Is finance adding value or just consuming time?

Back Office Holding Back 3

There’s no debating that every business needs to set aside some time (read: money) for basic finance operations. Whether it’s filing taxes, generating legally mandated financial statements or general bookkeeping, businesses of all sizes and within every industry require a level of accounting expertise on hand. Unfortunately, too many take this necessary expense at face value. They invest as little as possible to accomplish only what’s legally required of them.

In many cases, the time and money spent to meet these baseline requirements turns out to be a significant investment that offers little return. And even a skilled CPA, who can get a company’s books in order for investors and tax reporting, won’t be able to deliver the deep insight that could give a company the competitive edge needed to kick-start growth.

Most executives attempt to build out the resources needed to analyze and respond proactively to financial data. They do one of two things:

  • Hire new people or a financial accounting consultant.
  • Purchase new financial software.

To no surprise, they become quickly overwhelmed when they begin to do either.

To drive a seed or growth-stage business forward, it must adopt a forward-thinking finance strategy. But maximizing the value of accounting services may require looking at this ages-old practice in a new way.

FinanceThe time and money needed to get a seed company off the ground doesn’t add much value, unless the right tools and processes are in place from day one.

Where traditional finance falls short

The basic duties of finance and accounting staff in a small or startup business traditionally include general bookkeeping duties, along with organizing and compiling records for tax, payroll and reporting purposes. Even these essential services could end up consuming a sizeable portion of a company’s budget without adding much value.

Tax and payroll

The National Small Business Association’s 2015 Tax Survey asked small-business owners about how they handled day-to-day tax and payroll duties. Twenty-two percent of respondents estimated tax and payroll reporting consumed more than 120 hours of their time per year and constituted one of the heaviest financial burdens to their overall business.

Auditing and compiling statements for investors

Businesses routinely seek funding in the form of private equity, seed money or some other avenue to get up and running. In most cases, acquiring this funding means completing an audit, requiring another level of expertise that an ordinary CPA may not be able to provide. A 2015 survey of audit fees by the Financial Executives Research Foundation revealed that a private company could expect to pay an average of nearly $255,000 per year for an audit.

Understanding the business on a deeper level requires even more work and additional costs.

Providing actionable insight

There’s no debating the necessity of standard accounting for tax and payroll purposes. The same goes for the audit procedure that organizations must undergo if they hope to receive crucial funding. These operations and expenses should allow a business to function on a basic level. Unfortunately, they provide little fuel to propel them above the competition. You need to understand the business on a deeper level. In order to do this, you must:

Align disparate data

Integrate accounting, invoicing, time and expense, payroll and other routine expenses for full transparency. That way you don’t have to manually enter data multiple times into multiple systems.

Extract meaningful findings through analysis

The goal of analysis is to answer questions by interpreting the data at a deeper level and providing actionable recommendations. How did you do this month and how does it compare to the prior month? How does it compare to your projected assumptions? If your 3 year business plan was based on 42% margin but your financial performance shows you at 39%, when will you run out of cash?

Information at a glance

Finally, organizations must synthesize all of this in a way that allows decisions to be made. Develop a narrative of the finances so you can see how your business is performing financially and easily communicate those findings to stakeholders.

How to hit the ground running

Can business leaders achieve parity between these obligatory financial responsibilities and their strategic goals? For most, hiring consultants, scrambling to implement software and sorting through piles of data would be the obvious. However, it is also the frustrating and expensive choice. But when the people, process and technology can be aligned, these financial duties quickly stop burning time and start adding real value.

To learn more on whether your finance department is driving value or just wasting time, read Consero’s white paper on the subject.

Consero FaaS: Disrupting the Outdated Traditional F&A Model

  • Cash to GAAP conversion
  • Clean-up work
  • Interim oversight & support
  • Accounting software Implementation

Build it Yourself Solution

  • CFO / Interim CFO
  • Consultants / VARs

Consero FaaS Solution

  • CFO / Interim CFO
  • or Consero Interim CFO
  • Consero Setup/Transformation
Ongoing F&A
  • Monthly financials
  • Daily accounting support
  • Management reporting
  • Integrate add-on acquisitions

Build it Yourself Solution

  • CFO
  • Controllers & Accounting Team
  • Enterprise Accounting Applications

Consero FaaS Solution

  • CFO
  • or Consero Fractional CFO
  • Consero FaaS Enterprise F&A Software and Services

New PE Platform Investment F&A Challenges

Founder Owned Company Accounting:
  • Existing accounting done on a cash/hybrid basis
  • Run on SMB accounting software and other disparate applications
  • Inability to produce auditable financials
  • Lack of know-how to develop projections & KPIs
  • No consistency/structure to customer contracts
  • Underqualified staff
  • Non-scalable manual processes
Carve-Out Accounting:
  • Required to move off parent company accounting applications in a timely fashion
  • Have to build an entire F&A team
  • No documented operational policies and procedures
To Optimized Finance & Accounting:
  • Monthly financials available in 5-10 business days
  • Audit and diligence ready support details
  • Integrated enterprise grade accounting software
  • Budget and forecast reporting
  • Business KPIs
  • Efficient & scalable processes for rolling in add-ons