Consero’s COO and CFO Mike Dansby recently served as the moderator for a panel hosted by The CFO Leadership Council’s Austin Chapter. Members of the panel — which discussed Best Practices for CFOs in Managing Key Relationships — included Dominica McGinnis, CEO and Executive Coach with BridgeField Group; John Berkowitz, Founder and CEO of Ojo Labs; and Tiffany Kosch, Managing Partner with CenterGate Capital.

The following is a recap of some of the highlights of the panel discussion.

The CEO-CFO Relationship

John Berkowitz started things off by pointing out that the CEO and the CFO are a duo so they should complement and augment each other. They might have very different personalities and styles — one might be more financially conservative while one is more aggressive, for example — but that’s OK. “Strong communication between them will lead to success,” said Berkowitz.

“Sometimes people will say, “This is what the CEO should do, or this is what the CFO should do,” said Berkowitz. “But this assumes that every CEO and CFO are the same — which, of course, they’re not.”

Dominica McGinnis added that while people often say that the CFO and CEO should strive to develop a strong relationship, they often don’t know how to do this. “CFOs and CEOs should try to get to know and understand each other not just professionally, but also personally,” she said. “They should know that they’re on each other’s side and are there to help each other succeed.”

A good CFO-CEO relationship often comes down to managing expectations and building trust. “They both have to be credible and reliable and selfless,” said McGinnis. She used a marriage analogy in describing the CFO-CEO relationship: “Sometimes it seems like CFOs are from Venus and CEOs are from Mars, so try to align around a common language and approach.”

“Figure out where you are in the relationship,” McGinnis added. “Have you experienced anything difficult together yet? If not, it can be hard to build trust.”

CFO Relationships with Board Members

Relationships between CFOs and board members can be some of the most vexing of all. “It’s an interesting dynamic,” said Tiffany, who called this a “three-headed dog: the CFO, CEO and board members.”

Berkowitz has an eight-member board for his company, Ojo Labs. “My CFO and I meet with each board member individually before the board meeting because they all have different opinions and view the business differently,” he said. 

CFO Relationships with Bankers

The banker relationship is obviously one of the most important relationships CFOs have. Berkowitz encouraged CFOs to put themselves in their banker’s shoes and think about what their banker needs from them to help their business succeed. “This way, when you need support, your banker will know you and your business and be ready to help.”

McGinnis stressed the importance of building a relationship with your banker before you need help. Dax Williamson, Managing Director of Silicon Valley Bank who attended the panel discussion, concurred: “I get several ‘ace in the hole’ cards every year to use with customers. I always use them with customers who have taken the time to build a strong relationship with me, not ones who show up once a year to renew their credit facility.”

Dax also stressed the importance of being transparent with your banker. “As bankers, we can always deal with bad news, but bad news deferred is never good,” he said. “If you have bad news about your business, share it with your banker immediately. Waiting is never a good idea.”

CFOs should view their bank as more than just a vendor. “There’s a big difference between a banker as a vendor and a partner,” said McGinnis. Dax added, “If you just look at us as your vendor and go for the cheapest source of capital, you’ll get what you pay for.”

Tiffany points out that private equity firms have long-term relationships with bankers, but the CFOs she works with might just be working with them on one deal. “So we start with what we call a ‘have a beer chat’ between the CFO and the banker so they can get to know each other.”

General CFO Relationship Management Advice

The panelists offered the following general tips for CFO relationship management:

Dominica McGinnis: “A CFO can be a bridge builder since you have interactions with so many people. Strive to be a trusted advisor both within your organization and with key stakeholders on the outside.”

John Berkowitz: “As the CFO, don’t limit yourself to just one role, like being ‘the cost cutting person.’ View yourself more dynamically.”

Dominica McGinnis: “Managing staff can be a big transition for new CFOs. It doesn’t matter what your title is: If you’re directing others, you’re a leader.”

Contact Consero Global to Learn More

If you would like more guidance on managing key CFO relationships, this article may be helpful. You can also request a complimentary consultation from Consero. 

In our last article we explained the differences between private equity and venture capital, along with the various stages of venture capital financing. In this article, we discuss the importance of remaining funding ready and how to accomplish this.

Venture capital companies have an insatiable appetite for cash. It takes capital to invest in the technology, R&D, new product development and staff needed to fund ongoing growth.

This capital is usually raised in stages, starting with the pre-seed and seed stages then progressing through Series A, Series B and onward for as long as capital is needed. Unfortunately, four out of five companies that receive pre-seed and seed funding never make it to Series A. And nine out of 10 companies that receive pre-seed and seed funding don’t achieve a successful exit.

Prepare for Financial Due Diligence and Auditing

The key to making it to the next funding stage is remaining funding ready at all times. This starts with preparing for financial due diligence and auditing during the pre-seed and seed stages. These steps typically include the following:

• Gather formation documents (e.g., articles of incorporation, bylaws, shareholder agreements).
• Identify and build relationships with professional services providers (e.g., CPA, banker, attorney, insurance broker).
• Prepare revenue and gross profits by product offering.
• Obtain audited financial statements for the last two (private company buyer) or three (public company buyer) years.
• Consult with an audit firm about complex accounting requirements (e.g., revenue recognition, leases, stock options, convertible debt).

It’s also critical to adopt financial best practices during the pre-seed and seed funding stages. This starts with building a top-notch financial and accounting system with well-organized financial files. Your system should include monthly reporting and establish strong internal controls over financial reporting while accommodating corporate tax requirements and deadlines. Also invest in an appropriate enterprise resource planning (ERP) system for your needs.

8 Steps to Remain Funding Ready

Here are eight more steps you can take to remain funding ready at all times:

1. Implement accurate budgeting and forecasting. These provide the foundation for successful financial management. Investors want to compare current and previous periods so budgets and sales forecasts should be prepared on a monthly, quarterly and annual basis. There should also be common definitions of finance functions across the various time periods.
2. Establish sound collection practices. This is especially critical for early-stage venture-backed companies. Statistically speaking, the longer invoices go uncollected, the less like they are to ever be converted to cash. Therefore, early-stage companies should implement policies and procedures designed to ensure prompt collection of accounts receivable.
3. Utilize financial metrics, benchmarking and data analytics. Sometimes referred to as key performance indicators, or KPIs, these are quantifiable statistics that help define and measure progress toward key business objectives and other critical success factors. Common financial metrics include debt-to-equity, accounts receivable (AR) and accounts payable (AP) days, days sales outstanding (DSO) and inventory turnover.

These metrics should be benchmarked to previous time periods (e.g., the last month or quarter) or industry standards to spot trends and help reveal potential problems while you can still address them. RMA’s Annual Statement Studies is a good source for industry-specific financial metrics.

4. Incorporate cash flow management. Startups can burn through cash quickly, making cash flow management critical. The key is to decide which expenses are essential and will lead to increased market share and growth and which expenses are wasteful. Devise monthly cash flow plans to make sure your business remains liquid at all times.
5. Create a formal sales compensation structure. Sales is the main engine that will drive growth, so your sales comp plan needs to be structured and formalized no later than the Series B funding stage. Most sales comp plans today include a base salary plus benefits in addition to commissions and bonuses to incent and reward top salespeople for high performance.
6. Create a fundraising project plan and investor presentation. At each funding stage, investors will want to see how you plan to raise enough capital to carry the company through to the next stage. Prepare a formal presentation with these details that you can share with investors during your “pitch” meetings.
7. Use GAAP accounting and revenue recognition. Series A and Series B investors will expect to see financial statements prepared in accordance with generally accepted accounting principals, or GAAP. At this stage, GAAP reporting should be timely and accurate.
8. Prepare for potential international expansion. Depending on your products/services and your industry, Series B and Series C investors may inquire about how your company can tap growth opportunities overseas. So, prepare an international expansion plan that details these opportunities, along with the potential risks and costs of overseas expansion and any statutory international compliance requirements.

Using FaaS to Build an Optimized Finance and Accounting Team

Venture-based startups can build an internal finance and accounting team or outsource this function. Outsourcing using Finance as a Service (FaaS) tends to be far more effective for the majority of pre-seed and seed companies.

Building an optimized finance and accounting team in-house typically takes from 9 to 18 months, but an outsourced FaaS approach can accomplish this in as little as 30 to 90 days at a fraction of the cost. With this approach, you only pay for the finance and accounting functions you need, when you need them. 

Consero can help you build an optimized finance and accounting team using FaaS so you remain funding ready at each stage. Request your complimentary consultation today. 

Like kindling to a campfire, most startup businesses need capital in order to grow. This capital comes in two main forms: debt and equity. Debt is self-explanatory: This is money that’s borrowed from a lender or raised from a bond issuance that must be repaid with interest. 

Meanwhile, there are two different kinds of equity: private equity (PE) and venture capital (VC). There are important differences between them that you should understand before seeking equity financing for your company.

VCs Invest in Growth Companies

To understand these differences, you must first understand the different objectives of PE and VC investors. In short, private equity investors want to invest in businesses that are profitable, while venture capital investors want to invest in businesses that are going to grow. There’s a big difference between the two.

Right now you might be thinking: “But doesn’t every business want to be profitable?” Yes, but profitability isn’t always the main objective, especially during the early stages of a startup company. Technology giants like Amazon and Google are good examples of companies that operated at a loss for years so they could invest all of their cash back into the business in order to grow. 

These companies and their investors were taking the long view: They weren’t worried about becoming profitable right out of the gate. Instead, they wanted to grow as much and as fast as possible so they could eventually dominate their industries. They knew that if they could become the dominant online retailer and search engine, profits would soon follow. Of course, this strategy worked well for both of them.

Also, market capitalization — which is a main focus for VC investors — is calculated as a multiple of revenue, not earnings. So, the faster a company grows, the higher its sales and market cap will be.

Stages of VC Financing

Venture capital is usually raised in stages because successful growth companies always need more money in order to keep growing. Think of it like pouring gasoline on a fire: The more capital a business has, the more salespeople it can hire and the more it can invest in technology, research and development, and new product development to spur growth.

Pre-seed Stage:

The first stage is called the pre-seed stage. Here, there may not even be a real business yet — it might just still be an idea or concept in an entrepreneur’s mind. Funding at this stage usually comes mainly from family and friends or out of an entrepreneur’s own pocket, not from venture capital investors. 

Seed Stage:

The next stage, or the seed stage, is the first stage where venture capitalists might get involved. There still might not be a lot of revenue but there’s strong evidence that the seeds of a successful business have been planted. Real (not prototype) products and services are being delivered to the marketplace and a management team is in place that’s capable of executing the business plan.

Series A Stage:

The next stage of funding is called Series A. At this stage, VC investors want to see a real, operating business with repeatable sales and marketing processes that can acquire customers on a consistent basis. The business should be utilizing financial modeling and long-range planning and have adequate internal controls, along with a fundraising project plan and investor presentation

Series B, C and Beyond:

Subsequent funding stages after Series A are called Series B, Series C and so forth for as long as the business needs to raise capital. Venture capital investors will have specific expectations at each funding stage.

Always Be Funding Ready

The biggest thing to keep in mind when it comes to venture capital financing is the importance of being funding ready at all times. Remember that as long as you intend to keep growing, you will always need more capital — so you should always be ready to proceed to the next stage of funding.

Unfortunately, four out of five companies that receive pre-seed and seed funding never make it to Series A. And nine out of 10 companies that receive pre-seed and seed funding don’t achieve a successful exit.

Building a strong finance and accounting team is critical to maintaining funding readiness This can be done internally or on an outsourced basis, which tends to be more common among pre-seed and seed startups.

Consero can help you build the finance and accounting team you need to stay funding ready throughout each financing stage. Contact us by requesting a complimentary consultation to discuss your situation in more detail.

Next article: Planning a Successful Exit: How Venture-Backed Companies Can Remain Funding ready at All Times (Part II)

Like kindling to a campfire, most startup businesses need capital in order to grow. This capital comes in two main forms: debt and equity. Debt is self-explanatory: This is money that’s borrowed from a lender or raised from a bond issuance that must be repaid with interest. 

Meanwhile, there are two different kinds of equity: private equity (PE) and venture capital (VC). There are important differences between them that you should understand before seeking equity financing for your company.

VCs Invest in Growth Companies

To understand these differences, you must first understand the different objectives of PE and VC investors. In short, private equity investors want to invest in businesses that are profitable, while venture capital investors want to invest in businesses that are going to grow. There’s a big difference between the two.

Right now you might be thinking: “But doesn’t every business want to be profitable?” Yes, but profitability isn’t always the main objective, especially during the early stages of a startup company. Technology giants like Amazon and Google are good examples of companies that operated at a loss for years so they could invest all of their cash back into the business in order to grow. 

These companies and their investors were taking the long view: They weren’t worried about becoming profitable right out of the gate. Instead, they wanted to grow as much and as fast as possible so they could eventually dominate their industries. They knew that if they could become the dominant online retailer and search engine, profits would soon follow. Of course, this strategy worked well for both of them.

Also, market capitalization — which is a main focus for VC investors — is calculated as a multiple of revenue, not earnings. So the faster a company grows, the higher its sales and market cap will be.

Stages of VC Financing

Venture capital is usually raised in stages because successful growth companies always need more money in order to keep growing. Think of it like pouring gasoline on a fire: The more capital a business has, the more salespeople it can hire and the more it can invest in technology, research and development, and new product development to spur growth.

Pre-Seed:

The first stage is called the pre-seed stage. Here, there may not even be a real business yet — it might just still be an idea or concept in an entrepreneur’s mind. Funding at this stage usually comes mainly from family and friends or out of an entrepreneur’s own pocket, not from venture capital investors.

Seed:

The next stage, or the seed stage, is the first stage where venture capitalists might get involved. There still might not be a lot of revenue but there’s strong evidence that the seeds of a successful business have been planted. Real (not prototype) products and services are being delivered to the marketplace and a management team is in place that’s capable of executing the business plan.

Series A:

The next stage of funding is called Series A. At this stage, VC investors want to see a real, operating business with repeatable sales and marketing processes that can acquire customers on a consistent basis. The business should be utilizing financial modeling and long-range planning and have adequate internal controls, along with a fundraising project plan and investor presentation

Beyond Series A:

Subsequent funding stages after Series A are called Series B, Series C and so forth for as long as the business needs to raise capital. Venture capital investors will have specific expectations at each funding stage.

Always Be Funding Ready

The biggest thing to keep in mind when it comes to venture capital financing is the importance of being “funding-ready” at all times. Remember that as long as you intend to keep growing, you will always need more capital — so you should always be ready to proceed to the next stage of funding.

Unfortunately, four out of five companies that receive pre-seed and seed funding never make it to Series A. And nine out of 10 companies that receive pre-seed and seed funding don’t achieve a successful exit.

Building a strong finance and accounting team is critical to maintaining funding readiness This can be done internally or on an outsourced basis, which tends to be more common among pre-seed and seed startups.

Consero can help you build the efficient and scalable finance and accounting function you need to stay funding ready throughout each financing stage. Request a complimentary consultation today.

A recent survey of middle market CFOs contains both good and bad news for business leaders. First, the good news: More than a third (66%) of CFOs expect their businesses to be thriving a year from now.

The bad news? Most middle market CFOs say their companies’ growth didn’t meet expectations last year. Just 38% of them said that their company experienced strong financial performance in 2021. These are just a few results of the 2022 BDO Middle Market CFO Outlook Survey, which is conducted annually.

Hurdles to Business Growth

The path to business growth in 2022 and beyond will not be without hurdles, according to the survey respondents. The biggest concerns voiced by CFOs in the survey are:

• Ongoing supply chain disruptions (84%)
• Talent shortages (79%)
• Tax reform (79%)
• Potential COVID-19 resurgences (78%)

While challenges abound, so do opportunities. This is especially true when it comes to embracing new priorities at the forefront of business and stakeholder agendas like impact, purpose and sustainability. About one-third (64%) of the CFOs who responded to the BDO survey said they believe that implementing an environmental, social and governance (ESG) program will improve their long-term financial performance.

While just one out of three (36%) CFOs said their companies are actively pursuing a sustainability strategy now, virtually all of them (99%) said their company has at least one stated ESG objective this year.

BDO CEO Wayne Berson put it this way: “The next ten years will be driven by a mindset of sustainability and stewardship that prioritizes the needs of all stakeholders while accelerating digital innovation to create lasting business value.”

More Survey Responses

Digging deeper into the survey responses, CFOs view rising material costs (cited by 41% of respondents) as the greatest supply chain-related threat. This was followed by supplier delays (36%), supply shortages (35%) and transportation costs (35%). Accurate demand and inventory management was listed as CFOs’ top supply chain priority this year.

The top workforce challenge listed by CFOs this year is retaining key talent (42%), followed by attracting new talent (39%). To address workforce challenges, CFOs say their companies plan to invest in flexible work arrangements (42%) and increase employee compensation (40%).

Innovation was listed as the number one business priority for 2022 by the survey respondents. Their top strategy for achieving this is collaborating for greater network value (48%), followed by pursuing a joint venture (25%).

Mergers and acquisitions also appear to be a part of CFOs’ plans this year. On the heels of the hot M&A year in 2021, about one-third (31%) of the survey respondents say their companies plan to pursue M&A in 2022, which is up from 24% who said this last year and 25% who said it in 2020. 

The number one strategic goal cited by CFOs for pursuing M&A deals is enhancing their digital capabilities. Over half (53%) of CFOs said their companies plan to pursue digital transformation this year.

Using FaaS to Achieve Growth Objectives

One way CFOs can achieve business growth objectives in 2022 is by managing their finance and accounting function in the cloud. Finance as a Service, or FaaS, makes use of the best finance operation management practices by leveraging advanced technologies like artificial intelligence, machine learning, cloud computing, automation and more to streamline finance and accounting. This can result in lower costs and greater scalability and financial visibility to improve decision making for CFOs.

FaaS is also flexible and provides more control over finances than traditional accounting systems. This will enable you to spend less time on administrative tasks by eliminating the need for manual data entry while eliminating work cycle delays that occur due to waiting for accounts payable or payroll department approvals.

The (79%) concern for talent shortage is easily solved with the Consero FaaS solution. Consero offers a fully managed software & services platform that’s equipped with a skilled finance team along with pre-integrated, enterprise-grade finance and accounting software, featuring digital processes and workflows. With Consero’s FaaS cloud-based finance and accounting solution, you can complete a full digital transformation in 30 to 90 days — much less time than it would take to build an in-house finance and accounting function. 

CFO’s report 1/3 of their workweek is dedicated to managing a finance team. With Consero’s FaaS, business continuity risk is also lowered because companies leveraging FaaS do not need to recruit, hire, train, retain and backfill the finance team. This leaves executives more time to focus on what they do best, growing the business.

To learn more about the benefits of FaaS and Consero’s integrated finance and accounting platform, please request a complimentary consultation.

Cloud computing has come a long way in recent years as business leaders have overcome initial concerns about the security of storing and transmitting sensitive data in the cloud. Fully three-quarters of business leaders today are engaged in a cloud strategy, according to PwC’s inaugural US Cloud Business Survey, while nine out of 10 say they are “all-in” on cloud or have adopted it many parts of the business.

In addition, more than half (56%) of executives see the cloud as a strategic platform for growth and innovation. Unfortunately, nearly as many business leaders (53%) say they have yet to realize substantial value from their cloud investments. In other words, there’s a substantial value realization gap when it comes to recognizing and realizing the potential of cloud computing.

What Executives Want from Cloud Computing

The main business outcomes executives who responded to the PwC survey said they seek are improved resiliency and agility, better decision-making, and product and service innovation. Each was listed by about a third of the survey respondents. However, only about half of them said they have achieved these cloud objectives.

So what can business leaders and executives do to try to close the value realization gap with cloud computing? The PwC survey suggests four potential strategies:

1. Get in alignment on strategy and value. The survey found disconnects among executives when it comes to defining and quantifying the value of cloud computing. About a quarter of them define value as achieving faster innovation, while 20% define it as improved resilience and 19% define it as increased revenue. These differing views are symptomatic of the fact that some companies haven’t made clear strategic choices when it comes to their cloud investments.

The key is to make your cloud strategy part of your overall business strategy. To do so, you must make specific choices about how cloud computing can differentiate your business. For example, what digital and technology capabilities will cloud computing allow you to develop? What customer problems will it help you solve? And how can you embed cloud computing to enable end-to-end digital transformation?

2. Bridge the digital talent divide. The shift to the cloud has intensified the talent challenges many businesses today are facing. More than half (52%) of respondents to the PwC survey say that a lack of technology talent (such as cloud architecture and cybersecurity) is a barrier to their companies realizing full value from their cloud investments.

One way to solve this problem is to implement digital upskilling for all employees, not just technology employees. A digital upskilling program should focus not only on enhancing technical skills, but also on teaching new ways of working and creating new learning pathways. It should also develop programs designed to cultivate cloud computing skills.

3. Address risk concerns and build trust. Half of the PwC survey respondents view security and business risks as a significant barrier to realizing the value of cloud computing. In particular, they’re concerned that relying on third-party cloud service providers could increase their vulnerabilities and erode trust with customers, employees and other stakeholders.

To overcome these concerns, strive to build trust in cloud-based services. For example, some cloud services providers issue trust-based attestation reports assuring customers that their products and services have been thoroughly reviewed and certified by a third party. Addressing risk concerns early on provides an opportunity to build trust with customers and differentiate a company’s product and services.

4. Use cloud computing to advance ESG goals. Cloud computing can play an instrumental role in corporate efforts to achieve goals related to environmental, social and governance (ESG) issues. One-third of the PwC survey respondents said that they understand the impact of the cloud on governance aspects of ESG and they have implemented a plan to leverage the cloud to improve their ESG strategy and reporting.

Cloud computing can support companies’ ESG efforts in several different ways, including through cloud-based data management and reporting. This helps automate the reporting process while standardizing data and increasing transparency. Moving data to a third-party cloud service provider can also help reduce a company’s carbon footprint, since emissions from a data storage facility are usually considered scope 1 or scope 2 emissions.

Managing Finance and Accounting in the Cloud

Finance as a Service, or FaaS, has emerged a service offering with one of the most popular cloud applications today. With FaaS, all aspects of finance and accounting are managed by a third-party SOC 1 certified service provider.

Consero offers a fully managed software platform that’s equipped with pre-integrated, enterprise-grade finance and accounting software, featuring digital processes and workflows. This platform provides access to a comprehensive set of finance and accounting tools including:

• Cloud accounting software
• Customer invoicing and vendor billing
• Employee expense approvals and payments
• Statutory and management financial reporting
• Task management and workflow software
• Graphical metrics and KPIs

With Consero’s cloud-based finance and accounting solution, you can complete a full digital transformation in 30 to 90 days — much less time than it would take to build an in-house finance and accounting function.

To learn more about the benefits of FaaS and Consero’s integrated finance and accounting platform, please request your complimentary consultation today.

Attracting and retaining talent remains a huge challenge for businesses as the nation begins to emerge from the upheaval of the pandemic. According to the 21st edition of the EY Global Capital Confidence Barometer, six out of 10 middle-market companies say they face difficulty when it comes to finding and keeping skilled employees.

“The much-mooted threat to jobs from technology is not playing out as many had predicted,” states the EY report. “Indeed, as more jobs are automated in routine tasks, companies are finding it more difficult to attract and retain talent with the right technical and digital skills to benefit from these efficiencies.”

Pervasive Throughout All Industries

Talent acquisition and retention is the top concern among business leaders in 2022, according to a survey conducted by Protiviti and NC State University. “Most if not all of the organizations that we’re speaking with are struggling with things like attracting, retention, engagement, upskilling,” Protiviti Managing Director Fran Maxwell said during a recent webcast. “It’s pervasive throughout all industries, throughout all organizations now.”

Some employers are trying to attract and retain talent by boosting compensation. In November, hourly private sector wages rose 4.8%, according to the Department of Labor. And companies have budgeted 3.9% wage increases for this year, which is the biggest bump since 2008, according to the Conference Board. Unfortunately, these increases aren’t keeping pace with soaring inflation, which reached 7.9% in February, a four-decade high.

However, Maxwell notes that raising pay isn’t the only way to attract and retain talent. He recommends that businesses also make efforts to improve the employee experience — for example, by offering flexible or hybrid work arrangements, access to learning and development programs and creating a work atmosphere of well-being.

“Organizations that will win the talent war will focus on differentiating an employee experience, making it different for each employee,” said Maxwell.

Competing with Big Businesses for Talent

Large corporations have historically held the edge when it comes to brand marketing and employee recruiting. In the current environment, however, some middle-market firms are finding that they can compete with their bigger brethren by positioning themselves as an attractive alternative to large organizations.

One way to do this is to focus on the “power of purpose.” In the 2019 Mission and Culture Survey conducted by Glassdoor, eight out of 10 respondents said they consider a company’s mission and purpose before applying for a job there.

Purpose answers the questions: Why does your company do what you do? And for whom do you seek to create value? It’s often easier for middle-market companies to clearly articulate their purpose to employees and live it out authentically than it is for large corporations. Doing so

enhances the employer value proposition for employees, including highly skilled candidates looking for the right employer.

Another way middle-market companies are successfully competing for talent against large corporations is by offering employees accelerated career advancement opportunities. These companies often have more flexibility when it comes to things like giving employees earlier and more frequent client interaction, greater job responsibility and autonomy, more supervisory responsibility, and participation in strategic decision making.

More Middle-Market Advantages

With their agility, middle-market companies can also usually create flatter management structures. These tend to give employees more opportunities to interact with upper managers and move more freely between management layers throughout the company.

Embracing technology and creating a culture of innovation is yet another strategy middle-market companies can adopt to attract and retain talent. Large organizations are often slow to adopt the latest and greatest technologies, but nimble middle-market companies can usually implement technology and innovation more easily.

In the EY Global Capital Confidence Barometer survey, half of the respondents said they are leveraging technology and automation to improve workforce productivity. After watching so many innovation-driven startups quickly transform themselves into some of the world’s most valuable companies, many talented young employees now view organizations like this as attractive places to advance their careers.

Finance as a Service, or FaaS, can be a solution to finance department staffing challenges faced by many middle-market companies today. With FaaS, finance and accounting software and technology is managed by a third-party service provider. This includes recruiting, hiring, training, retaining and developing all finance and accounting team members. FaaS is a fully managed solution which gives executives more time to focus on strategic planning, analysis and forward-looking initiatives.

Questions to Ask

As you consider how your company can scale and compete successfully with large corporations for the best and brightest employees, ask yourself whether you’re really thinking about the mindset of the employees you want to attract. Also, do you know what factors give you a hiring edge over large organizations and are you capitalizing on them?

And perhaps most importantly, are you creating an exciting, dynamic corporate culture that embraces technology and innovation? These are the kinds of organizations most of the high-demand young employees today are looking for.

Could You Benefit from FaaS?

Could you be leveraging a third-party service provider to handle hiring and retention of your finance and accounting staff for you? Doing so could reduce the amount of time and resources you spend on tasks that take your focus away from growing the business.

To discuss the potential benefits of FaaS for your business in more detail, please request your complimentary consultation here.

Owners and CEOs often don’t think about due diligence and audit preparedness during the early stages of the business startup. But maybe they should.

Research has indicated that between 90% and 95% of companies that receive seed funding don’t achieve a successful exit. This raises the question: What’s the difference between seed companies that achieve a successful exit — whether this is going public or some other type of exit — and those that don’t?

Of course, one of the biggest factors is achieving the right product-market fit. But another factor that isn’t talked about as much is an early focus and emphasis on due diligence and audit preparedness, especially as the company moves through the various stages of capital fundraising.

Growth Stages and Funding Milestones

Following are some of the key steps that should be taken from a due diligence and audit preparedness standpoint for each major growth stage and funding milestone. Note that there is more complexity at each milestone, requiring greater sophistication on the part of the financial management team.

Pre-seed to Seed:

• Build your financial system and organize financial files

• Implement financial controls

• Set up collections processes to maximize efficiency

Fundraising Series A:

• Financial modeling and long-range planning

• Fundraising project plan and investor presentation

• Series A fundraising overview, current trends and term sheets

Fundraising Series B:

• Financial metrics, benchmarking and data analytics

• Annual financial planning/forecasting and cash flow management

• Board financial reporting packages

• GAAP accounting and revenue recognition

Fundraising Series C:

• Financial guidance for strategic decisions

• Merger and acquisition assistance (if needed)

• Board/investor presentations

• Potential international expansion

“The key is to maintain funding readiness throughout each of these stages,” says Jason Burke with Consero. “This should always be top of mind for seed companies. For example, make sure compliance is up to date, financial records are maintained and documentation is prepared so when opportunity arises, you’re ready to take advantage of it,” he notes. 

Get Started Early

Jason stresses that due diligence and audit preparedness should begin on day one of the startup. “It’s never too early to get started,” he says. “You’re going to need a lot of supporting information to back the numbers in your financial statements.”

He lists the following due diligence and audit preparedness steps:

• Gather formation documents such as articles of incorporation, bylaws and shareholder agreements.

• Identify and build relationships with professional service providers including a CPA, banker, attorney, insurance broker and industry-specific consultants.

ª Gather such information as internal control narratives and a summary of related party transactions.

• Prepare revenue and gross profit projections by product offering.

• Obtain audited financial statements for the last two years, or three years for a public company buyer.

• Consult with an audit firm about complex accounting requirements.

“It’s important to maintain your own financial documents and not rely on your CPA firm for this,” says Jason. “If you switch firms, important data that substantiates a tax position could be lost.”

Jason also stresses the importance of keeping financial statements in good order and maintaining adequate internal controls at all times. “Failure to do so can lead to numerous problems when it’s time to exit the business, not to mention higher taxes,” he says.

Your Finance and Accounting Team

Building a strong finance and accounting team is critical to proper due diligence and audit preparedness. This can be done internally or on an outsourced basis, which tends to be more common among seed startups.

Consero can help you build the finance and accounting team you need to assure adequate due diligence and audit preparedness. Contact us today and schedule a complimentary consultation. 

As a CFO, your corporate board of directors is one of your most important constituencies. Therefore, it’s critical to manage board relations carefully and strategically and to make sure that you and your CEO are aligned on your approach and your respective roles.

This starts with understanding the unique interests of each of the individual members, knowing their data needs, and determining who should be communicating with which board member and on what cadence, says Consero’s CFO and COO, Mike Dansby. “This will enable board members to most effectively support and govern the company,” says Dansby. “And it will lessen the chance that there are unmet board member expectations on the part of your company.”

The Makeup of Your Board

Managing board relations effectively starts with achieving the right makeup for your board. In smaller organizations, the board might consist of just investors and the founders. But as businesses grow, the makeup of their board should evolve as well.  For instance, “independent” board members may be added to bring specific industry, product or functional expertise to the board.  Additionally, with growth the board will evolve and form committees.  Quite often, someone with deep financial expertise is added to chair the audit committee.

Over time, conflicts can sometimes arise based on how the board makeup is structured. Consider a venture capital-backed business with both early- and late-stage investors. The early-stage investors might not be as patient as time passes and might prefer a quick sale to generate liquidity whereas late-stage investors may be more willing to take a long-term view of the business.

“I have seen this scenario play out many times,” says Dansby. “It can be avoided by carefully managing the makeup of your board to achieve a balanced representation of shareholders, management and independent directors. Also, the company should pay close attention to the voting rights and preferences given to each series of shareholder to understand if decision making is balanced or loaded in favor of a particular shareholder class.”

Communicating with Your Board

Another key to effective board relations is knowing how to communicate with board members in the language they want to hear. For example, a business that’s backed by venture capitalists most often operates at a loss. In this scenario, the VC board members will be primarily interested in the progress of bookings growth and how to use cash flow to help drive growth, not in things like marketing and expense management. 

“There’s no need to go over a detailed P&L statement with them or talk about expense reduction,” says Dansby. “Instead, spend your time with them focusing on sales, revenue and cash flow.”

On the other hand, a business that’s owned by private equity investors is probably more established. The PE board members will likely be most interested in ways to boost efficiency and cash flow in order to service debt, as well as adherence to loan covenants. If debt is minimal, they will probably be interested in expense management and what types of investments are needed to grow the business. 

“Private equity owners tend to demand more data and perhaps be more hands-on with the business,” says Dansby. “Sometimes this requires a little more patience on the part of CFOs.”

Organizing and Facilitating the Meeting

According to Dansby, it’s important to choose a consistent format and agenda for your board meetings so members know what to expect. “Have a consistent flow to your meetings and a consistent set of metrics so they have a similar experience and get the same view every time,” he says.

For example, you might get routine business matters out of the way up front, like approving stock options. Next, you could cover the executive summary and key strategic initiatives. Then you can spend the rest of the time focusing on the things that are important to your board members, as discussed above.

Dansby recommends preparing the board deck and distributing it to board members several days in advance so they can review it and be better prepared. Get consensus early on as to key metrics and analytics for the business and stick to those.  Relegate the GAAP financials to the appendix as most boards prefer to look at some version of an adjusted EBITDA analysis.

The hardest aspect of keeping board members up to speed might involve translating complex financial data into actionable insights. “Board members might be unfamiliar with financial concepts that CFOs analyze regularly and confused by accounting jargon,” says Dansby. “Therefore, it’s important to keep reports simple and make sure they’re timely, consistent and concise.”

The CFO’s Role in the Meeting

At times CFOs might feel like a stick in the mud when they have to follow the CEO at a board meeting. The CEO is the optimist who talks about big-picture strategy and headline numbers, and then the CFO has to explain what the numbers mean, how the company can achieve them, and perhaps a dose of reality to the discussion. 

“Sometimes CFOs even need to reign CEOs in a little bit,” says Dansby. “But a board meeting isn’t the right time or place for open disagreements or to challenge the CEO. Instead, be adaptable and explain to the board what assumptions need to be met for the company to achieve the CEO’s vision and goals.”

If you have more questions about managing your corporate board more effectively, request a complimentary consultation.

The phrase “war for talent” was coined by McKinsey & Co. in the late 1990s to describe an environment where competition among employers for skilled workers was becoming more intense as the workforce began aging and employees exhibited less loyalty to the companies they worked for. 

This so-called war has only intensified since then. The demographic and societal trends that started more than two decades ago have continued with baby boomers starting to retire in droves and highly skilled employees hopping from job to job as new opportunities arise. COVID-19 has also played a large role in the upheaval of the workforce as both businesses and employees adjust to new ways of working due to the pandemic.

In fact, one out of every four employees say they plan to change jobs once the pandemic subsides, according to the Pulse of the American Worker Survey conducted last spring by Prudential. 

Challenges in Accounting and Finance

The war for talent can be even more intense in the finance and accounting industry. Highly skilled finance and accounting employees can often pick and choose from among the best jobs, which makes it hard for corporations and CFOs to build and maintain a stable finance and accounting staff.

The good news is that building such a staff isn’t always necessary anymore. Instead, businesses can utilize Finance as a Service, or FaaS, to meet their finance and accounting requirements. With FaaS, the finance and accounting back-office duties are outsourced to a third-party service provider. This relieves the CEO or CFO of the difficult, expensive and time-consuming job of hiring and retaining a full-time finance and accounting staff.

FaaS: A Comprehensive Approach to the Finance Function

Finance as a Service is sometimes confused with the services provided by outsourced accounting firms. However, FaaS offers a much more comprehensive approach to financial and accounting management than simple outsourced accounting, along with greater transparency and rigor.

First, FaaS provides a full suite of staff, services and software that’s capable of managing a corporation’s entire finance and accounting operations. This includes processing transactions and customer payments, paying vendors and producing monthly financials. In other words, FaaS is a one-stop financial and accounting services shop. 

FaaS also offers a single, self-serve software interface instead of multiple programs that corporations have to manage themselves. This interface should provide clarity and transparency with regard to financial and accounting information. With FaaS, knowledge isn’t concentrated with a single individual who is the only one who can access relevant financial and accounting data. Instead, this data can be easily accessed by anyone on the team when needed. With a single, self-service interface, more than one person can get that system to meet their needs on any given day.

In addition, FaaS features flexible and transparent pricing which makes it easy to forecast what costs will be as the company’s needs change in the future. Practically speaking, this means that a FaaS provider charges based on the service offered, not by the hour or based on the level of staff assigned to the client. This way, corporations know exactly what they’re paying for and how their costs will rise or fall as they scale up or down

Finally, FaaS offers access to skilled finance and accounting professionals who have the appropriate level of expertise for the corporation’s specific needs. While much of financial operations is fairly straightforward, sometimes corporations need a higher level of strategic thinking and expertise, like when performing acquisitions and onboarding new entities, for example. With FaaS, corporations only pay for this higher level of service when it’s needed. 

FaaS Service Brings Everything Together

In the end, Finance as a Service comes down to one word: service. This is what brings together the comprehensive offering, single self-serve interface, pricing transparency and customized level of expertise. A true FaaS provider will offer this kind of comprehensive approach to managing the finance and accounting function.

As a CEO, now would be a good time to think about how adopting Finance as a Service could help you win the war for talent. To discuss the potential benefits of FaaS for your business in more detail, please connect with us here. 

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