Every VC-funded startup craves efficiency. They need to push forward as quickly as possible, and they need to get their finance and accounting up and running, too. Growth is the ultimate quest, and complexity builds up fast. The goal is to establish a smart finance foundation easily and efficiently, and sometimes that means outsourcing strategic CFO and controller expertise and financial operations to get just what you need at this time. This becomes the full stack CFO team, with all levels of strategic advisory and everyday accounting to keep the finances rock-solid.
If the startup lacks a fully formed finance function—if they don’t have the resources, expertise, and skills needed—there’s a risk of missteps, decisions made on false data, and hindered opportunities for growth. Milestones won’t be met. The VCs who are backing the company are going to notice. And tough decisions will have to be made.
There’s sometimes a false assumption at those companies that it’s not important or that not all the layers are needed just yet, or that full-time positions are the only way to make it work. For those companies, the finance function starts out meekly, perhaps with a junior accountant who mostly processes and records payments. A hole builds up within the business: Management lacks visibility into what’s really going on—how it’s performing, how to manage the cash, how to know with certainty what the next move should be.
When the finance function does receive the attention it deserves, the growth momentum can keep moving ahead. A finance function with all the layers in place and accessible—that has a full stack CFO solution—differentiates fast-moving, dynamic early-stage or emerging growth companies from the pack.
Elevating the Finance Function
It is possible to fill out the finance function in a more flexible, and effective, way as a fast-growing company’s needs evolve and as milestones are met. It does not have to look the same from one day to the next. Specialized skills and expertise are combined for a scalable solution that meets the company’s exact needs, on an ongoing basis.
Smart companies know that every layer of the finance function matters—from CFO-level strategic advisory insights, to controller expertise and skilled finance and accounting pros who run the day-to-day finance operations and set up technology applications that are relied upon to track what’s going on at the company and help everyone forecast what’s ahead. When properly combined, the levels of finance serve as a full-stack CFO solution that companies in the early stages of growth can build upon, depending on their unique needs.
How to Develop Robust Finance Operations
A mix of recording what has happened and predicting what’s next is part of the day-to-day work in finance, as invoices are sent out, bills paid, transactions recorded and cash flow managed. An accounting manager and accountant can manage the daily accounting needs, and a cost accountant can scrutinize the information that’s gathered. Regulatory compliance requirements and audit prep are addressed as necessary, as are technical accounting issues. Financial planning and analysis assists the needs of the strategically minded members of the team.
With the right processes and systems in place, the company can produce timely, accurate financial information. In turn, management will be able to make informed decisions as they debate whether to expand their hiring efforts, invest in a new product line or go after an acquisition. This includes developing the accounting structure and streamlining the payroll and AP/AR procedures, and improving the close process.
When You Need Startup CFO Insights
Talk of a CFO can seem premature for some companies on the fast yet early growth path, but the expertise of this strategically minded executive role can make all the difference as a company finds its way forward—and it does not have to be at a full-time capacity.
CFO expertise can be relied upon for a variety of matters that will help to push the company toward its goals. On a part-time or fractional basis, a CFO can oversee debt and equity financing, advise on the company’s capital needs, answer the tough questions from the board and investors, and ready the company for any major transactions ahead, such as an IPO or a merger or acquisition.
Startup Controllers Set the Pace
A skilled, strategically minded startup controller fills an essential role as the young company establishes its budgeting and planning processes, creates intelligence spending plans and conquers accurate and timely financial reporting. It’s critical to understand what’s going on at the company in a way that the senior team, the board and any investors can actually understand.
The Tech Stack and Its Essential Layers
Technology provides the underpinnings for every company, and they can realize great value by carefully selecting technologies that work well together. A “tech stack” of integrated applications enables efficiencies across the responsibilities of the finance team, from basic accounting to billing/invoicing and expense reporting to cloud storage and more. Integrations are key, because if these systems are disparate, the workload can be redundant and burdensome, and the information not as smoothly shared and clear as it could be. Think through the various applications you need for your own company’s tech stack.
The Bottom Line: Always Planning for Future Growth
When does a company need a fully formed finance team? It’s a common question, but there’s a different way of looking at this: What matters is whether the company has access to the right capabilities, skillsets, operational expertise and strategic insights for making informed decisions and continuing on their growth path. Companies can scale up from a part-time outsourced team to full-time players over time. It can be gradual, or it can be rapid, depending on the time to scale.
Entrepreneurs can have a team made up of the right people, with the right skillsets, ready for them. When more is needed—setting up the company for a IPO, taking on a revenue recognition quandary—that specialized capability can be brought in as needed. A full stack CFO solution provides exactly what’s needed as the startup moves forward so that expectations are met—and surpassed.
Tracey Hashiguchi heads up RoseRyan’s Emerging Growth Solution area, which focuses on delivering all areas of finance and accounting that VC-funded companies need to go further, faster. This practice area delivers all the finance that growing companies need through its dedicated team of savvy consultants. She develops RoseRyan’s strategy, programs and consulting team for helping startups get to the next level. Before joining RoseRyan, Tracey worked at Deloitte.
Tackling the Top Challenges in Finance and Accounting at Silicon Valley Companies Today
Small or large, private or public, companies all around Silicon Valley are facing many of the same challenges in finance and accounting today. These issues can affect morale in the finance team, prevent the company from getting at the information it needs to advance the business, and hinder the company’s growth. They’re not all surmountable overnight, but their impacts can be minimized if they’re given due attention.
Crushing Workloads Conflict with Efficiency Mandates
Often motivated by the need to reduce costs as well as the need to focus on high-value deliverables, companies are on a constant hunt to streamline processes and drive efficiency. At the same time, we see a lot of companies with very bright, knowledgeable and capable employees who are buried under a hefty backlog with no easing in sight.
How did they get there? The reasons vary: They may have been brought in when the company was in a crisis mode, which hasn’t let up. Or the company’s growth has outpaced the finance department, which has been under budget constraints that prevent hiring. Or, as we’ve seen with many companies, it’s been a perfect storm of extra projects that all hit at once—such as the back-to-back adoption of the new revenue recognition and lease accounting standards, and related systems implementations that went along with that. No matter the reasons why, the team feels behind—never mind trying to make progress on improving or streamlining processes.
Unfortunately, sometimes it’s simply a matter of not having the right staff to handle the work—we’ve seen underappreciated individuals perform heroic acts to hold things together as long as they can until they finally quit. Only then does the organization wake up to the workload the person was under and responds with three new hires. How much better would it have been to address the issue before the original employee burned out and left?
Rapid Changes in Technology
Emerging technology trends bring the potential for greater efficiencies and better access to critical information—along with the need to stay on top of what’s new and how the company can adapt. Automation of manual processes and moves to cloud-based ERP systems require a shift in traditional ways of working while vastly improving the timeliness and reliability of essential financial data. Artificial intelligence tools making their way to the market could transform the way finance teams operate, from how we reconcile documents and conduct reviews to realizing increases in productivity levels.
Evaluating the latest in technology should have a regular spot on the finance team’s agenda. Think about whether you are using your existing systems to their full potential. Are they being optimized to help streamline your existing processes? The things that worked great five years ago might be out-of-date today. Sometimes bringing in a third-party resource can help identify ways to streamline and make better use of existing technology.
The War for Talent Rages
The battle for finance and accounting skills and specialties continues, and there are no clear winners emerging. Companies keep looking for top talent to add to their team—employees who can think strategically, uplift the department to a higher level, leverage use of technology to automate and innovate, and who possess deep subject matter expertise. It’s a tall order for any one person to meet in the traditional, full-time workweek.
Flexibility in expectations can raise the talent of the team. It also makes sense to remain flexible to handle fluctuating workloads, and supplement with particular skills and talents when you need to. It might be the perfect time to supplement some skills for special projects and invest in training to raise the expertise of your talented team already in place.
How to Move Forward in Finance
So what’s our best advice for how to tackle these challenges? First, assess the situation and find the blockers. Carve out some time to really analyze your top bottlenecks and blockers in the finance department. Find out what is preventing you from delivering high-quality, value-add information right now. Are your business plans rooted on information that is not as credible or reliable as it could be?
For a bogged down department or an inefficiently run company, there may be little time for innovation or meaningful streamlining. If you are struggling just to get your books closed, there’s a bigger problem underneath it all. Oftentimes there are process issues upstream that just float downstream until they land in accounting. Take a look at the entire process to see if a bigger discussion is in order that may involve more than the finance team. Maybe the issue is trying to work with data from various sources that need to be reconciled, integrated or somehow manually manipulated. Investigate the spreadsheets—how many are you using to manage data and book your entries?
The answers to that could be a combination of staffing and technology issues. As you get at the root causes of the department’s issues, you may find there are opportunities to automate manual processes, harness improvements in technology or bring in another level of finance expertise. Sometimes you have to make an investment before you can see results.
As for the talent wars, sadly, we don’t have a magic bullet for that one. We find it gets harder and harder to find those “unicorn” employees who can do it all. They do exist, but they are really hard to find. So, companies may find they need to build today’s flexible team—hire someone with a reasonable financial foundation, and invest in training and upskilling the staff you do have. Our finance pros have stepped in to help companies wrangle the workload while helping to raise the level of the team in the process.
Despite the many differences among companies at various stages of the business lifecycle, they deal with common challenges in finance and accounting operations. We experience it firsthand as we help a range of fast-moving Silicon Valley companies face a host of new situations. We see it when we are consulting emerging growth ventures on a high growth trajectory and with midmarket companies grappling with a recent M&A change and new regulations. And we see it in large enterprises dealing with ever-increasing volumes of data from disparate sources, spinning out parts of their business and acquiring other firms.
Armed with ideas for finding and fending off the blockers in finance, the team can push through their latest challenge—until the next one comes along.
Pat Voll is a vice president at RoseRyan, where she provides strategic guidance to several practice areas, including corporate governance, strategic projects and operational accounting. She also manages multiple client relationships, develops new solutions for the firm, and oversees strategic and corporate culture programs. Pat previously held senior finance level positions at public companies and worked as an auditor with a Big 4 firm.
How to Deal with the New Revenue Recognition and Lease Accounting Standards? Help for Private Companies
What’s the biggest takeaway from the experiences of public companies that have adopted the new revenue recognition and lease accounting standards? For both accounting rules, the process has been more time-consuming and complicated than many of them ever anticipated.
Here’s a partial list of the common challenges our Technical Accounting Group has seen companies face in their implementations (for more about the impact companies are experiencing, play back our recent webinar Hot Topics in Accounting and Reporting: Insights from the Trenches):
Some Challenges of Adopting ASC 842, Leases
Finance teams that haven’t tackled this accounting rule should give themselves enough runway to go through the adoption process:
Understand that it won’t be easy (because it’s not!): It’s not just about journal entries—there are significant efforts to inventory all your leases, analyze how the new guidance will be applied, elect practical expedients, and establish policies to determine management judgment and assumptions, and develop new disclosures.
You also shouldn’t underestimate the scope involved. Most companies either think they don’t have embedded leases in service contracts or they expect that looking for embedded leases will be fairly straightforward and assume it’s going to be a quick and easy process. We’ve found it takes longer than expected to scope these out because it requires a good understanding of the services that are being provided and the assets that are utilized. The operations side needs to be involved. Think about what your procedures will be for identifying embedded leases, not just during adoption, but also on an ongoing basis. Every time you have a new lease, how are you going to identify that there’s a contract that might include a lease?
Getting the information you need: Give enough time to track down the information you need to do the calculations for each lease. This includes tracking down the actual lease agreements themselves. Also educate the organization—anyone responsible for managing a contract could provide you with valuable information on identifying if there’s a specific identified asset or if the company has a right of control over the asset. Also dig through your AP activity—vendor contracts and purchase orders—and identify any services that might involve an asset. There needs to be an ongoing process for identifying potential new contracts and purchase orders that might involve an asset and might need to be assessed under this new way of accounting for leases.
Focusing on the right matters: Understand what is material to your balance sheet and focus your attention on potential lease arrangements that are material to your company. We recommend setting a capitalization threshold and coming up with a policy for which leases will be capitalized. This is a guideline to go by and is not technically GAAP—be careful that you don’t go so far that in the aggregate you create a material misstatement. It’s a much more practical approach than just automatically doing the accounting for every transaction.
Some Challenges of Adopting ASC 606, Revenue from Contracts with Customers
Two years into the process, public companies are adjusting to the new way of recognizing revenue.
Adjusting to making variable consideration estimates: This part of the standard significantly changes practice for many companies because you didn’t used to make these estimates. You used to wait until your fees were fixed and determinable—it made your life a lot easier. So, now you’re not going to wait to recognize revenue, and you need to estimate these amounts. Think through the methodology for making these estimates and how you can ensure that it will be practical going forward.
Identifying performance obligations: Performance obligation identification can be especially challenging to determine whether the promises are distinct within the context of a contract. If it’s capable of being distinct, it seems to be a lot more straightforward, but figuring out things like the interdependence of promises on other goods and services has been challenging.
Dealing with disclosures: Some public companies experienced quantitative impact upon adoption of ASC 606, but all companies have had to implement new disclosures, and that has been fairly significant for people to build processes around. And it’s a key area that the Securities and Exchange Commission has focused on in comment letters. For example, they have asked for additional disclosures related to significant judgments made in identifying performance obligations.
Be Prepared for These Technical Accounting Changes
Private companies still struggling with ASC 606 adoption don’t have the resources or bandwidth to work on multiple standards adoptions in parallel or even back-to-back. The Financial Accounting Standards Board’s tentative decision to propose delaying the effective date for leases for private companies would be a welcome relief for those companies.
While the lease accounting standard is dominating the queries our Technical Accounting Group is getting these days, we can tell you that our best advice is to be prepared. Know what the challenges are, and lean on the lessons learned and best practices of the companies that have surmounted these complex rules before you.
For more about the challenges companies have faced with lease accounting, plus common concerns by the SEC, you can check out our Hot Topics in Accounting and Reporting: Insights from the Trenches webinar at your convenience. For private companies’ in particular, we have prepared Get a Handle on Revenue Recognition and Lease Accounting Before It’s Too Late.
Diana Gilbert, a senior consultant in RoseRyan’s Technical Accounting Group, has deep corporate and operational finance experience focusing on technical accounting, revenue recognition, process improvement and financial systems, SEC reporting and SOX compliance. Prior to RoseRyan, she held controller roles at a number of Silicon Valley technology companies and was a senior manager at KPMG.
Startup Finance Has a New Advantage: A Full Stack CFO Team
Every VC-funded startup craves efficiency. They need to push forward as quickly as possible, and they need to get their finance and accounting up and running, too. Growth is the ultimate quest, and complexity builds up fast. The goal is to establish a smart finance foundation easily and efficiently, and sometimes that means outsourcing strategic CFO and controller expertise and financial operations to get just what you need at this time. This becomes the full stack CFO team, with all levels of strategic advisory and everyday accounting to keep the finances rock-solid.
If the startup lacks a fully formed finance function—if they don’t have the resources, expertise, and skills needed—there’s a risk of missteps, decisions made on false data, and hindered opportunities for growth. Milestones won’t be met. The VCs who are backing the company are going to notice. And tough decisions will have to be made.
There’s sometimes a false assumption at those companies that it’s not important or that not all the layers are needed just yet, or that full-time positions are the only way to make it work. For those companies, the finance function starts out meekly, perhaps with a junior accountant who mostly processes and records payments. A hole builds up within the business: Management lacks visibility into what’s really going on—how it’s performing, how to manage the cash, how to know with certainty what the next move should be.
When the finance function does receive the attention it deserves, the growth momentum can keep moving ahead. A finance function with all the layers in place and accessible—that has a full stack CFO solution—differentiates fast-moving, dynamic early-stage or emerging growth companies from the pack.
Elevating the Finance Function
It is possible to fill out the finance function in a more flexible, and effective, way as a fast-growing company’s needs evolve and as milestones are met. It does not have to look the same from one day to the next. Specialized skills and expertise are combined for a scalable solution that meets the company’s exact needs, on an ongoing basis.
Smart companies know that every layer of the finance function matters—from CFO-level strategic advisory insights, to controller expertise and skilled finance and accounting pros who run the day-to-day finance operations and set up technology applications that are relied upon to track what’s going on at the company and help everyone forecast what’s ahead. When properly combined, the levels of finance serve as a full-stack CFO solution that companies in the early stages of growth can build upon, depending on their unique needs.
How to Develop Robust Finance Operations
A mix of recording what has happened and predicting what’s next is part of the day-to-day work in finance, as invoices are sent out, bills paid, transactions recorded and cash flow managed. An accounting manager and accountant can manage the daily accounting needs, and a cost accountant can scrutinize the information that’s gathered. Regulatory compliance requirements and audit prep are addressed as necessary, as are technical accounting issues. Financial planning and analysis assists the needs of the strategically minded members of the team.
With the right processes and systems in place, the company can produce timely, accurate financial information. In turn, management will be able to make informed decisions as they debate whether to expand their hiring efforts, invest in a new product line or go after an acquisition. This includes developing the accounting structure and streamlining the payroll and AP/AR procedures, and improving the close process.
When You Need Startup CFO Insights
Talk of a CFO can seem premature for some companies on the fast yet early growth path, but the expertise of this strategically minded executive role can make all the difference as a company finds its way forward—and it does not have to be at a full-time capacity.
CFO expertise can be relied upon for a variety of matters that will help to push the company toward its goals. On a part-time or fractional basis, a CFO can oversee debt and equity financing, advise on the company’s capital needs, answer the tough questions from the board and investors, and ready the company for any major transactions ahead, such as an IPO or a merger or acquisition.
Startup Controllers Set the Pace
A skilled, strategically minded startup controller fills an essential role as the young company establishes its budgeting and planning processes, creates intelligence spending plans and conquers accurate and timely financial reporting. It’s critical to understand what’s going on at the company in a way that the senior team, the board and any investors can actually understand.
The Tech Stack and Its Essential Layers
Technology provides the underpinnings for every company, and they can realize great value by carefully selecting technologies that work well together. A “tech stack” of integrated applications enables efficiencies across the responsibilities of the finance team, from basic accounting to billing/invoicing and expense reporting to cloud storage and more. Integrations are key, because if these systems are disparate, the workload can be redundant and burdensome, and the information not as smoothly shared and clear as it could be. Think through the various applications you need for your own company’s tech stack.
The Bottom Line: Always Planning for Future Growth
When does a company need a fully formed finance team? It’s a common question, but there’s a different way of looking at this: What matters is whether the company has access to the right capabilities, skillsets, operational expertise and strategic insights for making informed decisions and continuing on their growth path. Companies can scale up from a part-time outsourced team to full-time players over time. It can be gradual, or it can be rapid, depending on the time to scale.
Entrepreneurs can have a team made up of the right people, with the right skillsets, ready for them. When more is needed—setting up the company for a IPO, taking on a revenue recognition quandary—that specialized capability can be brought in as needed. A full stack CFO solution provides exactly what’s needed as the startup moves forward so that expectations are met—and surpassed.
Tracey Hashiguchi heads up RoseRyan’s Emerging Growth Solution area, which focuses on delivering all areas of finance and accounting that VC-funded companies need to go further, faster. This practice area delivers all the finance that growing companies need through its dedicated team of savvy consultants. She develops RoseRyan’s strategy, programs and consulting team for helping startups get to the next level. Before joining RoseRyan, Tracey worked at Deloitte.
Sarbanes-Oxley Success: The Missing Piece Could Be Effective Communication
What you really don’t want in the midst of Sarbanes-Oxley compliance is any kind of sudden surprise. Getting caught off-guard in the middle of a compliance effort can slow things down considerably and create rifts within the company. The audit committee chair suddenly finding out about a material weakness in internal controls that should have been brought to their attention weeks ago could derail the Sarbanes-Oxley timeline. A CFO being apprised of a broken chain of command that could have been addressed from day one understandably won’t be happy.
Such scenarios can largely be avoided by baking in an effective communication plan at the outset of the SOX compliance program to keep management and stakeholders up to speed on progress and findings. Setting up communication pathways at regular intervals between peers, SOX project sponsors, senior management, the board members (the audit committee in particular) is essential. You can identify problems early and take action on them, thereby avoiding any nasty surprises. This streamlines your program and creates a better outcome.
Let’s Talk About This
Communication is an inherent part of Sarbanes-Oxley Act compliance. In particular, the section informally referred to as SOX 404, internal controls over financial reporting, lets investors and regulators know whether management and the auditors stand by the company’s internal controls and, in effect, the company’s accounting policies and practices. If the statement made is a positive one, it requires documentation to back it up with evidence to show that a thorough evaluation occurred. If there’s a weakness to report, that could call into question the adequacy of the financial information being shared.
But in between the start of a Sarbanes-Oxley program and the final signoff by the CEO and CFO are many opportunities for a communication breakdown, from the SOX project manager not having access to the audit committee to stakeholders outside the finance team not knowing they have any responsibility for SOX compliance. For a successful SOX program, be sure you have a well-crafted communication plan that covers these key areas:
Educate the SOX stakeholders.
Outside of finance, Sarbanes-Oxley is often a mystery when it hasn’t yet become a way of life at companies. For companies looking at their internal controls as they near an IPO and for newly public companies gearing up for SOX for the first time, they should meet early with stakeholders who need to understand their connections and deliverables for this compliance effort, including those outside of the finance function like HR and sales. Sarbanes-Oxley experts brought on board can help to keep these stakeholders aware of their responsibilities and what needs to happen next or what is missing in the process, at the right level, without overburdening everyone with more details than they need to know.
Make sure you have smooth communication pathways.
Those leading the SOX work—whether they are outside consultants or internal leaders—need to keep an open flow of communication from the beginning of the process to the end. If something looks amiss or a problem arises, it needs to be addressed swiftly. Identify the control owners and decide how often certain key players need to be updated about how testing is going. Schedule updates at frequent intervals and stay organized with the facts, so everyone knows what’s happening, from the testers and executives to the audit committee and external auditor.
Foster two-way communication.
Management also needs to be informative, providing up-to-date information necessary for testing, while those leading the SOX program need to be up-front, too, to bring to light information management needs to know, provide progress updates, and deal with any problems that pop up.
Flag issues early.
It’s better to have the tough conversations early on and address the issues than to deliver bad news when up against a deadline or when a problem has worsened. This is one of those times when the SOX manager needs to have access to senior management, to make noise when necessary and create solutions to fix a problem. By being solutions-focused, the SOX team will be known for providing answers rather than just surfacing complaints. Complaints don’t result in improvements. Those on the team who are more accustomed to SOX compliance shouldn’t be fearful of communicating any issues but instead should be naturally forthcoming, and alert those who need to be in the know.
Communication’s Role in Compliance
A breakdown in controls can mess with a company’s ability to provide trustworthy, reliable financial statements. Sarbanes-Oxley compliance helps public companies pinpoint such issues, and companies gearing up for an IPO wisely look for any gaps in their controls, too.
All too often, though, these compliance efforts can be slowed or put into jeopardy if communication flows are spotty or weak. That’s why it is best to have a solid communication plan built into the entire program. It should not be an afterthought, but a careful process designed from the start. This foundational layer involves early collaboration with stakeholders, the right set of reviews, regular updates and checkpoints, and careful consideration of information for the audit committee and the board. A lapse in any key communication pathway can bring about a nasty surprise, and set up the project for failure.
A team with deep experience with the ins and outs of Sarbanes-Oxley compliance can ensure this entire process goes seamlessly. Make the most of your Sarbanes-Oxley partners’ acumen so that the risks to the business are clearly understood. They bring a fresh perspective, with insights pulled from other companies in your industry, as well as specialized expertise. They know who needs to know what, when. It’s all part of a well-designed communication plan.
RoseRyan Director Christopher Ludwig heads our Corporate Governance practice, which includes our Sarbanes-Oxley Compliance and Internal Audit solutions designed for fast-moving companies. He previously was director of Sarbanes-Oxley compliance and internal audit at SOAProjects, and he has held compliance-focused and finance roles at KPMG, CafePress.com, The Federal Reserve Bank of San Francisco, and IBM.
5 Tech Trends That Are Transforming the Finance Function
As a Silicon Valley finance and accounting consulting firm, we’re on double duty. We’ve got to keep up with all the exciting stuff our innovative, fast-moving clients are doing while we also keep rolling in the major technology advances that affect our profession. It’s a must: Finance teams need to continue to evolve as technologies change and affect where they work, how they work and how they’re valued by the rest of the company. They need to continually review their systems and evaluate when it may be time to bring in a new app or system that could transform how they operate, analyze and report what’s going on in the business.
Top of mind is getting access to reliable, timely financial information. Various technologies have greatly improved how data is collected and elevated the integrity of the data itself. This frees up CFOs and other senior leaders to focus on strategy-level thinking and decision making, streamlines business processes and pulls finance teams away from all the menial and manual tasks that bog down their workday. The finance function can pay less attention to gathering and consolidating data, and give more time to making sense of it—and acting on it.
CFOs and Controllers Should Focus on These 5 Emerging Tech Changes
FloQast, a close management software provider, recently weighed in on this issue in a report listing the top five technologies for CFOs, controllers and accounting professionals. “Even in accounting and finance, perhaps considered some of the more traditional of professions, there’s a swift surge of change that as industry pros we can scarcely choose to ignore,” they write.
The changes in store are positive: As these technologies mature and companies fold them into practice, the premise is finance teams will be more productive and efficient. You won’t have to suddenly be a programmer to excel in the future version of the finance function, but you will need to be able to think through problems and solutions while setting up new systems. We agree that advances in the following technologies deserve the attention of senior finance executives and their teams:
1. APIs (application programming interfaces)
It used to be that the disconnect between systems meant redundancies and keying in information. That was the norm. Now, APIs enable interactivity between systems, like ERPs and general ledgers. This leads to more opportunities for automated tasks, including those related to payroll and receivables, and less room for errors.
2. Robotic process automation (RPA)
No, robots aren’t taking over finance—but bots are starting to help out with a few mundane tasks. So far, FloQast says, you’re more likely to find RPA technology in use at Fortune 500 companies than smaller organizations. But the potential exists for all finance teams to benefit. The act of receiving invoices and then making payments, for example, could happen without human intervention. Journal entries could be minimized and so could the number of steps required to complete some transactions.
3. Artificial intelligence (AI)
As AI tools become more intuitive, the line between humans and machines are blurring. Relatively simple activities like setting up meetings can occur behind the scenes, without humans having to negotiate available times and places. Pulling out key information in contracts could happen without anyone needing to put on their reading glasses; comparing documents would no longer take up so much of the team’s time; and audit activities could be significantly streamlined.
4. Blockchain
The decentralized ledger system behind cryptocurrencies like bitcoin can bring efficiencies to finance teams for its ability to provide an impenetrable history of financial transactions and ownership of assets. It still needs a killer app to get going on a large scale, some experts say, and questions remain about how auditors can validate blockchain. In the meantime, a public register or database for making transactions and transferring assets without an intermediary opens up many possibilities. It could cut out middlemen (i.e., banks) and ease internal processes, such as managing inventory, recording financial activities and protecting contracts.
5. Remote work
It’s not a secret in finance and accounting that retaining and attracting top talent is a tough feat, and flexible work arrangements are one way to overcome it. Cloud and mobile computing have enabled more remote work, which has become a necessity for many teams—to get the job done after hours and put the right skill sets in the right place exactly when it’s needed. The effect on the finance function has its mix of pros and cons—working together as a team can take some creativity in communicating—but always having access to the best talent, no matter where they’re situated, is the ultimate goal.
These five tech trends have the ability to reshape the efficiency and workflow at companies of all sizes, and CFOs and controllers should be on top of them to evaluate the potential benefits. The latest advances in technology present opportunity for the finance function to elevate its value within the company, as it gets more strategic, efficient, productive and accurate over time. The finance teams that offer up timely insights about the business will likely make the right moves to surge ahead. This could be good news for everyone.
The Business Lifecycle: Know the Journey So You Can Plan Ahead
What do you see in the road ahead in 2019? Does it appear more uncertain than sure? Is it paved with growth opportunities or a pullback? For companies large and small, the path forward can take awhile to become clear. At RoseRyan, we observe that the business lifecycle has four stages: Companies start up, grow rapidly (those that do), expand through IPO or acquisition, and evolve into a mature enterprise, which has its own share of crisis points over time.
Every stage offers its share of ups and downs, and tough decisions as the team manages growth and figures out how to overcome the many obstacles that are thrown their way. An unexpected issue—like a takeover offer or a tricky accounting change—can cause a sudden swerve in direction.
Whether your company is in survival mode, gearing up for growth, making its own bid for acquisitions, or figuring out how to beat the competition, a smooth-running finance function is critical. When you can predict the path ahead, you are better able to get through it. There are unique finance challenges that are likely to arise at different stages of the business lifecycle. It could be time for a life sciences company in the “start” stage to go after funding, for example, or a cannabis company in the “grow” stage may need outsourced CFO and controller expertise during a time of hypergrowth. An acquisition may be what an expanding tech company needs most for growth, or an enterprise may be looking at divestiture options to a private equity firm if a tighter focus on the core business is what’s needed next.
The lifecycle presents a framework for predicting what’s happening and what’s around the corner. Smart management decides about resource deployments to keep up with the changes. Knowledge of what you can expect during each of the lifecycle stages can tremendously help decision-making for planning resources and priorities.
Do you know what stage you are in? A quick review:
Start: There’s a balancing act between being in survival mode and getting the small business on solid ground. The need to rein in spending can restrain resources when they’re needed most—as the company gains traction and begins to move at a fast pace. An outside finance team may be in order to provide part-time, outsourced CFO and accounting teams to set up the financial foundations, guide the smart use of capital, and zero in on key risks.
Grow: Rapid growth is wonderful, but it certainly has challenges. With the heightened complexity comes more pressing accounting and finance demands. Some outsourced finance pros may be exactly what’s needed to calm the chaos and get the financial house in order during a massive growth spurt.
Expand: A transformational transaction could be on the docket, but is the company prepared? Does everyone know what comes next? Moving forward with an IPO or acquisition typically requires a lot of extra work. The due diligence, integration, increased compliance requirements, and transition to the new version of the company can be mind-boggling. Savvy support and specialized expertise get companies through the finish line and beyond.
Evolve: Fully mature companies are up against the pressures of other companies wanting what they have, and investors expecting specific outcomes. A change in strategy or even a restart, restructuring or divestiture could be the right move to get the company back on a better footing. Having the right mix of expert finance pros sure does come in handy at critical times.
Where’s your company going next? When opportunities come knocking, it’s easy to fall off course if you don’t have the right mix of finance talent on your team. The view becomes fuzzy when you’re moving rapidly or a mega transaction is in your line of sight. When you know the stages of the lifecycle, you can better predict what’s ahead. It helps to have a experts who have been down the road before to help navigate the path ahead.
Looking for a roadmap? Check out our explainer on the lifecycle and our report, “Navigating the Business Lifecycle,” which includes relevant case studies about each stage.
Judging the Cleantech Open—These Startups May Change the World
The Cleantech Open (CTO) continues to pump out companies with aspirations to change the world, and many of them are from our area. I was fortunate to be a part of the effort earlier this year, as a judge for the western regional finals in Oakland. The winners—Apeiron Technology, Sepion Technologies and South 8 Technologies—are going on to compete in January at Cleantech Open Global Forum for a national grand prize.
From its founding in 2006, this cleantech startup accelerator program has aimed to find and foster the top cleantech ideas in the country. Advances and innovations are happening at a furious pace, as evidenced by the companies I judged. They included the following cleantech niches:
To be sure, to become a “promising startup” in the eyes of the CTO, the participating companies need more than a niche and a standout idea. To make it, these startups need to have a solid base—and that’s something as judges we were expected to explore. In fact, the judging process starts months prior with an initial screening of companies that involved reading business plans, analyzing financial models and seeing if the companies can execute on their vision. The judges included sustainability and business experts, investors and technologists.
The three western regional winners will compete with other emerging environmental and energy technology companies for $100,000. Although every company has their eyes on the big prize, there’s a lot of mentoring, small prizes and contacts that are made just by being in the competition. The team that runs the regional event was very professional and fun to work with, and I recommend anyone who wants to get involved to give them a call.
The quality of presentations was outstanding as the CEOs of each company spent 7-10 minutes clearly articulating their visions. Following the Q&A sessions, the judges had a spirited debate about the presentations and then entered their scores in a calculator to get a weighted average for each presentation. The process was clean, transparent and fair.
The great news is that all the contestants are working on real plans, have clear expertise in their fields and have created excitement within the cleantech community. Aperion, for example, has come up with a process for converting carbon from methane or natural gas into products like graphene sheets and graphite, and the process is emission-free. Congratulations to the winners and the following companies that were also recognized:
Runners-up
Honors
People’s choice
Chris Vane is a director at RoseRyan, where he leads business development for our finance and accounting consulting firm’s cannabis, high tech and cleantech practices. Chris can be reached at [email protected], or call him at 510.456.3056 x169.
Meet the 10 Newest Finance Pros Joining the RoseRyan Dream Team
To achieve staying power in Silicon Valley, top talent is a must. We’ve been lucky to attract 10 new finance and accounting pros to help companies go further, faster. These new additions to our dream team are helping startups advance, navigating high-growth companies around the chaos, and showing businesses in transition the way forward. Here’s a brief introduction to the latest finance experts to join our team:
Kathy Braach
Kathy is an asset to any small business she helps. She takes on their payroll, AP/AR, profit and loss statements, general ledger work, reconciliations, books closings, banking, fixed assets, budgeting, forecasting, and financial reporting.
Bert Chan
Bert is helping our Sarbanes-Oxley clients with their IT-related issues and project management needs. He most recently was a Sarbanes-Oxley project manager at Vaco, and he was previously a an internal audit director and IT audit manager at UTi Worldwide.
Taj Gulamani
Taj is a CFO pro who operates at a strategic level to navigate companies forward. His consulting career includes serving as a CFO Nuru Energy and Cradle Technologies. In addition to consulting for AMD, LAM Research, NDS Surgical Imaging and Antek Peripherals, he’s held senior finance roles at HGST and MMC Technology.
Anne Johnson
Another CFO ace, Anne was most recently the CFO at furniture company KBM-Hogue. An alum of KPMG, Anne’s skills include financial reporting, budgeting and modeling, FP&A, strategic and operational planning, and accounting operations.
Karie Liu
Karie knows general operational accounting, general ledger work, reconciliations, closing books, fixed assets, payroll, employee benefits, HR, cash flow and forecasting, audits and financial reporting. She previously worked at Machine Zone, CrowdStar and Playphone.
Danika Neumann
Danika is a newcomer to our team who supports small businesses with their general accounting needs. She previously worked for accounting firm Newland and Co.
Jackie Neumann
Jackie’s areas of experience include payroll, AP/AR, audit prep, GL work, reconciliations, closing books, banking, fixed assets, budgeting and forecasting, and financial reporting.
Rose O’Connor
Rose helps small businesses as she works on contracts, financial accounting, reporting, budgeting, audits, day-to-day operations, operational accounting and finance, and general ledgers. A Moss Adams alum, Rose most recently worked at a nonprofit.
Jennifer White
Jennifer’s experience includes public accounting (she’s an E&Y alum), corporate accounting and corporate finance, and she has a strong focus on process improvement and cycle-time reduction. Jennifer has worked at Plantronics, Extreme Networks and Applied Materials.
Yuki Tegarden
Yuki was most recently at Techpoint, where she served as CFO and managed their IPO process. Her expertise in public accounting, revenue recognition, and operational finance will come in handy as she supports our Technical Accounting Group. She began her career at Deloitte and then worked as a senior revenue manager at Seagate Technology.
RoseRyan brings the right finance solutions at just the right time to companies in and around Silicon Valley. It’s made possible through the mix of finance expertise and specialized skills our consultants offer when companies need to power through a tricky transaction or a strategic finance issue.
We’d love to hear from you if you know a finance ace who would love to be a part of our “Top Workplace” and our award-winning culture. Thanks for referring great candidates our way, by reaching out to our talent expert Michelle Hickam at [email protected].
Kathy Ryan Honored by Accounting Today for Second Time
What an honor! Congrats to Kathy Ryan, who was recently named to Accounting Today’s annual list of “Managing Partner Elite” for a rare second time. This year, Accounting Today gave this prestigious recognition to just 10 special leaders in the field from across the country.
Accounting Today has a set criteria for who appears on the list: Those named are known for being planners, for making the most of technology, developing workplace culture, and implementing smart ways to best serve their clients and grow their firm.
Kathy does all those things, but it’s unusual for someone to be named twice, as the publication noted in its recent write-up about the 2018 Managing Elite Partner list:
Accounting Today recognized both Kathy and RoseRyan for:
Kathy’s leadership has been widely recognized in the 25 years she has led RoseRyan. She first made Accounting Today’s Managing Partner Elite list in 2014. The San Francisco Business Times has named her an influential woman in Bay Area business, and the San Jose/Silicon Valley Business Journal has named her one of the most influential women in Silicon Valley.
Want to be a part of a great team that has demonstrated staying power since Kathy and another woman founded RoseRyan 25 years ago? See our latest job opportunities, and reach out to our Talent Manager Michelle Hickam if you think you’d be a good fit for our winning workplace.
6 Ways to Improve Your Life Sciences Company’s Sarbanes-Oxley Compliance This Year
At every point along the business lifecycle, life sciences companies are on the fast track. They’re chasing after a new discovery or a new method of treatment, or actively anticipating approval to commercialize their latest product. The many compliance requirements they face threaten to slow them down. Fortunately, for publicly traded life sciences companies, Sarbanes-Oxley compliance has become more efficient than in years past, and the related processes and procedures can be continually streamlined.
In fact, compliance with the Sarbanes-Oxley Act has come a long, long way since the law was put in place more than 15 years ago. Savvy companies that know where to turn to be efficient in this area can keep their attention on the business on hand and not get bogged down with a system of bloated controls.
Here’s how fast-moving companies like those in life sciences can make sure their Sarbanes-Oxley compliance program is in tip-top shape:
Attack the bloat: As time progresses, the clinical trials add up and so do the complexities—and the internal controls around ensuring the financial integrity of the growing business. The focus shouldn’t be on adding layer upon layer of controls but instead be all about the right controls. When this happens, redundancies are eliminated, management has assurance that nothing is missing, and compliance becomes a less burdensome and much more effective exercise.
Keep motivated: Sarbanes-Oxley earned its share of attention because of the costs involved in the early years, but the benefits are clearly impressive: A decade-long decline in financial restatements can be attributed to the internal controls over financial reporting provisions of Sarbanes-Oxley, according to this recent article.
When controls are properly designed, a company’s risk of a material misstatement shrinks. Stakeholders and investors gain trust in the underlying controls of the company that help ensure the integrity of its financial reporting and safeguard its assets. All of that goes away if a restatement is needed—restated financials erode shareholder value and their confidence in management, and they’re a major distraction that can derail a company’s movement forward. These are motivating factors for making sure your controls program is exactly where it should be at this stage.
Always be prepared: A streamlined Sarbanes-Oxley program uncovers the risks that matter most as well as operational inefficiencies. The result is a more agile organization that can more easily adjust to regulatory shifts and emerging risks as they arise.
Bring in flexibility: At first, after the law was introduced, the internal controls aspect of Sarbanes-Oxley seemed so inflexible, with a check-the-box mentality and an assumed rigidness of auditors’ expectations. But today’s smartly implemented Sarbanes-Oxley programs are customized for each company and their particular risks. Advances in technology and outsourcing options make it so implementation, testing and monitoring are more cost-efficient and effectively carried out. When it’s time to apply new controls, companies can bring in specialized expertise only when it’s needed.
Minimize surprises: Team up with Sarbanes-Oxley aces who know what auditors are focused on, what documentation they expect to see and the likely questions they may ask. The audit process will go a lot smoother, and overall costs can go down, if it’s thought about up-front.
Stick with industry experts: Companies in the medical device, pharmaceutical or biotechnology fields face unique challenges compared with other industries. Life sciences companies need trusted advisors who understand the nuances and sensitivities they’re dealing with, whether they have just one product in the pipeline or they’re juggling multiple rounds of gaining FDA approval.
Similar to other industries in the fast lane (like tech companies), those in the life sciences sector have to deal with constant uncertainties as they go through developing, acquiring approvals, licensing and selling their products. The process of complying with the Sarbanes-Oxley Act shouldn’t be one of those uncertainties.
Compliance can be significantly streamlined by zeroing in on the controls that matter with the help of a highly skilled, diverse team of experts who have extensive life sciences experience. They can assist with designing, testing and monitoring controls; folding best practices into your program; as well as overseeing the entire process. The principles behind Sarbanes-Oxley can also be implemented, in a more flexible way, for private companies so that they are fully prepared for a major transaction, like going public, with solid internal controls.
With a collective team by your side, the compliance solution you need scales to the stage you’re in and the milestones you’re about to meet. Expertise and experience will get you through it.
RoseRyan has had a dedicated Sarbanes-Oxley Compliance solution since the 2002 law’s regulations went into effect. Public companies gain efficiency in their design and testing of internal controls, with a right-sized controls set that addresses their current risks. We also help private companies set themselves up with solid internal controls before a major transaction through our Financial Integrity solution. RoseRyan director Stephen Ambler currently guides this practice area.