Introduction to embedded accounting: A Modfin case study - understanding concept and significance

Suzanne Robertson
Finance automation
March 26, 2024

Modfin’s embedded accounting system helped a successful international startup prepare for an audit, avoid financial issues, and get set up for success.

Modfin is a financial platform that helps businesses large and small manage payment operations, automate accounting and streamline workflows. With speed and precision, Here’s how Modfin solves problems, implements solutions and decreases the need for companies to rely on high-cost resources.

Audit Assistance

A popular online seller with 100 million in annual sales was facing an impending audit. They needed help identifying and organizing underlying issues that were impacting their ledger.

With an auction component and sellers from China, the eCommerce site was in need of a scaled up solution to manage buyer’s money flows and fees. They also needed a strategy to help to track fund disbursement to sellers across the globe. Challenges included the inability to reconcile receivables and payables, difficulty collecting transactions, and managing over a dozen different fees.

The clock was ticking when the CFO reached out to Modfin to explore an embedded accounting solution.

What is embedded accounting?

Embedded accounting has emerged as a pivotal force in business streamlining processes and enhancing decision-making by integrating financial information directly into operational workflows, a crucial step when facing a complex audit.

Ways that Modfin benefited this international eCommerce business included putting proper transactional accounting in place, a 50% reduction in reconciliation costs, and providing valuable real time information.

Modfin founder Gabor Foldes worked directly with the client to prepare them for the audit and to move forward successfully. He explains why embedded accounting was the right solution instead of concentrating on financial reconciliation.

Why your business doesn’t need financial reconciliation

  • Embedded accounting pulls all financial data into the same place in real time into the same ledger.
  • Businesses get the benefit of doing reconciliation with all data in one source at the end of the process.
  • All data is matched and examined then recorded at the transaction level, mapping in real time so you don’t have to reconcile. Data is in the same standardized location.
  • At that point the ledger is already at a reconciled format and what is not cleared is shown.
  • Having a computer automate this process as opposed to a human equals greater automated accuracy.

Gabor says, “Basically, Modfin has a unique system. We have a small data model running AI that reveals reasons for ledger mismatches. This helped us avoid actions causing our client issues like charging customers twice.”

He explains that intelligent matching and reason determination takes away the need for reconciliation and there were other Modfin benefits.. “We helped our client prioritize accounting, not reconciliation. Another win for the client was the time it took them to switch from their enterprise resource system. Usually this is extremely difficult to implement. However, with Modfin, they were able to switch in 6 weeks instead of 12 months.”

Concepts of embedded accounting

Embedded accounting is an approach that embeds financial data and insights directly into the operational processes of an organization. Conventional accounting is often viewed as a separate function of an organization whereas embedded accounting seamlessly integrates finances into day-to-day activities. This is achieved by leveraging technology and data analytics to provide real-time financial information. Embedded accounting folds financial metrics into workflows enhancing their agility, responsiveness, and overall performance.

Benefits of embedded accounting

When a business uses embedded accounting they gain real-time insights. This gives a global view of the business leading to efficiency and reduced manual errors.

Integrating financial data into operational processes reduces the need for manual data entry and reconciliations. This streamlining frees up valuable time and resources for more strategic activities. When accounting efforts are automated across the board, the need for manual data entry and risk of errors are minimized

How embedded accounting increases an organization’s financial health

A business cannot be financially healthy without a workable accounting system. The best way to ensure the financial health of an organization is to use an embedded accounting strategy. Here’s how this advanced approach to accounting can be significant for businesses of any size.

Brings together financial data from any source

Modfin understands the importance of streamlining financial information. With the Modfin platform, financial professionals can easily collect invoices, payments, and other data from in-house systems or through one of the many Modfin connectors.

Management of payments

Through integration with financial systems, embedded accounting automates payment processes. This includes automating invoice generation, payment authorization, and disbursement.

Loan management

For loans, embedded accounting assists in managing the entire lifecycle of the loan. This includes the origination process, approvals, fund disbursement, and repayment monitoring. Organizations ensure compliance and minimize risk.

Decision making

Up-to-the-minute information helps decision makers access financial data and make the rapid-fire decisions needed in today’s advanced technology landscape.

Risk management

Identifying and mitigating financial risks is a key aspect of embedded accounting. By integrating risk analysis directly into operational workflows, organizations can quickly address potential financial challenges.

Cost control

Embedded accounting helps in monitoring and controlling costs at a granular level. This visibility allows organizations to identify cost-saving opportunities and optimize resource allocation. Additionally, embedded accounting saves on manpower costs, requiring less costly resources to run the business.

Final thoughts

Modfin’s eCommerce client had a successful audit and streamlined operations with embedded accounting.

Modfin is a leader in the fintech arena with an embedded accounting platform that can be tailored to most businesses that have an online marketplace or handle complex financial transactions such as money flows, online payments or on-demand services.

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