Financial transparency is a necessity in any corporate back office, but for an organization that takes the leap onto the public stage, that transparency becomes a matter of compliance, investor satisfaction and overall success.
When home insurance technology firm Hippo went public via special purpose acquisition company (SPAC) in March, Chief Financial Officer Stewart Ellis began to elevate his prioritization on transparency — and digitization became instrumental to that goal.
“We’ve been focused on all of the different internal controls and processes that relate to ensuring that we have a good handle on where and how we’re spending money, that we’re doing so with the approval that we need, and that we’re reconciling all of the funds flowing in and out of the business at the level that we would need in order to reach the [Public Company Accounting Oversight Board (PCAOB)] audit standards,” he told PYMNTS in its latest Voice of the Digital-First CFO discussion.
In pursuit of greater visibility, control and, ultimately, profit, Hippo’s finance chief is balancing several spinning plates. Driving modernization in the back office can come in many forms, with several goals in mind. And as Ellis explained, it’s often a mix of strategies needed to shape the kind of future Hippo envisions for itself.
Working With The Check
Like so many organizations, back-office workflows like accounts receivable (AR) and accounts payable (AP) quickly emerged as key focuses for digitization, particularly when it comes to electronic payments. Yet the seamlessness in payment acceptance and reconciliation that Hippo sees by accepting credit card payments isn’t necessarily easily repeatable when it comes to receiving payments from business partners.
“Most of the payments in this industry and this ecosystem are made by mortgage lenders, mortgage servicers or title companies, and those players in the ecosystem have not yet fully embraced digitization,” said Ellis. “We end up receiving a lot of checks.”
Reconciling those check payments with individual policies can be a challenge, but it’s one that has inspired deeper relationships between Hippo and its banking providers. While businesses are increasingly willing to pay via electronic payments, collaborating with the bank has allowed the company to embrace sophisticated optical character recognition (OCR) and lockbox technology that can ease the pain of check acceptance and provide the kind of digital data necessary to automate workflows and drive transparency.
And at the broader level, it reflects the opportunity for organizations to work with what they have, rather than forcing more drastic changes in the back office.
Adjustments Versus Overhauls
Some workflows may only need minor adjustments or a quick software implementation to yield improvements. Others, however, need a bit more of an overhaul to achieve the kind of enterprise-wide goals Hippo pursues.
As such, Ellis said the company has invested significantly in developing proprietary systems to overhaul several front- and back-office functions.
Built on a business model that is intended to disrupt the outdated ways of homeowners’ insurance, Hippo has created tools and infrastructure to support digital onboarding with integration to valuable third-party data providers, modernize the way the policies themselves are framed (for instance, to cover electronics as opposed to pewter bowls and paper bond certificates), and to rethink the claims process and the customer relationship.
In some ways, Ellis said, the spirit of an overhaul has spread to the back office as well in areas like planning. Proprietary technology that supports the firm’s unique goals and business model trumps any efficiency that could be gained by an out-of-the-box solution.
“One of our core competitive advantages as a business is our own technology stack, so we need to make sure it plays nicely with the tools we’re using,” he noted.
Rethinking The CFO
As Hippo rethinks the way homeowners’ insurance is done — and the way its back office operates — Ellis also reflected on the business ecosystem’s own rethink of the role of the CFO. And today, he said, that means a finance leader is no longer solely focused on keeping score.
Cross-department collaboration “is essential to the definition of the job itself,” noted Ellis. “It’s less a question of being important or not important. If you’re not doing that, I don’t think you’re behaving as a CFO.”
Having a presence across all departments is essential to ensuring that everybody can get on the same page about the company’s goals and how to achieve them. CFOs more often have to play forecaster — not only to predict where the company is headed, but also to steer any change if that direction needs to be adjusted.
Migrating to the cloud and embracing automated technology can help the back office, especially finance functions, to bring efficiency and enhanced data visibility. Handling that data in a way that can identify whether a company is on the right path — and then guiding its next steps — is what enables true modernization.
“I think about CFOs as distinct from other finance professionals,” Ellis said. “As partners with the organization to change its future.”