When a private equity firm closes on a portfolio company, the finance function has roughly 100 days to prove it can scale with the investment thesis. Most arrive underprepared. 57% of investor-backed CFOs still spend most of their time stuck in operational work, leaving little room for the strategic guidance sponsors are counting on.
Across newly acquired companies, the same five finance and accounting mistakes surface again and again. Each one caps growth, drives up the relative cost of finance, and chips away at the valuation the deal was underwritten on. Here’s what each looks like in a portfolio company, and how to fix it before the next reporting cycle or exit.
1. Building an Unscalable Finance Function
Unscalable processes are the single most common reason a finance function falls behind the investment thesis. When the team spends most of its day on manual administrative tasks, it has nothing left to contribute to growth, and the PE operating partner quickly sees that the portfolio company lacks the tools, processes, and people to hit plan.
The cost shows up fast. Private equity firms generally expect finance and accounting to cost 1% of revenue or less as a company scales toward $100 million in sales, and that benchmark is hard to hit when inefficiencies compound. High-growth companies have no room for manual workflows; as the business scales, processes have to be automated and systems connected, or growth stalls.
Centralized finance data makes automation and standardization possible. Once workflows are standardized and automated, AI and modern finance software can take over the repetitive work entirely.
The fix: centralize financial data first, then automate and standardize the highest-volume workflows before adding headcount. Scalability is a design decision best made early, before the company outgrows its systems and the work becomes an expensive cleanup project.
2. Reinventing the F&A Function From Scratch
Time is the most valuable resource a portfolio company has. Once the investment is made, sponsors expect the finance and accounting function to be optimized within about 100 days. Too often, middle-market companies discover their existing systems are the obstacle, and the CFO ends up rebuilding when they should be steering.
A company running on QuickBooks tends to hit the same walls: missing reporting functions needed for fundraising, data and user limits, and bottlenecks created by a lack of automation. These are predictable signs a portfolio company has outgrown entry-level accounting software. When a CFO is tasked with implementing financial systems and hiring controllers at the same time, their first months disappear into building the function.
Building the foundation from scratch introduces multiple points of failure:
- Producing audit- and tax-ready reports
- Selecting and implementing the right software
- Hiring and training the right people quickly.
It takes 9 to 18 months to stand up a full F&A foundation in-house, and there’s no guarantee it will be optimized at the end of it. An optimized function should scale on automated processes, deliver standardized forward-looking KPIs, and close the books in 5 to 10 business days, audit-ready.
The fix: treat the 100-day window as a deadline to optimize what already exists. Adopt proven systems and processes, and the CFO’s time goes to strategy.
3. Hiring a CFO With the Wrong Skill Set
Portfolio companies often hire a CFO to establish financial structure and build the team, then expect that person to also provide strategic guidance. Most CFOs fall into one of two profiles (strategic or operational), and the gap between them determines whether finance becomes a value driver or a bottleneck.
| Profile | Builder (Strategic CFO) | Maintainer (Operational CFO) |
|---|---|---|
| Background | Business process design, systems implementation | Controller or accountant track |
| Strength | Brings order to chaos and designs the finance function | Excels at repeatable, well-organized F&A management |
| Best when | High change, post-acquisition transformation | Stable, low-volatility operations |
| Risk to a portfolio company | Underused if the business is already stable | Can’t surface the forward-looking data sponsors need |
Hiring a maintainer and expecting builder results is the common pitfall. A maintainer keeps the books clean, while a builder knows which questions to ask and which insights leaders need to say yes or no to the right initiatives. In a high-change PE environment, that strategic skill set is what justifies the seat.
The fix: match the hire to the moment. A company in transformation needs a builder, and when a builder isn’t available or affordable full-time, a fractional or outsourced strategic finance leader fills the gap.
4. Operating Without Timely, Reliable Information
Leaders need information that is timely and forward-looking. When it’s buried in finance and answerable only by the CFO, decisions slow down and the business carries risk. CFOs working from disconnected systems lose their days to formatting, validating, and exporting spreadsheets for investors, auditors, and regulators, leaving little time for strategic guidance. Reliable, repeatable reporting is the foundation that frees finance to be strategic.
Slow information also carries compliance risk. Tax and regulatory compliance consistently ranks among the top concerns of finance leaders, and a lack of executive attention to it leads to underinvested tax systems, missed tax breaks, and misreported values that draw penalties. The same disconnected processes that delay reporting are what expose a portfolio company to audit findings and compliance failures.
Without visibility into financial health, basic measurement breaks down, and a fund manager can’t reliably calculate EBITDA, the metric every investment decision leans on. The same research that tracks operational overload also found 65% of investor-backed companies now close their books within nine days, setting the pace a portfolio company is measured against.
The fix: centralize data into connected systems and build a standardized reporting cadence, so accurate numbers and a clean close are routine well before an audit or diligence request lands.
5. Running on Disparate, Disconnected Systems
Multiple disconnected systems make finance operations costly, complex, and error-prone. Point solutions for expense, payroll, accounts payable, and billing each create their own silo, and transactional detail gets lost as data is imported into the general ledger. Accountants then spend their time stitching spreadsheets together by hand, a manual process that invites omissions and errors and makes automation impossible.
Disconnected systems are where cost, risk, and missed insight all converge. They inflate the cost of finance, undermine the accuracy investors rely on, and make a clean balance sheet harder to produce at a fundraise, an audit, or a sale. For a company heading toward a transaction, that directly affects how prepared it is for the diligence a buyer or lender will run.
The same gaps tend to surface as a lower valuation once investors start scrutinizing the data.
The fix: unify the finance stack on connected systems with a single source of truth, so data flows into the general ledger without manual reconciliation and reporting reflects reality.
Turning Finance Into a Value Driver
Fix these five mistakes and finance becomes the foundation the value-creation plan is built on: a clean balance sheet, dependable cash flow, and a valuation that holds up under scrutiny. A modular Finance as a Service model reaches that state faster than building in-house, pairing AI-driven efficiency, connected systems, and senior finance talent in one engagement.
That’s why 87% of investor-backed finance leaders now work with a third-party finance and accounting partner. Consero’s Finance as a Service gives portfolio companies an out-of-the-box F&A department, the same approach BV Investment Partners used to scale finance across its portfolio.
Request a consultation to pressure-test your portfolio’s finance function before the next reporting cycle or exit.
Talk to a Consero finance expert about what a modern, AI-enabled F&A function looks like for your business. We’ll map it out together — it’s 30 minutes, zero pressure.
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Frequently Asked Questions
Should a PE-backed company build an in-house finance team or use a finance partner?
It depends on the timeline and the skills already in the building. Building in-house can take 9 to 18 months and ties up the CFO in implementation during the exact window sponsors want strategic output. A finance partner delivers proven systems, processes, and senior talent in weeks, where building in-house takes quarters, which is why companies facing a near-term transaction or a stalled close usually partner first and hire selectively later.
What financial KPIs do private equity sponsors expect portfolio companies to report?
Sponsors expect standardized, forward-looking metrics they can compare across the portfolio: EBITDA and margin trends, cash flow and working capital, revenue growth and retention, and the unit economics specific to the business model. The harder requirement is consistency, the same definitions reported on the same cadence every month, so the board sees trends month over month.
How quickly can a portfolio company fix finance issues flagged in due diligence?
Surface-level cleanup, such as reconciling accounts or restating a few months of financials, can happen in weeks. Structural issues like disconnected systems, an unreliable close, or missing reporting infrastructure take longer because they require process and system changes that go well beyond adjusting entries. Starting that work ahead of diligence is the difference between a finding that delays a deal and one that never makes the report.
