How to Be Audit and Due Diligence Ready at All Times

There’s at least one characteristic shared by most seed companies that achieve a successful exit: an early focus and emphasis on audit and due diligence preparedness. Unfortunately, many owners and CFOs don’t think about this as early as they should, which can lead to delays in deals getting done and lower deal values.

Why Early Preparation is Critical

A lack of audit and due diligence preparation can lead to lead to a number of problems, such as:

  • Internal control issues
  • Delays in deal completion
  • Higher deal costs
  • A lack of proper documentation
  • Overwhelmed staff

In a worst-case scenario, a lack of early preparation can lead to failing the audit and due diligence phase of the deal. Conversely, being audit and due diligence ready at all times can yield a number of benefits, such as:

  • A fast and simple due diligence and process
  • Lower audit fees
  • Less strain on employees
  • Preservation of valuation
  • Accelerated exit

Due diligence is part of a liquidity event, so it’s never too early to start planning for it. Follow these three tips to help your company be audit and due diligence ready at all times.

  1. Set Goals and Expectations

Start with the end in mind: What will you need to support a due diligence exercise? Of course, this starts with a set of financial controls and processes that will result in a clean audit. You’ll also need an approach to document management and a plan that supports an efficient and timely audit. Treat each audit as practice for when you’ll be going through due diligence.

Create a standard due diligence checklist (your banker or attorney can help you with this) and map your internal processes to the data needs outlined in the list. Not all items will be within your operational purview, so share non-financial items with other leaders to help them prepare. Often, the most troublesome areas are contract management and employee document management. You can save a lot of time in due diligence by keeping them well-organized and up to date.

A few questions to ask:

  • What are your financial and organizational goals?
  • What are your prescribed audit requirements?
  • What is the timeframe for a potential sale?
  • Are there proper staffing, processes and controls in place?
  1. Build Relationships

Identify and build relationships with professional service providers such as your Finance as a Service (FaaS) provider, banker, attorney, CPA and insurance broker. Tap these relationships regularly throughout the year — don’t just wait until it’s audit time to talk to these professionals. 

Consero, a Finance as a Service provider hosted a webinar titled: 3 Tips to Be Audit Ready And Why It Matters. The discussion was led by Mike Dansby, a CFO with more than 35 years of combined management and consulting experience in multiple industries including software, tech, and services. Leveraging a Finance as a Service partnership ensures you will be GAAP and ASC 606 compliant while also being Audit and Due Diligence ready. 

Consult with an audit firm to set a timeline that works for everyone and also talk to them about complex audit requirements. Many companies are now choosing to do their own quality of earnings analysis before going to market. Talk to a provider to find out how they might approach this and then incorporate their viewpoints into your internal reporting and review processes. The key is to gather as much data as you can ahead of time so the deal isn’t held up later when you’ve got a buyer.

  1. Make Document Preparation an Ongoing Process

Document preparation should be an ongoing process throughout the year — not a one-time event when there’s an audit. This requires documented and updated policies and procedures along with monthly balance sheet and account reconciliation. This can serve as the basis for audit review schedules, thus minimizing audit prep schedules.

Also stay up to date on accounting standards and pronouncements like those from the AICPA and remain GAAP-compliant at all times. And work with your human resources team to make sure employee documents are organized and digitized. Pay especially close attention to proprietary information agreements and intellectual property assignments. It’s nearly impossible to get these from employees after they’ve left the company.

Consider these specific document preparation steps:

  • Record company accounting and financial policies
  • Gather documents on internal control processes
  • Prepare reconciliation documentation for financial statements
  • Anticipate audit procedures and due diligence requests when designing day-to-day processes

How FaaS Can Support Audits and Due Diligence

Audits and due diligence exercises don’t have to be a necessary evil. You can impress your auditors, owners and prospective buyers by planning for these activities ahead of time and building their considerations into your day-to-day processes.

Consero Global offers Finance as a Service (FaaS) that can support your audit and due diligence efforts. FaaS is a modern alternative to building an in-house finance and accounting team that delivers greater financial visibility and improved operational scalability, along with a lower and more predictable cost structure. 

Contact with us to learn more about how FaaS can help you be audit and due diligence ready at all times: https://conseroglobal.com/request-a-consultation/

 

Why Emerging Hedge Fund Managers Are Turning to Outsourcing

As the hedge fund industry grows and evolves, the fortunes of emerging managers are coming into sharper focus. While many larger funds have weathered the recent storms, start-up funds and emerging fund managers face a growing number of hurdles.

A new Insight Report from Hedgeweek, The Next Generation: How emerging managers are adapting to the new hedge fund landscape, examines how emerging hedge fund managers have fared in this environment. One of the most prominent findings in the report is the desire of these managers to outsource non-core functions of the business, such as finance & accounting and HR support, in order to free up more time to focus on alpha generation.

Outsourcing Back-Office F&A Administrative Functions

One-third of emerging hedge fund managers said they plan to outsource more of their administrative and F&A operational functions in the future, according to the report, while none of the managers said they plan to outsource less. This is almost double the industry average (17%) of hedge fund managers who plan to outsource in the future.

In the report, some managers said that the shift to remote work caused by the pandemic demonstrated that certain activities no longer have to be performed under one roof. This helped further accelerate the outsourcing trend. As one respondent put it, “We had 10 years of digitization within one year.”

Another respondent attributed the trend partly to the pandemic, along with other factors such as the changing landscape, the importance of cybersecurity and the “importance of information technology in running a modern business.”

In Search of Specialized Expertise

According to the report, cost-squeezed emerging hedge fund managers are now willing to outsource more of their business functions to third-party service providers, like Consero, that can offer specialized expertise across a variety of areas including technology, finance & accounting administration, HR support and payroll functions. Meanwhile, they are keeping core competencies like portfolio management and trading activities in-house.

Outsourcing has helped ensure that emerging managers are better able to focus on alpha generation so far this year. This, in turn, is helping them build a track record that investors are willing to commit to in the increasingly volatile market environment we now face.

The report noted that the expansion of outsourced services is bringing a degree of comfort to newer hedge funds. This is especially true for quantitative-focused managers who face particularly acute administrative and technology challenges.

Outsourcing Finance and Accounting Functions

Finance & accounting, human resource management and payroll administration are examples back-office administrative areas where it often makes sense for emerging hedge fund managers to outsource. A third-party service provider can handle all of a fund’s finance & accounting functions along with administrative functions on an outsourced basis, freeing up the fund manager to spend more time focusing on alpha generation.

These services are sometimes referred to as Finance as a Service, or FaaS. FaaS goes beyond outsourced accounting to include a full suite of staff, services and software that’s capable of managing a fund’s entire finance and accounting operations. In other words, FaaS is a one-stop F&A and administrative services shop.

FaaS features flexible and transparent pricing, which makes it easy to forecast costs as the fund’s needs change in the future. 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 fund. As a result, hedge funds know exactly what they’re paying for and how their costs will rise or fall as they scale up or down.

Consero: The FaaS Specialists

Consero offers Finance as a Service to emerging hedge fund managers, PE/VC firms and their portfolio companies. If you would like to discuss the potential benefits of FaaS for your fund, please request a complimentary consultation

How CFOs Can Better Manage Key Relationships

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. 

Planning a Successful Exit: 8 Steps to Remain Funding Ready (Part II)

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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. 

Planning a Successful Exit: Understanding the Various Stages of Venture Capital Financing (Part I)

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)

Understanding the Various Stages of Venture Capital Financing

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.

How to Realize Value from Cloud Computing

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.

Why Focusing Early on Due Diligence and Audit Preparedness is Critical to a Successful Exit

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. 

The Ultimate Guide to Finance as a Service

The Ultimate Guide to Finance as a Service

Every business’s financial transactions need to be processed without the risk of either error or fraud. They also need to condition their daily financial and accounting activities, in the form of creating financial statements, closing books on time, or providing accurate reporting, among others. Yet, if the financial leaders are constantly drawn into the company’s other details, the business often misses tackling these matters effectively.

This is where Finance as a Service (FaaS) comes into play. More than outsourcing back-office and other non-core finance functions, FaaS can provide organizations with enhanced reliability, timeliness, and quality insight into their financial performance. To achieve a similar level of financial management as a multinational enterprise, small and mid-sized organizations have to integrate their financial, accounting, and business strategy streams. That is precisely what FaaS has to offer. It provides middle-market businesses with an enhanced ability to:

  • Focus on execution and business continuity.
  • Consolidate all of their value streams.
  • Gain access to the services of an entire finance team at only a fraction of the cost in terms of overhead costs.

FaaS providers use scalable systems, standard operating procedures, and advanced cloud software, which increases business agility enough to meet any company’s unique needs while also providing them with easy-to-read dashboards alongside custom reporting.

And in light of the COVID-19 pandemic, businesses, while having to contend with various uncertainties, also have the opportunity to build a stronger organization overall. There are several ways that companies can make a nimbler finance function that can support a more informed decision-making process. That said, below are some of the biggest challenges that finance teams have to deal with during Covid-19 and beyond.

The Challenges That Lead to Inefficient Processes

The Covid-19 pandemic has had a significant impact on finance and accounting functions that are not entirely centralized and rely heavily on manual processes. Chief Financial Officers (CFOs) have been experiencing challenges when it comes to:

  • Limited access to actionable real-time financial data – When dealing with decentralized systems, putting the correct information together often needs to be done by hand. As such, leadership stakeholders often have to work with outdated information, which can generate limited results.
  • Inefficient on-premise systems – With more people working remotely, it has become increasingly challenging to access slow on-premise financial management systems that were not originally designed to support today’s business continuity.
  • Cash constraints – Accelerating cash is also a priority for all organizations, no matter their size or industry. Leading functions are often focused on high fixed finance operation costs with little money available for capital expenditure. Businesses can face additional challenges if their working capital is further locked into accounts receivable and accounts payable.
  • Staff management – Whether or not the current pandemic affected their demand, companies have still faced additional challenges in protecting their employees from infection, facilitating remote work, and more. This was particularly difficult if their existing infrastructure was unable to support these changes.
  • Various operational inefficiencies – Legacy enterprise resource planning systems, poor service placement design, and different siloed processes make it increasingly difficult for businesses to improve their productivity and operating efficiency.

That said, how can finance functions outsourced through Finance as a Service help build business resilience and improve business performance?

The Usefulness of Finance as a Service

Through FaaS, CFOs and their finance teams can design fast responses to emerging organizational needs, generating valuable insight to improve their decision-making process. As an agile and future-oriented service, FaaS combines the best existing finance operations management practices with advanced finance and accounting technology in the form of artificial intelligence, machine learning, automation, and cloud-based ERPs, to achieve their desired goals.

In doing so, companies can achieve faster access to working capital, real-time and accurate forecasts, lower operating costs, and more. It can also help companies standardize many of their repetitive and time-consuming manual processes.

FaaS can also help CFOs by:

  • Providing real-time financial data – By consolidating data sources with reporting systems, CFOs have access to a single source of truth that increases the speed and quality of insights, improves cash flow, planning, forecasting, and performance management.
  • Digital processes & technologies – Unlike on-premise systems, cloud-based tech is far easier to access remotely.
  • Minimal cash outlay – FaaS will reduce the fixed finance operating costs. This means that companies have more cash in hand to increase their ROI.

It’s also important to mention that there was increased demand from both CFOs and the accounting department for more strategy and innovation. This was even before the onset of Covid-19. Senior executives no longer need to spend their working hours on grunt work, especially since today’s digital technology can automate most of these processes.

Traditional finance and accounting processes are quickly becoming obsolete. As such, finance leaders who continue using outdated systems will be placing their organizations at risk. The CFOs’ reputation rides on their ability to plan and implement strategies to drive the company forward. They should be driving innovation and safeguarding their organization against future uncertainties. CFOs can’t afford to waste their valuable time on daily repetitive tasks instead of focusing on client relationships, business intelligence, wealth management, strategy implementation, and more.

Therefore, the future of finance and accounting will be dictated largely by outsourcing through FaaS. It helps lower operating costs, get access to top finance talent, state-of-the-art technology and the experience of finance and accounting professionals.

Is Outsourcing With Finance as a Service Right for Everybody

A common misconception is that businesses would lose control of their department by outsourcing their finance and accounting processes. Yet, when implemented correctly, outsourcing means that an organization will gain a strategic partner capable of supporting the existing finance team while also filling any current operational gaps.

As such, the types of companies that can benefit the most from a FaaS model include:

  • SMEs – This model perfectly fits companies with precise accounting needs and growing transaction volumes. This includes startups and small and medium-sized enterprises (SMEs) that also want to have the ability to quickly and effectively scale their operations as their business develops.
  • Emerging growth organizations – The FaaS model also works for companies with complex accounting needs and high transaction volumes, requiring a more in-depth financial know-how. FaaS providers offer a wide range of transaction processing and controller-level services.
  • Companies sponsored by Private Equity or Venture Capital FaaS are also excellent for providing executive-level access to CFO services for the most comprehensive financial management partnership in financial guidance and financial reporting for corporate and capital transactions.

Signs You Need Finance as a Service

Several telltale signs often indicate the need for modernizing the finance and accounting function and looking to a Finance as a Service partner. Among these, we can include the following:

  • Too much overhead – When companies have difficulty managing their in-house team’s overhead, outsourcing finance and accounting services may be beneficial. Outsourced teams can generate timely financial statements to improve financial visibility and reflect the company’s progress. Outsourcing also eliminates the need for in-house management of hiring, training and other similar time-consuming disruptions.
  • Outdated technology – As mentioned, FaaS providers will also provide you with a competitive advantage by using their advanced technology. Those who cannot afford to make such an investment will still have access to cloud-based finance and accounting software to provide accurate financials delivered in real-time.
  • Work efficiency – When the quality of the work has to suffer, be it in terms of overall performance or the number and frequency of errors, FaaS can be a worthy option to consider. The quality of work can result from unqualified personnel or staff members who have too much on their plate. In either way, finance as a service is there to see it through.

What Are The Challenges of Outsourcing With FaaS?

Before businesses start considering outsourcing their finance and accounting operations, they should be aware of the potential challenges while undergoing this process.

Knowing What Services to Outsource

One of the most common challenges of outsourcing with a FaaS provider is knowing which services should be outsourced in the first place. Business owners should define which of these processes and associated activities need to be outsourced.

It’s essential to keep in mind that finance and accounting operations are often decentralized to the different business units within an organization. For an effective outsourcing operation to take hold, both similarities and differences between these business units must be identified to know which processes to standardize.

Complying With Regulations

One major issue that often prevents companies from outsourcing their finance and accounting processes is their perceived risk related to regulatory compliance of HIPPA, ERISA, or SOX. And while some FaaS providers will charge extra for this type of service, more professional providers will already have it built into their packages as a basic offering.

It should go without saying that there needs to be absolute clarity when it comes to outsourcing governance. It’s also in the service provider’s own best interest to assist their clients in meeting these regulatory requirements as quickly and as effectively as possible.

Soft ROI

Another common challenge encountered when outsourcing finance and accounting processes are seeing all of the benefits of outsourcing. Some finance and accounting managers have difficulty accurately estimating their operating costs. And switching from outdated systems that are over-reliant on paper-based processes and spreadsheets will have a cost, in terms of both time and money.

That said, it isn’t easy to quantify the added value of internal resource redeployment to facilitate timely and accurate business analysis. This is the type of “soft” ROI that can’t be quantified directly but still needs to be considered, nonetheless.

Organizational Readiness

Another challenge that can be encountered when wanting to outsource with FaaS is the lack of cultural readiness in accepting external finance providers. With limited outsourcing experience, organizations have a tough time in accepting a third party having access to their systems or believe their commitment to providing high levels of service.

In a recent interview with Robert Alvarez, CFO of BigCommerce (BIGC) and two-time winner of the CFO of the Year award, he stated “When I suggest Consero’s Finance as a Service model to someone, I stress that they need to treat them as part of their in-house team, and not merely an outsourced provider.” Bringing your FaaS partner into your company culture becomes an important piece for success.

How to Choose an Ideal FaaS Outsourcing Provider

Since every business is unique, there is no one-size-fits-all approach to the situation. There are, however, several factors that need to be considered when it comes to finding the best Finance as a Service partner capable of meeting all of your needs and requirements.

  • Determine Your Needs – The first thing that needs to be considered is your own needs as a business. They need to determine if they also need Financial Planning,& Analysis, Controller Services, and/or CFO consulting, aside from their accounting core functions.
  • Their Technical Know-how – Professional outsourcing providers need to explain their methodology when it comes to project management, tracking results, resolving issues, and more. This will help you understand the process and how everything will be handled. Additionally, they should have a business continuity plan that will ensure uninterrupted services.
  • Vision Alignment – Another factor that needs to be considered is how well the FaaS provider aligns with your core business objectives. The best situation is when the provider is willing to provide a high level of visibility through regular financial reporting.
  • Communication – Likewise, businesses need to talk with the finance provider to determine their availability during predetermined times. This is particularly true if they are operating in different time zones and both teams need to determine if and when working hours alone to minimize any communication gaps.
  • Their Technology – Outsourced service providers need to have the right technology capable of tackling any financial and accounting responsibilities that may appear. It’s only through advanced software and IT infrastructures such as reliable networks and integrations that they can cover all of your needs and expectations.
  • Their Reputation – Last but not least, businesses should check their future provider’s reputation by looking up online client reviews, references, and testimonials. Check out reviews from companies in your industry and which may have similar needs to your own.

How Consero Global Can Help

Consero Global is one such Finance as a Service provider that can strategically outsource your finance and accounting functions while also allowing you to maintain your strategic financial leadership. Our services help cover any gaps between your financial numbers and your goals – which is a common problem that often leads to business failures.

By increasing your financial visibility, you will also be able to measure progress and monitor performance accurately and in real-time. You’ll also be able to assess the risk in all conceivable scenarios, meet challenges head-on, and overcome any obstacles that stand between you and your business growth.

Finance as a Service also removes the hassle and overhead costs associated with technology research and searching for, hiring, onboarding, and training people. Since Consero is already equipped with state-of-the-art technology and has a team of financial experts, there is no need for our customers to go through the trial-and-error grinding process associated with finding the right team and tools needed to get the job done. We’ve done it hundreds of times, so you don’t have to.

Since we provide both the staff and technology, businesses don’t have to design and document their finance and accounting processes from the ground up, which can take up to 12-18+ months in some cases. We can have everything up and running in one or two months, on average.

In addition, you will have access to our aggregation platform – SIMPL – which combines transaction details, real-time data, support documents, and financial dashboards under the same roof. This data can be accessed remotely by anyone authorized with an internet connection.

Business leaders need forward-looking financial reporting capabilities, clear and real-time financial data, and the right perspective into key performance indicators to respond rapidly to any unforeseen situation. Business leaders will also have to stay on top of their invoice processing, cash flow management, and document automation, among other such processes, while adhering to compliance policies.

This is why finance and accounting outsourcing is a cost-effective solution to meeting the specific requirements of every finance department out there. And unlike your typical outsourced accounting, which is only about moving some non-core business processes to a third party, FaaS is a model that provides far more than that. Finance as a Service delivers integrated advanced technology, process automation, strategic CFO guidance, business strategy cadence, data analysis expertise, and business process engineers.

Consero Roundtable: Add-on Acquisition Readiness – Is your finance team ready for that next acquisition?

Recently, Chris Hartenstein, Consero’s VP of Customer Success, hosted a conversation about the role the finance function can play in an add-on acquisition strategy and how to develop a readiness plan that paves the way for a successful integration. 

More than ever, buyout groups are investing in industry platform plays with an aggressive acquisition strategy to build value, but that requires a swift and competent integration into the operations of the buyer. So what role does the finance function have in ensuring that happens? Consero Global’s VP of Customer Success, Chris Hartenstein has personally helped integrate 18 companies with their buyers over the last year and knows the real-world challenges of the process.

He hosted a chat with Trey Chambers, the CFO of the B2B software tools provider IDERA, that has been owned by multiple PE firms, and Elizabeth “Scottie” Wardell, the Managing Partner of the middle market PE firm, Integrity Growth Partners. And for the perspective of a target company, they’re joined by Steve Isom, the CFO of donor management software and system provider Bloomerang, who had recently supervised the acquisition of his previous employer, Flywheel. Below is a lightly edited version of their conversation.

Chris Hartenstein (CH): What are some of the key priorities that companies should be looking at as they negotiate closing some of these acquisitions? Trey, you’ve managed 17 acquisitions over there, so tell us what you look for. 

Trey Chambers (TC): We haven’t always been good at it, but we keep learning. The key for all M&A is a good target, and that means knowing what you’re looking for. We have an M&A team in-house, with a pipeline of targets, and we’re always looking at who’s in our space and building those relationships, as a lot of our acquisitions are through our informal chats [with targets]. Most of all, I’d make sure there’s a strategic purpose. Maybe they have a better technology or one that doesn’t do what your [offering] does, or maybe it merely removes a competitive threat. Some are growth acquisitions, some have recurring revenue, maybe they have an older technology, but offer an opportunity for synergy. We think our ideal target has some combination of those qualities.

Once we have a target, we create what we call is a “skinny model” with high level financial information from the target, and then we’ll discuss a purchase price based on revenue or EBITDA multiples and then pressure test that as we begin diligence. You need to make sure you’re ready. We hire Deloitte to do a “quality of earnings report,” which takes the historical financials and does the equivalent of a mini-audit that traces any anomalies, one-time events, etc., so we truly understand the company’s historical performance. Then we assign the various diligence duties. We have a diligence tracker, and after all these years, we have a good one that tracks cash management, who’s doing the GL, and so on. Our goal is to get these deals done in 60 days, although it still tends to be 90 days, so it’s still pretty quick. The goal is to finish, or cut bait quickly.

I used to have a small team focused on diligence, but now I invite a lot of the team on a lot of the calls, because we used to close the deal, only to struggle with integrating the company afterwards. But now everyone is up to speed prior to close, so we can hit the ground running.

Elizabeth “Scottie” Wardell (ESW): I’d like to reiterate Trey’s point about having a sound rationale and thesis for this acquisition. It can be attractive to say, “I can get this at a really cheap multiple,” but if you don’t have great rationale that fits with the overall story of the company, when you go to sell, the buyer will unpack why this was added, and you won’t get credit for simply adding dollars to your P&L. In fact, it may distract from organic growth opportunities. Don’t be too focused on how things look on paper, because it still has to makes sense to the overall business thesis.

I’d add that people should think about these acquisitions structurally. What does it take to finance these acquisitions? If you’re going to incur debt, will that put a burden on the company’s other growth activities? So you should think about where the capital is going to come from, especially as I work with a lot of lower middle market companies that are at key organic growth inflection points, in addition to whatever M&A strategy may be explored.

CH: Steve, you’ve been on the other side of all this, having been recently acquired. What’s your perspective?

Steve Isom (SI): Something to consider with these deals is by the time diligence begins, it’s really confirmatory. There’s already a thesis and a LOI, so the role of finance is to give them confidence. Think about every interaction with a potential buyer as a chance to  further build that confidence in the business. This means erring on the side of transparency, giving the internal roadmap of controls, policies, forecasting and tell the story of where you were, where you are and where you were planning to go. I think you can develop a good relationship with the acquirer, so if you find yourself in a situation where a number you shared was incorrect, or there’s a detail that you pulled, you’ve built that rapport and trust with the acquirer, where you can have an open conversation about it, rather than trying to sneak by any adjustments to the data room.

CH: So much of what you need to make these acquisitions a success come from the finance function, and when the target’s finance department is in disarray, it can stall the deal. So what are some red flags that you’ve seen that would give you pause, and how have you ensured your finance teams don’t wave any such flags too? 

SI: There’s this idea of deal readiness. There’s a difference between an unsolicited inbound offer and going into an exclusivity process, or hiring a banker where you have 60 days to prepare. I’ve made a point to have info available and structured to be ready for that. When you’re on the acquirer’s side, you’re really looking for an efficient process at the target. Is the finance leader inheriting any operational debt? Are there things broken in the processes here?

ESW: If the numbers keep changing, or if different systems are saying very different things, that’s a red flag. This doesn’t imply anything nefarious, just that there may be more “noise” around the earnings. Inconsistency matters. In the presentation of the numbers- how confident are they talking about the numbers? How comfortable are they with them? What are the key drivers? Are they coming off as transparent, or do they bristle when I get to the next layer of questions? Some of that can be discerned by the body language of the different parties, say between the CFO and CEO, and if there is tension. Are they cutting each other off? Maybe there’s a lack of coordination and those are red flags. If you can’t reconcile cash at the end of the day, that’s most certainly a red flag as well.

CH: I like the idea of body language and making sure that people are being transparent. Trey, what are the red flags are you seeing?

TC: Is the data easy to reach? Are questions answered quickly? Is there pushback- some of that pushback is legit, but when it’s not, you need to decide [if it’s worth that trouble.] Acquiring small and unsophisticated is much harder than acquiring large and sophisticated, in terms of integration. A lot of companies in the lower middle market are cash-based by nature, so they’re not as mature on the process and accounting front, which means you’ve got to pick up the pieces post-close. I’ve always told my team, get everything you can pre-close, since if this is a synergy play, you may lose people who know things, and they are far more motivated to give that data before closing.

CH: Smaller deals take as long, if not longer, to close than big ones. In getting ready for deal, what should you have on hand from a finance perspective? 

SI: Most of the time, people underestimate how long it takes to integrate a business. Take any pain point in your business and understand that it will amplified and exacerbated during this process. Get the teams working together as soon as possible- maybe they outsourced or they have a great team. As Trey said, you have their attention before closing.

TC: One of our CEO’s favorite statements is “Get to the future.” The future is always scary but we know we need to get there. 90% of the time we want to use our processes and our playbook and the seller is, like everyone else, convinced their way is the best way. These are difficult conversations that don’t get any easier, so it’s best to have them upfront.

Next, have a staffing plan. I understand which positions are there and which will still there after the deal closes, and be sure to plan on turnover, complete with a back-up plan. The last element I’d suggest is that we do is weekly integration meetings about two to three weeks before the deal closes, if it looks likely. And we start building from there. Three or four weeks after that, we’ll invite staff from the target as well to participate.

CH: Scottie, what’s the value of the finance function of either side of the deal?

EW: [The finance function] can serve as a “quarterback hub” for the integration and analysis work. I’d add, think about the change management opportunity. It’s a lot of people getting together to do things different, and there will be energy from acquirer and target, and the more thoughtful you are there, being methodical about culture and giving opportunities to show shared goals and deal with any “hidden” info. How do you factor in people’s fears and hopes around this process? How do you optimize the best of the both groups? Things can get damaged if you don’t tackle the human element here, no matter how fancy the algorithms are. And the finance function can play a role in this.

SI: That’s especially true if most of the staff will be staying. Over-communication is key. Put yourself in their shoes. There are all these assumptions from the acquirer that there are these key people we want to stay, and well, the acquirer needs to say just that. Tell them that they are those key people. And to Trey’s point, if you try not to rock the boat, and assure them that they can keep most of their processes in place, every little change will seem all the more disruptive.

TC: People getting acquired are by nature scared, and they’ll assume the worst. “I’ll be fired,” or “The new processes will be worse.” So don’t string anyone along. We’ll meet everyone across functions within a week of the deal closing, and update them if we know we need them, or if we know we don’t need them, and even that we’re not sure yet, but promise that as soon as we know, we’ll tell them. People like certainty, and that will engage everyone faster for the Company’s future. People appreciate that, even if it’s bad news.

CH: Exactly. Don’t leave them in limbo. Steve. From a deal readiness standpoint, how did you share data when your prior company was acquired? It was an unsolicited offer, correct?

SI: That’s right. And from the first meeting to close was, I think, roughly 30 days. We had recently been through an equity raise so there were a lot of materials already in hand, and as a recovering investment banker, let me tell you, a professional presentation lends a lot of credibility. And honestly, we benefitted from having Consero. Because of their process, the team completed a full diligence list from Deloitte in 24 hours, and that kept the deal rolling along. That instills a lot of confidence.

CH: What else can a finance function do to help close these deals and scale both finance teams together? 

TC: Consero is great at onboarding new companies, since everyone that moves to their platform is coming from another platform. So Consero moves those companies to the platform efficiently, which allows us to focus on the business. And don’t forget the financial planning and analysis side here. So we refine that skinny model from the LOI stage and have a final model in place, and then we focus on that as we move forward. For all these acquisitions we measure them on a stand-alone basis for the first year so we can measure the P&L off the model and focus on the KPIs, to gauge where we are compared to our plans.

SI: You also need to make sure the CFO understands the thesis and the success criteria for the deal. Explain to the CFO the five or six milestones along with a reporting cadence against those metrics, and there’s no better way to assess success.

ESW: There’s always a lot of moving pieces post-close so I’d stress there needs to be a clear project management function, or at least a systemic approach over who owns what. And  finance can help lead that systemic approach. And losing sight of that can cause plenty of unnecessary value destruction.

TC: To that point, as part of our playbook now, we created a diligence tracker and appointed someone to manage that tracker. It keeps everyone on their toes, and keeps the integration engine humming.

SI: As a seller, make sure there is a project manager before the close, and that QB needs to make sure that the context of the deal is kept in mind. If that head of R&D answers the questions in a vacuum, there can be problems. Someone needs to make sure that the responses are consistent. CH: And that consistency can build a lot of trust. I think we all know that  no acquisition will be successfully integrated without that, and the finance function plays no small role in building trust in the numbers and the process, along the way.