What happens if your public company decides to “go dark”? If you are in the military or in covert operations of some sort, this slang term means you have ceased all forms of communication—probably to save your life. Teenagers can sometimes go dark. If your teenage son or daughter is not responding to your phone calls, texts, tweets, and any other way you to try to communicate, they’ve gone dark. You may feel snubbed and left out. But consider the positive aspect: This quiet period is actually part of their development. They are establishing their independence. Are they using their time wisely? That is what needs to be determined.
For publicly traded companies, going dark means they are delisting from an exchange (e.g., NASDAQ) and simultaneously deregistering with the Securities and Exchange Commission. In this age of transparency, going dark may not seem like a smart move. In fact, it might be just the right move, depending on the company’s objectives. Returning to the teenager example, you need to know—is your company using its time wisely?
If you are an investor, business partner or employee of a company that is going dark, pay attention to these areas as you explore the future potential of the business.
Take a closer look. While there are several practical considerations in the decision to “go dark,” the company may also have strategic implications. Review company filings with respect to the process, as well as press releases announcing the decision. These documents are intended to provide information as to the considerations involved in making the decision to go dark. Strategic implications may or may not be evident from the press releases and filings. It pays to take a closer look and see if you notice opportunity behind the ominous sounding development (more about this later).
Review current shareholder listings and changes in shareholdings. You can get this information from periodic SEC filings, including the latest proxy statement. This will tell you if there are major shareholders owning the stock. A little more research may give you some insights on the major shareholders and their plans for the company.
As an example, a major investor might have a strong track record in turnaround situations, or industry consolidation strategies or other strategic moves. Chances are, you will see a concentrated shareholder base, as companies that go dark must have fewer than 300 registered shareholders (an SEC rule). It pays to know who is driving the bus.
Also review company liquidity and capital structure. Once a company has gone dark, it no longer has direct access to the public capital markets. As a practical matter, if it is a small or microcap company, or if it is underperforming its peers, the company may not have access to such markets in any case. This is something to consider if the company has liquidity issues or is undercapitalized. Private equity and debt may or may not be available, and it can get expensive.
Consider whether cost avoidance is a legitimate driver. Publicly traded companies spend a lot of time and money maintaining the standards required by the national stock exchanges and the SEC. The costs easily exceed $500,000 per year for even the smallest of the small cap companies, to include annual audits, quarterly reviews, legal fees, audit committee fees, SOX compliance costs, annual registration fees and increased insurance premiums for director and officer liability. Oftentimes, boards find that the incremental costs of the public listing outweigh the benefits. Companies often site cost savings as a significant factor in going dark. Saving precious capital is a legitimate reason, but it has a downside.
Look into shareholder liquidity. Shareholder liquidity is probably the scariest part of the going dark process. When the company delists from national exchanges, its stock may continue to trade, but liquidity will depend on whether brokers will continue to make a market for the shares. There can be no guarantees. As such, shareholders may find it difficult, expensive and/or at least time consuming to sell the shares. And there may be a very thin market or no market at all. However, as long as there are market makers, the alternative exchanges—the pink sheets, the bulletin boards, etc.—will continue to trade the shares.
See if you will still have access to financial information. Transparency is another possible casualty of going dark. Most companies that deregister follow a practice of posting their periodic financial results either through quarterly press releases or direct posts on their websites. While they are under no obligation to do so, it’s good business practice, and it doesn’t cost much. And many companies continue to maintain a website and provide contact information. While you won’t see a Form 10-Q or Form 10-K or any of the other SEC filings, at least you will see quarterly and annual financial information, and hopefully you will have contact information if you have questions.
Study the strategic intentions. As noted above, there may be strategic reasons a company goes dark. It could be a logical step in taking a company private and could be a part of a bigger plan. Going dark is a relatively low cost exercise, with immediate cost benefits. If the strategy is in fact to “go private,” and your research shows that the major shareholders have a good track record, you could stand to benefit. At some point the majority shareholders and/or the company may be back in the market to cash out minority shareholders. Once again, no guarantees, but it’s something to consider.
Anytime a company goes through a transformative event, it’s wise to turn to experts who have gone through similar situations and can step in to guide the company, based on their past experiences, best practices and what makes the most sense for the business. Going dark is not routine—it’s a vital, transformative time that requires specialized expertise.
Terry Gibson heads up RoseRyan Private Equity to help PE firms extract more value from their portfolio companies. A founder of Steel Partners Corporate Services, he has been focused on serving the PE industry for over 15 years. He was the CEO of CoSine Communications and BNS Holdings, and he oversaw the finances at Calient Networks and served as controller at Lam Research.
SOX compliance evolves: What’s worked so far and what’s still out of whack
When SOX was first invented, we all struggled to figure out what companies were supposed to be doing, and what auditors were expecting to see. All this happened while the auditors were trying to follow new audit rules just as their new regulator (the PCAOB) came into existence. We were all stumbling around together.
AS2 came out with principles-based guidance—and was the shortest auditing standard in history. It threw everything into the auditors’ scope regardless of materiality, and created a lot of work for dubious value. And a lot of expense.
Along came AS5 to replace that standard, with an attempt to focus auditors on items that could reasonably give rise to a material misstatement. Use professional judgment was the message. That helped settle things down for a while … until the PCAOB started failing audit firms in the inspection process, citing deficiencies in its reviews of internal control over financial reporting.
The audit firms pushed back, and the PCAOB pushed harder. All the pushback was occurring behind the curtain. Companies were often left in the dark about priorities and expectations. And disagreements over what should be in scope of the audit have persisted.
Interpretations in flux
Over a decade after SOX’s passage, a mismatch in expectations continues. The interpretation of the rules keeps evolving. The new directives aren’t always official but are instead happening piecemeal, audit firm by audit firm, and sometimes even engagement team by engagement team. Companies have often been caught unawares of new changes, not realizing that the bar had been raised.
Most of this direction has stemmed from inspection findings. Audit firms are in the unenviable position of delivering the news to their clients about what the PCAOB inspectors find, and companies understandably cry foul that it’s not helpful to have them change their ways “after the fact.” When it comes to audits, no one likes surprises.
The upsides of SOX
Years of SOX compliance have resulted in positive progress. The way companies design controls is far different today than the early days—and how they evidence the execution of controls has matured as well. We see that companies have integrated SOX into their operations—it is not some “thing” off to the side, separate and apart from ongoing operations. And real, tangible benefits are being derived from it. Financial statements are more reliable. There are more checks and balances in place. We see a better defined “tone at the top”—there’s clear integrity and transparency in how SOX-compliant companies do business.
We’ve also seen companies becoming more mature in their operations and documentation of accounting entries. In the past, we were more likely to see journal entries with no supporting documentation. Or we’d find that reconciliations were performed but nobody reviewed them. Now, the level of documentation produced and retained is more robust, and there is more scrutiny of the underlying data itself.
What do they want?
Still, it’s not always clear whether companies are living up to their auditors’ (and their auditors’) expectations. In 2013, some light shone through when the PCAOB released an audit alert following three years’ worth of serious deficiencies in internal-control audits. The general public finally got to hear what the inspectors were seeing beyond their vague inspection reports. The PCAOB expected to see more proof that the auditors were doing what they are supposed to be doing while reviewing internal controls, and those demands have trickled down to the auditors’ clients.
Here’s one example of how it plays out now: When auditors want to look over management review controls (controls that help management identify errors), they need to understand them and then test to see if they are operating at a precise enough level to detect a material misstatement. The potential snafu here is that management documented their review in accordance with their own needs, not the auditors’. The auditor will want sufficient evidence to prove what management looked at, what was investigated and how it was resolved.
Management does not need a stack of paperwork to perform a meaningful budget-to-actual analysis and be comfortable that there are no material misstatements. But auditors want to know for sure that the analysis was done and thoroughly reviewed or else they are hard-pressed to place reliance on that control. Ten years ago, a simple signature on a page was often sufficient evidence. Not so today.
At times it seems audit requests are coming from a “one size fits all” approach rather than a tailored approach based on specific facts and circumstances. Companies end up feeling a need to pile on the documentation to make future audits easier but on areas that have little connection to the possibility of a material misstatement.
What’s next
How the PCAOB goes about its inspections could change. In May, the PCAOB revealed that it may go about the selection of audits to review differently, shifting from a risk-based focus to taking some audits at random (as it is now, the PCAOB tends to review the riskiest/most complex clients in a company’s portfolio).
That change may not address the issue of mismatched expectations but it will certainly get the conversation going, which isn’t a bad thing. As usual, the devil is still in the details. What matters to the regulator—and the firms it audits—will continue to evolve as precedents get set and the bar gets raised. Some areas, such as cybersecurity risks, could attract more focus.
Here’s the bottom line: The evolution could all be for the better, as long as we can use judgment about what adds value and what is merely checking off boxes.
Pat Voll is a vice president at RoseRyan, where she mentors and supports the dream team, and heads up client experience, ensuring all our clients are on the road to happiness. She was recently asked by ComplianceWeek for her take on the “new normal for internal controls.” Pat previously held senior finance level positions at public companies and worked as an auditor with a Big 4 firm.
What’s your move? The big consideration for data security
RoseRyan VP Pat Voll recently weighed in on a recent CFO.com debate that posed the question “Is your data more secure in a data center or in the cloud?” CFO published her bylined article alongside other data-security experts in one of its monthly Square-Off virtual panels. Pat’s take: Companies need to focus on the “who” rather than the “what” when looking at where they store their information. See below for an excerpt of Pat’s article:
Ultimately, you are responsible for the protection and security of your data, regardless of where it is stored. Where your data is safest depends on your company’s own internal processes, infrastructure, controls, training, and discipline, and those of your cloud provider.
Consider this fact: The most common reason companies suffer from a data breach is because of an employee error. In a recent survey by the Association of Corporate Counsel, 24% of in-house lawyers blamed employee error for a breach at their company. That’s higher than phishing attacks (12%), third-party access (12%) and lost devices (9%).
A mishap by an employee could happen no matter where the data resides—on-premises or in the cloud. To tamp down the risk, it is essential that companies take a hard look at their internal processes, including periodic training for all employees and robust on-going monitoring of controls, to ensure policies and procedures are being followed.
CFOs can’t pass off the responsibility for data security to the IT department and hope it’s getting done. Similarly, you can’t assume the vendor has adequate controls and procedures in place. It’s not only the right thing to do—it’s increasingly becoming an expectation.
To read the article in its entirety, go here.
Going dark: What it means and why it might be a smart move for your company
What happens if your public company decides to “go dark”? If you are in the military or in covert operations of some sort, this slang term means you have ceased all forms of communication—probably to save your life. Teenagers can sometimes go dark. If your teenage son or daughter is not responding to your phone calls, texts, tweets, and any other way you to try to communicate, they’ve gone dark. You may feel snubbed and left out. But consider the positive aspect: This quiet period is actually part of their development. They are establishing their independence. Are they using their time wisely? That is what needs to be determined.
For publicly traded companies, going dark means they are delisting from an exchange (e.g., NASDAQ) and simultaneously deregistering with the Securities and Exchange Commission. In this age of transparency, going dark may not seem like a smart move. In fact, it might be just the right move, depending on the company’s objectives. Returning to the teenager example, you need to know—is your company using its time wisely?
If you are an investor, business partner or employee of a company that is going dark, pay attention to these areas as you explore the future potential of the business.
Take a closer look. While there are several practical considerations in the decision to “go dark,” the company may also have strategic implications. Review company filings with respect to the process, as well as press releases announcing the decision. These documents are intended to provide information as to the considerations involved in making the decision to go dark. Strategic implications may or may not be evident from the press releases and filings. It pays to take a closer look and see if you notice opportunity behind the ominous sounding development (more about this later).
Review current shareholder listings and changes in shareholdings. You can get this information from periodic SEC filings, including the latest proxy statement. This will tell you if there are major shareholders owning the stock. A little more research may give you some insights on the major shareholders and their plans for the company.
As an example, a major investor might have a strong track record in turnaround situations, or industry consolidation strategies or other strategic moves. Chances are, you will see a concentrated shareholder base, as companies that go dark must have fewer than 300 registered shareholders (an SEC rule). It pays to know who is driving the bus.
Also review company liquidity and capital structure. Once a company has gone dark, it no longer has direct access to the public capital markets. As a practical matter, if it is a small or microcap company, or if it is underperforming its peers, the company may not have access to such markets in any case. This is something to consider if the company has liquidity issues or is undercapitalized. Private equity and debt may or may not be available, and it can get expensive.
Consider whether cost avoidance is a legitimate driver. Publicly traded companies spend a lot of time and money maintaining the standards required by the national stock exchanges and the SEC. The costs easily exceed $500,000 per year for even the smallest of the small cap companies, to include annual audits, quarterly reviews, legal fees, audit committee fees, SOX compliance costs, annual registration fees and increased insurance premiums for director and officer liability. Oftentimes, boards find that the incremental costs of the public listing outweigh the benefits. Companies often site cost savings as a significant factor in going dark. Saving precious capital is a legitimate reason, but it has a downside.
Look into shareholder liquidity. Shareholder liquidity is probably the scariest part of the going dark process. When the company delists from national exchanges, its stock may continue to trade, but liquidity will depend on whether brokers will continue to make a market for the shares. There can be no guarantees. As such, shareholders may find it difficult, expensive and/or at least time consuming to sell the shares. And there may be a very thin market or no market at all. However, as long as there are market makers, the alternative exchanges—the pink sheets, the bulletin boards, etc.—will continue to trade the shares.
See if you will still have access to financial information. Transparency is another possible casualty of going dark. Most companies that deregister follow a practice of posting their periodic financial results either through quarterly press releases or direct posts on their websites. While they are under no obligation to do so, it’s good business practice, and it doesn’t cost much. And many companies continue to maintain a website and provide contact information. While you won’t see a Form 10-Q or Form 10-K or any of the other SEC filings, at least you will see quarterly and annual financial information, and hopefully you will have contact information if you have questions.
Study the strategic intentions. As noted above, there may be strategic reasons a company goes dark. It could be a logical step in taking a company private and could be a part of a bigger plan. Going dark is a relatively low cost exercise, with immediate cost benefits. If the strategy is in fact to “go private,” and your research shows that the major shareholders have a good track record, you could stand to benefit. At some point the majority shareholders and/or the company may be back in the market to cash out minority shareholders. Once again, no guarantees, but it’s something to consider.
Anytime a company goes through a transformative event, it’s wise to turn to experts who have gone through similar situations and can step in to guide the company, based on their past experiences, best practices and what makes the most sense for the business. Going dark is not routine—it’s a vital, transformative time that requires specialized expertise.
Terry Gibson heads up RoseRyan Private Equity to help PE firms extract more value from their portfolio companies. A founder of Steel Partners Corporate Services, he has been focused on serving the PE industry for over 15 years. He was the CEO of CoSine Communications and BNS Holdings, and he oversaw the finances at Calient Networks and served as controller at Lam Research.
Conquer complexity: Get briefed on the latest accounting updates
In the accounting world, the rules are ever changing. Large in scope and long awaited, the new rule for recognizing revenue continues to get clarifications in the months leading up to its effective date. The new leasing standard is finally here as well and sharing the attention. Those are just the biggies—the Financial Accounting Standards Board has been coming out with a flurry of changes in recent months, and regulators are paying attention to what you are doing with them. There’s a ton of information to follow to stay compliant.
How equipped finance teams are to keep up with all the moving parts varies quite a bit. They oftentimes find it beneficial to lean on technical accounting experts who can decipher the never-ending landscape and help with interpretations. Such experts can help them stay on track in understanding the latest accounting refinements, transition-method choices and effective dates. Diana Gilbert, senior consultant at RoseRyan and head of our Technical Accounting Group, helped many companies get up to speed during the June 2 webinar, “Demystifying the Latest Major Accounting Changes.”
This fast moving, 90-minute, all-out binge covered the latest twists and turns that have come out from FASB and regulators over the past year. Some changes have simplified things. Others will have a narrow effect. And many will force finance teams to do some soul searching as the deadlines near. Contracts and compensation plans may need to be revisited.
Diana filled in listeners (most of whom were from life sciences and technology companies) on the five topics below, along with other changes, and gave timely advice along the way.
Revenue recognition: Companies that don’t have a game plan for the new revenue recognition standard are running out of excuses. The SEC has been “aggressively” referencing the new rule in recent speeches to let companies know they will be watching what gets said in disclosures, Diana said. Boilerplate, vague language won’t cut it much longer.
“This has been out there since 2014, so they are going to question why you’re still evaluating it now,” she said. “If you’re honestly, sincerely evaluating it, then just be prepared for the questions. But if you’ve done your evaluation and pretty much do understand the impact, then think about including more detailed disclosures, particularly about decisions you’ve already made,” such as the transition method the company will be taking and the planned adoption date.
Leases: The new standard finalized in February will bring what we refer to as operating leases today onto the balance sheet. The rule applies to leases of property and equipment with terms of at least one year and centers around the lessee’s “right of use” of an item (the obligation to pay for that right is what will appear on the liability side of the balance sheet).
The new rule could change behavior, Diana predicted. “Think about it. If you’re going to have it on the balance sheet anyway, are you still going to lease it or would you buy it outright?” she said. “You might create new forms of leases that are clearly less than a year, without the option to renew, and you’ll have to deal with the issue every year. That may make sense for inconsequential arrangements. It will be interesting to see what happens going forward.”
Financial instruments: Public companies will begin following new rules on classifying and measuring financial instruments for filings submitted in 2018, and private companies will do so a year later. Equity investments that are not consolidated are generally going to be measured at fair value through earnings. In some ways, disclosure requirements have been simplified with the rule changes—companies won’t have to disclose their methods and significant assumptions for estimating fair value—and in other ways they have expanded.
Stock-based compensation: Companies have “a grocery bag of different changes” to deal with when it comes to improvements to employee share-based payment accounting, Diana warned. The most significant relates to deferred tax assets. When the changes take effect, companies will no longer record excess tax benefits and certain tax deficiencies resulting from share-based awards in additional paid-in capital (APIC). APIC pools are eliminated under the changes.
Diana said this is a “huge simplification” in terms of tracking share-based compensation, but the downside is the potential for more volatility in the income statement. This particular change is applied prospectively from the date of adoption (which begins after December 15, 2016, for public companies).
SEC comments: The SEC staff has always tended to question areas that involve judgment and subjectivity, Diana noted. In recent years, in particular, they have been scrutinizing the statement of cash flows and whether companies’ internal controls are effective. Diana recommended that companies be as clear as possible and use tables and charts to help tell their story.
“Comment letters come about because they don’t understand what’s happening,” Diana said. “Or it’s a complex area and they’re going to ask you questions whether you like it or not.”
Keeping tabs on regulators’ areas of emphasis and accounting standard-setters’ changes takes time and effort. Things are in constant motion, and companies need to stay on top of it all. That’s how they can help minimize the questions that come from regulators and any uncertainty that may arise during implementation. To save time and effort in understanding the latest accounting standards (changes through June 1, 2016), feel free to check out the 90-minute replay of “Demystifying the Latest Major Accounting Changes” here.
Superstar controllers need technical chops and so much more
Job interviews with controllers—whether you’re in the hot seat or the one asking the questions—are getting broader these days, as the role of the controller and expectations around it have escalated. Just as today’s CFOs are expected to be more strategic than the bean-counting finance chiefs of yesteryear, so too are controllers getting called upon for their operational skills and are expected to have broader, forward-looking views. Today’s controllers are not all about past figures. They contribute to strategy to guide it into the future.
We see this transformation firsthand whenever we’re embedded in teams at companies around the San Francisco Bay Area, and we’ve frequently taken on controller roles on an interim basis. RoseRyan consultant Cheri Koehler—a superstar controller in her own right—has gathered up some practical tips and advice for controllers at companies of all sizes:
Be a bridge builder: Controllers have typically been buddies with HR and customer service folks as many of their transactions and activities overlap. Extend similar connections around the company, making links between finance and IT, procurement, distribution, manufacturing and others. In this way, controllers can set up collaborative partnerships and give themselves a voice when choices are about to made. As proactive business partners, they keep finance in the loop and provide valuable support, advice and analysis whenever it’s needed.
Find and keep talent: This requires a continuous effort—even when the finance team seems well stocked. Things can change and specialized skills may be needed for a complex transaction or someone could have to leave without much notice. Superstar controllers regularly tend to the talent pool by always keeping their connections open and paying attention to develop and retain the people they have on hand. They look for opportunities to empower the team and keep them enthused.
Stellar controllers know how to bring the information they gather to life. They’re excellent communicators by making sure they can influence and persuade, they help with strategic decisions and activities throughout the company, and evangelize potential improvements and efficiencies. What makes this possible? They are up to date on the latest technologies and can keep their eyes and ears to the ground to learn best practices in their field. Ensuring they have a talented team in place makes all the difference.
Are you a controller striving for greatness? Or a CFO who needs to strengthen the finance bench? To understand the controller role today and what skills are needed for superstar status, check out 5 ways to become a superstar controller.
IPO, M&A: Big changes ahead require smart moves at every step
Companies that have made it past the startup stage and are growing like gangbusters have beaten the odds. They’re not only surviving but making it. They’ve branched out their customer base and perhaps their geographic reach. They’ve upped their production, they have a small group of loyal investors, and their earnings are going upward. But for how long? How long can organic growth get the company to where it wants to go?
At some point along many companies’ lifecycle, the growth plan turns into an acceleration plan. They want to expand—and usually fast. Either they know things will slow down without action and it’s time to make a strategic move. Or they need a boost to widen the intense gap between them and their competitors. It’s time for a transaction. A big one.
When a jolt of growth is needed, whether that’s a capital infusion, an acquisition of fresh talent or something entirely new (like intellectual property), thoughts turn to going IPO or making an M&A deal. And that’s when things really speed up. Smart companies on the IPO track take a hard look at themselves, to be sure their own financial house is in order (so key to a proper and favorable transaction). Acquiring companies put on their due-diligence hats and delve into the details of their target business.
The focus in either scenario is usually pretty narrow, with the eye on the final prize—a done deal, a successful transaction, a sigh of relief. But really the work, the drive forward, does not end. For teams that have never gone through such a process before, that narrow view may be all they can handle on their own. They do not have the experience—or the bandwidth—to think about what comes next.
Companies at this stage bring on experts who can get them through the prep and details of the transaction. The smart ones also give consideration to the time after the deal is done. How will the combined companies in the M&A deal mesh? How do they keep the business trucking along while also setting a smart foundation for the new entity?
For IPO-bound companies, the post-transaction time needs to be folded into the planning. Does the company need to bulk up to take on tighter reporting deadlines and increased investor (and possibly, regulator) scrutiny? How can the company ease the culture shock that will certainly hit as the company transforms into a transparent entity that is subject to new regulations? The more planning that can be done up front, the easier the after effects will be.
Just as the needs and resources of their companies evolve as they get bigger, so do the needs and resources of the finance teams and the CFOs who lead them. They self-assess and evaluate to see whether they can keep up with evermore demands and expectations as the company goes big. Where are the skills gaps? Can we stay on top of the changing accounting and regulatory rules with a more complex organization? Will the CFO be able to handle the spotlight post-IPO and rally the troops during the rocky transition? Can the organization handle the many internal demands when integration of a merged company may take awhile?
The questions will vary depending on the transaction at the time and the team on hand. But they are worth asking when a deal is imminent. The earlier, the better when a large transaction is in the near future. When you don’t know the right questions to ask, it’s time to turn to seasoned pros who do.
Chris Vane is a director at RoseRyan, where he leads the development of the finance and accounting firm’s cleantech and high tech practices. He can be reached at [email protected] or call him at 510.456.3056 x169.
An executive briefing: Demystifying the latest accounting rules and what you need to think about
A flurry of effective dates, interpretive guidance and new rules—companies are processing a lot of information coming their way from the Financial Accounting Standards Board and the Securities and Exchange Commission. Some of the changes have been in the works for ages (we’re talking about you, revenue recognition), and now there are overlapping implementation periods and many, many questions on the part of finance teams that need to put all these rules into place. Is your head spinning yet?
Finance professionals not only need to make sense of the rules, but they also want to know what their auditors think of them and how their peers are going to approach them. For the accounting change biggies—like the new leasing standard—some companies will need to revisit their internal processes and they’ll have some tough choices to make on how they’ll proceed (Should any contracts be changed? How much do investors need to know now about the potential effect on the company’s balance sheets?). The impacts will vary by company and can vary widely. Some companies are getting surprised by how much.
We’ve noted before that FASB has been in the process of clearing to-do items off its own agenda and dumping them onto finance teams’ plates, making this the time to get a handle on it all. That’s why we have developed a 90-minute webinar for senior finance executives called “Demystifying the latest accounting rulings—what finance leaders need to know” so they can get a grip on what’s happening and how to deal with it. This online event will break down the newly effective standards and proposals from FASB plus updates from the SEC and the Public Company Accounting Oversight Board. Senior consultant Diana Gilbert, who leads our Technical Accounting Group, will guide you through it on Thursday, June 2, 10:00-11:30am PT. Read more about this webinar and register here: bit.ly/AcctgWebinar.
Get ahead of these changes. With looming, varied effective dates, you’ll need to prioritize and understand the impacts, all while keeping watch for more updates coming down the pike.
5 reasons I have no regrets about leaving the corporate world and becoming a consultant
I recently left the corporate world after nine years. I loved my job as a controller, but my life had become my work. Working 16- to 18-hour days, plus weekends, practically nonstop, left very little room for time with my 15-year-old son and no time for me. I kept thinking things would ease up. Until one day I decided to stop waiting and do something about it.
I had barely started applying for other positions when I heard from Michelle Hickam, our wonderful recruiter at RoseRyan. After my first conversation with Michelle, I knew that I wanted to be with the RoseRyan family. Michelle talked about the sense of camaraderie at the firm, which was something I had yet to truly encounter in my career. Once she gave me the insight regarding the consultant life, I instantly started visualizing myself with RoseRyan.
Months later, I’ve only been here for a short amount of time, and I am so happy that I am with such a great company and great people. Here’s what I picked up about RoseRyan in just my first few weeks:
1. No politics to be found. With RoseRyan folks, newbies are supported as much as the veterans. Everyone I’ve encountered so far has made me feel welcome and part of the family. I was nervous meeting CEO Kathy Ryan for the first time, but she was very welcoming and made me instantly feel like this is where I belong. She gave me the impression that we are all in this together—our individual successes help us as well as our clients.
2. Siloes don’t exist. Over time, some companies build impenetrable walls between departments, leading to an attitude of every team for itself. That’s not an issue here. As consultants, we sometimes work separately, with different clients, but we’re all part of one big team. Everyone has been so helpful by letting me know I can reach out to any one of them if I have any questions or concerns.
3. Work/life balance is possible! I didn’t give “work/life balance” much thought until I joined RoseRyan. But around here, people talk about their activities outside of work. They’re all hard working but they make time for life too. My son and I can reserve Sundays for whatever we want to do—together. Vacations are no longer nonexistent or at risk of getting canceled at the last minute.
4. Morale is a positive one. Uplifting encouragements are a constant at RoseRyan. Other employees have introduced themselves and have offered me tips and assurances. I feel like they’re rooting for me.
5. We’re continuous learners. One of the things I love about RoseRyan is the emphasis on love of learning. RoseRyan offers training that enables consultants to advance their skills, keeping them marketable and competitive. RoseRyan makes sure that we all have the necessary skills and knowledge to be successful.
I’m grateful for my time in the corporate world. It’s where I learned how to deal with tough situations, and where I refined methods for consolidating financials, budgeting and forecasting, managing cash and making currency conversions. But it was time to move on, to try new things, and learn something new. It was time to see what the consulting world had to offer me.
And, most importantly, it was time to reconnect with my son (time with a teenager ticks fast!). Working for RoseRyan has made me realize that I can still work very hard without having to sacrifice my family and the things I love to do.
Anna Cruz joined RoseRyan as a consultant in April 2016. She previously was a controller at Playphone, regional accounting manager at Culligan and an accounting manager at Pepsi Bottling Group.
We’re always on the lookout for top talent—full-time and part-time. So if you like what we’re about—and you have the right stuff—contact Michelle Hickam or call her at 510.456.3056, x134. See our current job openings here.
Managing through rapid growth takes smart, deliberate finance moves
If the startup stage is all about surviving, the next phase of a company’s lifecycle, when it is time to really grow, is all about scaling. Once you’ve made it past the viability test, you’re riding the momentum of rapid growth. The company has come out of the gate firing on all cylinders, putting the entrepreneur’s brilliant idea into action and trying to scale as it continues to raise funds, connect with customers, hire talented people and establish its worth in the marketplace. There’s pressure to move quickly, to get noticed and fend off any competition, but there’s also risk in this pressing need for speed.
A major part of maturing and progressing smartly out of the start stage is managing resources to support the growth. Building an infrastructure for growth that doesn’t materialize can spell disaster. A young company with all the potential in the world can skid off the rails if they’re letting loose with spending. Overly confident that sales will come in—some day, any day now—the company could end up with bloated inventories, mismanaged resources and employees with nothing to do.
On the flip side, underestimating growth can be equally calamitous. Not having enough inventory on hand will send customers running to the open arms of the competition. And not having the people needed to properly process orders, support much-needed upgrades and meet customer demands will require an extremely difficult recovery to your good name. By applying the right set of finance smarts and business acumen to manage and predict growth with intention, the company can minimize the risks of burning out employees, setting up unrealistic expectations with lenders and investors, and losing sight of their cash flow amid conflicting revenue and spending goals.
Senior-level financial leadership can bring some much-needed order to the company so that it can progress at the right growth trajectory to match the strategy and end game. They can also direct focus onto the future, laying the groundwork for whatever is in store for the company. It is usually at this strong growth stage when a company brings in more reinforcements to supplement the finance team and hires its first full-time CFO. A seasoned finance pro can help steady the ship, to keep the company moving at high velocity but with a plan in place that is thoughtful and deliberate.
NatureBox, the Silicon Valley company that delivers smart, delicious snack packages, was moving at lightning speed when we sent in an interim CFO and an accountant to shore up ranks. At the time, its fledgling finance team was understandably struggling to keep pace with the explosive growth underway. And demand for NatureBox’s products was fierce. We helped out with extra hands to keep up with day-to-day accounting and also got them ready for the future, putting practical processes into place, prepping them for their first audit and providing strategic insights into key areas of the business.
Once set up properly, the finance team at a fast-growing company is poised to provide the full perspective that’s needed to successfully advance. Until then, the decision-makers may have had disparate vantage points, focusing only on their piece of the puzzle. The well-led finance team can put it all together and dig into the meaning of all the numbers and how they are connected. With a cohesive view, the direction of the company can become clearer and the company can prepare for what’s next, whether that next move is an IPO, an acquisition or whatever is behind door #3.
Avoid erratic moves that force the company into the slow lane. Bring some order to the chaos. Be realistic about the growth rate of your company and make solid plans to support it.
RoseRyan helps companies across the lifecycle, from when they are starting out, growing like gangbusters, expanding through M&A or IPO, and evolving as a public company. To find out more about the lifecycle stages, go here.
Pat Voll is a vice president at RoseRyan, where she mentors and supports the dream team, and heads up client experience, ensuring all our clients are on the road to happiness. Her article about creating a winning culture in the midst of the talent war was recently published in Accounting Today. Pat previously held senior finance level positions at public companies and worked as an auditor with a Big 4 firm.
Finance’s role in unlocking value for private equity portfolio companies
When private equity firms choose their investments, they see promising potential. The entity that becomes their portfolio company may have hit a roadblock and is in need of a transformation. An entirely new strategy could be in order. Behind that strategy is a strong finance team that plays a pivotal role in helping the PE firm realize the full potential of that new investment.
Over the past 15 years, I have had the opportunity to help PE firms translate strategy into financial decisions for their portfolio companies. It’s a fascinating CFO role, as there are so many unique factors at play with every company—and there is a sense of urgency, a sense of purpose. Every operating plan, every exit strategy is different. All parties (new investors, old investors, the management, the board) have a vested interest in getting the company moving in the right direction. With the right kind of finance guidance, and alignment around a well-thought-out set of objectives, the company can move where it needs to go.
The CFO in this type of scenario—whether it’s outsourced or a full-time position—has responsibilities to investors, the PE firm and the portfolio company, and is entrusted with improving the company’s operating performance, uncovering efficiencies, boosting productivity, executing the game plan and, ultimately, unlocking value.
The following activities are critical:
Setting up a strong governance foundation: Jumping in to lead the finance function at any time requires leadership skills, technical know-how and an action-oriented mindset. There are a lot of moving parts, and it’s important to focus on alignment toward the goal, creating the right set of performance-based metrics and compensation, and setting up the right practical processes to aid in decision-making.
Laying a strong foundation of financial operations: Timely, accurate financials are essential for understanding the state of the business. These are made possible when accounting systems and processes are up-to-date and internal controls are set. A robust finance function will help the company meet its compliance and regulatory requirements, ensuring the private equity firm can stay focused on the overall strategy and feel confident that the company is progressing rapidly. When the pace of business is fast—as it tends to be in the private-equity world—underlying data needs to be accurate for effective decision-making.
Victory lap
Sure, the transactions make the headlines, but what excites me is the transformation of a company to meet the PE firm’s strategic objective. Every journey is different and sometimes the timeline is several years. The wheels put into motion vary considerably based on the situation. If you do it properly, your efforts will be rewarded and your investors and management will have realized significant appreciation, and that’s exciting stuff.
Terry Gibson heads up RoseRyan Private Equity to help PE firms extract more value from their portfolio companies. A founder of Steel Partners Corporate Services, he has been focused on serving the PE industry for over 15 years. He was the CEO of CoSine Communications and BNS Holdings, and he oversaw the finances at Calient Networks and served as controller at Lam Research.