
Data is all around us, but it can be hard to gather and interpret all of this data. Too often, data is scattered between platforms: our bank accounts, QuickBooks, or billing software.
The financial industry primarily emanates from the banking system it relies upon. Banks allow us to store cash securely, transmit payments, or receive money. Banking is a regulated industry, which means it can be slow to adapt and meaningfully change.
In 2013, a new API was launched called Plaid.
Plaid was started by two people, Zach Perret and William Hockey. Initially, the pair intended to build financial management products like budgeting and bookkeeping software. They discovered something more significant, though. After having trouble reliably connecting bank accounts to gather data, they shifted their business to build a unified banking API.
Plaid partners with banks to provide informational access as a service. Financial technology apps leverage plaid to provide a constant feed of information for their end-users. This kind of open banking has revolutionized the way that bookkeeping and accounting can be done.
Ten years later, Plaid has become the information connector of the world's most prominent financial technology platforms. If you're connecting a bank account to an app like QuickBooks Online, for example, you've used it before.
When we can meaningfully connect data points, we can better understand the things we're trying to analyze. The more connected data points we have, our knowledge will improve!
Financial data is much easier to access, thanks to APIs like Plaid, and data is far easier to aggregate and analyze, thanks to other software platforms having their APIs. QuickBooks, for example, has an extensive, interconnected network of apps and platforms that allow you to quickly and easily aggregate information into a useful format.
Want to automatically sync your most recent payroll run to reconcile your finances easily? Just connect your payroll software to QuickBooks through the built-in integration!
Are you tired of manually recording sales figures from your online storefront? Luckily, plenty of platforms can help you sync any e-commerce platform to your accounting software.
Need to make sure that invoices are being sent and adequately recorded? Almost every online billing software can integrate with virtually any accounting platform in some form or another.
Collecting all of the pieces of your financial puzzle is now more accessible than ever, which means that you can unlock a deeper understanding of your business by simply leveraging the right tools.
What technology has unlocked in terms of interconnectedness regarding a business's financial data is remarkable. We can more easily derive insights and make meaningful decisions because of it. But it doesn't stop at data-driven decision-making.
Interconnected systems have allowed individuals to build million-dollar businesses by themselves.
Financial technology can help you automate the day-to-day manual processes that most businesses rely on! Instead of manually processing payments and sending out invoices, billing software can automatically collect payments for services rendered or products delivered.
These processes can also eliminate the margin for human error, meaning that you can worry far less about your business getting paid for your work and more about generating more business.
Digital payment platforms allow users to send payments via ACH, international wires, or even mail checks without signing something.
In the past, building a multi-million dollar business was utterly reliant on the human processes put in place, especially regarding financial management. Business owners had to struggle to manage their financial operations and ensure that things were proceeding as expected.
For many, the financial responsibility of running a small business was too much or too overwhelming. Instead of pressing into learning about financial best practices, many business owners ignored the need to implement good financial systems and processes and pressed onward.
Unfortunately, as your business scales, financial issues become more and more pressing.
You can't make the right hiring decisions without understanding your financial position. You can't create new products without investing in research and development first, which is expensive! You certainly can't hope to confidently withdraw money from the company when you're not even sure your profit figures are accurate.
Leveraging financial technology makes the complex financial management process much easier for many business owners today. Designing a strategy around a user-friendly interface and aggregated, understandable data is much easier than before.
By properly leveraging financial technology, you can create more agile teams that are free to focus on meaningful work. You can help more people, develop more products, and grow your business faster.
The world of technology is continuing to change at a rapid pace, and financial technology is slowly joining the march.
Artificial Intelligence and Machine Learning provide exciting new ways to process data and provide insights to small businesses worldwide.
Blockchain technology offers an exciting way to process transactions, reduce fraud, and increase transparency in financial activity.
Financial institutions continue to roll out a more interconnected banking system that allows for better access to our financial data.
Each of these things contributes to how we understand and evaluate our business's financial story. We can create new insights and efficiencies as we continue to aggregate and connect financial information. We'll build new products, offer new services, and usher in a bright future.
The companies intending to leverage today's financial technology will be leaps and bounds ahead of those who aren't. As technology progresses, the disparity between forward-thinking businesses and those stuck in the past will become more and more significant.
Luckily, it's easier than ever to get started. Many accounting firms, automation experts, and technology platforms exist to help business owners implement new changes that can make a real difference.
Harnessing your own data can make a real difference.
Unlocking your own financial story can make a real difference.
That brings us to the end of today's episode.
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The more knowledge we can share with one another, the better off we'll all be.
Join us again soon as we venture to unlock the financial story behind your profitable business. Looking forward to having you here with us next time, on The Profit Plot.