Access Management and IT SOX Controls: Where Deficiencies May Be Found During an Audit and How to Avoid or Mitigate Them

If you haven’t noticed yet, you likely will soon: A lot of recent auditor scrutiny has centered on access management. External auditors appear to be taking a much stricter position when auditing access controls. They’re offering little leeway for process errors and are declaring a deficiency for even a single finding.

Are we seeing the ushering in of an era of “zero tolerance” for any finding related to the provisioning and deprovisioning of account access to software applications? Whether we are or not, many of the tasks involved in provisioning/deprovisioning are prone to the possibility of errors, and companies—especially IT departments—need to be extra vigilant that good processes are in place and are followed.

When we work with companies doing internal auditing to get ready for auditor scrutiny, or helping companies prepare for SOX compliance, we come across some common slip-ups that have occurred, as well as areas of concern that would catch the attention of auditors, based on their top areas of focus these days. These include:

  • Acting promptly after a termination: Timely removal of former employees’ account access from the network and applications has become a major focus for auditors. Selecting large samples (sometimes 100%) means the opportunity for auditors to find an oversight is high. Whether the finding rises to the level of a deficiency (or worse) depends on the risk associated with the access (how long the inappropriate access was in place, what data the account had access to, and whether that access was actually used).
  • Keeping track of contractors: Who is responsible for tracking the comings and goings of contractors (HR or IT?)? Without a centralized way to report and process when a contractor relationship has ended, multiple contractors might have account access to applications and data long after their ties to the systems should have been disabled or removed.
  • “Sign in as” is used too liberally: Can one user (other than the application administrator) log in using someone else’s user account?
  • Single sign-on: Single sign-on means that access to applications is controlled centrally, via a network login (to the Active Directory or similar system tool). Even if IT removes a user’s access from Active Directory (the network access), the account could remain active on the application. Despite a very small risk that the account could be used by an insider, auditors can still identify this as a deficiency.
  • Inadvertently providing access to the wrong person: This issue sometimes arises when two people have the same name or when a company doesn’t have a strong policy around naming conventions when creating accounts on the network.
  • Inadvertently creating a segregation-of-duties conflict: These conflicts may open up when adding new access permissions to an existing account, especially if an application has multiple customized roles (with special functionality) rather than using the standard roles.
  • Inadvertently providing access that is not appropriate for the job: When managers hastily ask IT to provide their new employee with the same access as someone else on the team, they may not realize the full extent of access that existing employee has. IT should be cautious of these requests, and check that the manager has thought each one through.
  • Giving developers too much rein: Auditors may raise a concern if they notice developers have administrator access in the production environment without mitigating controls.
  • Application password policy: By design and of necessity, application administrators have the ability to sign into applications directly—bypassing the single sign-on process.. Thus, IT needs to ensure that applications’ password policies for administration passwords enforce periodic password changes.

User Access Management and Mitigating Risks

Getting your team’s arms around user access, including effective reviews of user access, can save a lot of downstream headaches. By learning how to self-detect potential problem areas, you can reduce your business risk for unauthorized access, and avoid issues with external auditors, remediation efforts, lengthy SOX memos, and potential deficiencies. RoseRyan consultants can help with identifying and mitigating risks, as well as with training and supporting your team. Reach out to RoseRyan today and ask for one of our SOX compliance experts.

RoseRyan consultant Pankaj Jalan has steep experience with SOX implementations and designing, documenting, and testing IT controls. He was previously Security and Controls Director at PepsiCo and a Senior Manager at Deloitte.

As a RoseRyan consultant, Moira Berman has steep experience working with IT organizations in developing and testing controls. Currently she advises public companies on SOX compliance and assists IT teams with identifying and resolving their areas of risk. She has worked at corporations, including as Director of IT at LEGOLAND, and she has held senior level roles at Big 4 accounting firms.

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What is AI’s impact on Accounting & Finance?

Is the Recent News in Artificial Intelligence Hype or Hyperbole?

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Artificial Intelligence (AI) is a rapidly developing field that has the potential to revolutionize many aspects of our lives—from healthcare and transportation, to finance and education. However, like any emerging technology, there is often a lot of hype and hyperbole surrounding AI, particularly in the media and popular culture.

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Although the birth and early development of AI took place originally from the 1940s onwards, as various industries worked in tandem to bring advanced machines and humans together, a seminal event took place on 30 November 2022. This is when the latest generation computer technology was broadly released to the public in the form of a ‘conversational language generation model’, or generative text application ‘chatbot’ called ‘ChatGPT’.

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Chatbot is short for ‘chat robot’, a computer program designed to solve problems by simulating human conversation through either text or voice communication. ChatGPT—GPT being an acronym for ‘Generative Pre-trained Transformer’—is a revolutionary new technology that was made widely public in November last year by OpenAI, an AI research laboratory and deployment company based in San Francisco, California.

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This most recent version of OpenAI’s Large Language Model (LLM) text chatbot—specifically called ‘ChatGPT-3’—is a significant upgrade compared to earlier iterations of this type of technology, in that it allows users to type natural language prompts into its simple user interface with conversational fluidity, and receive uncannily human-like responses—similar to having a conversation with a real person.

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Prior responses and questions are subsequently processed by ChatGPT to help inform future user queries, while relying for the answer output on a massive trove of data that was originally scraped from far and wide across the Internet as part of the AI’s ‘training’.

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The Impact of Artificial Intelligence on Finance and Accounting

I tested ChatGPT-3 by running two tests: the first being in the subject areas of finance and accounting, related to the new leasing and revenue recognition rules. The responses that the LLM gave me relating to each of these subject areas were outstanding: efficiently written and presentation quality.

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My second test was done in consultation with one of our CFOs. We were discussing the traits that make a good CFO, namely: wisdom, leadership, intelligence and emotional discipline. His initial thoughts were that LLM tools such as ChatGPT may have an impact on automation—or automating efficiencies—by simplifying some administrative and operational tasks, but would have to evolve greatly to impact the key traits of our industry.

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Once we delved further into considering various use cases around tapping into collective knowledge for alternative business cases, multiple uses of data and obtaining better feedback on projects and work generally, he started to come around to the idea that perhaps RoseRyan’s expertise would be greatly enhanced through having a broader perspective enabled by a tool such as ChatGPT, and so being able to provide better data insights and intelligence during our engagements with our clients.

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This approach would also lead to faster and smarter business decisions overall in the future. This thinking is in line with his belief that it is always good to have a secondary opinion or vantage point when making critical decisions.

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Of course AI is not going to replace human traits like ingenuity, unique experiential insight or help you become more emotionally strong as you navigate challenging market forces. What it can do, however, is provide an alternative point of view that combines massive amounts of data, insights and feedback from potentially millions of sources and users.

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It will be exciting to see how this new tech tool evolves not only in finance and accounting, but also customer service, marketing, R&D and other business service areas.

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Here are some helpful links to key initiatives and companies focusing on Artificial Intelligence:

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Over the next couple of weeks I invite you to follow these thought pieces as I share further intel on some AI productivity tools that utilize some of the latest advances in the marketplace, as well as looking at the benefits (and some challenges) associated with AI. Sign up below to receive the latest news and insights.  

 

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So is the latest AI news hype or hyperbole? Yes… it’s a little of both—but once you use ChatGPT you will understand the answer to that question yourself. Join the over 100 million users who have already started using ChatGPT, and find out what the future of business holds for those organizations bold enough to pivot to using AI as part of their model.

Chris Vane, RoseRyan Director

This image was generated using AI art generating applications*

 

*Images used in this blog generated variously via Stable Diffusion V1.5, Stable Diffusion V2.1, Open Journey and Anime using You.com user interface embedded AI image generator tool. (Note: You.com also features the ChatGPT text generator tool.)

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Business Life Cycle Stages

While every company is unique and dealing with distinctive challenges, all businesses tend to follow a similar trajectory—the business life cycle stages. Over the course of 30 years of helping companies start up, manage high growth, expand, and hit strategic obstacles, we have seen this time and again. While not every company survives to go through every stage, those that advance are bound to hit a range of challenges that are familiar to consultants.

To be able to act quickly, companies can benefit from understanding what has worked—and what hasn’t—from the businesses that came before them. To start, you will want to be familiar with the stages of the company life cycle.

1. Startup Life Cycle Stage

This is where the entrepreneur life cycle begins—and the quick pace doesn’t ever quite let up until you enter the later business life cycle stages. Launch an idea, a prototype, a product, a business, and you’re off to the races, as you continue to layer on the foundations of what a successful company can look like.

There’s a balancing act here as you don’t want to grow too quickly, too fast. Outsourcing some functions can help to achieve a workable balance, while also giving you access to expertise the company could not yet afford to take on full time, such as guidance from a CFO and CMO on a part-time or occasional basis.

Mentoring from trusted advisors can help to get you through the inevitable growing pains that hit a startup, which tend to work against steep odds, as they work toward running the business in addition to positioning it properly in the marketplace, understanding its place amid the competition, building out a finance function, and deciding the best course of action when it comes to marketing.

Outsourced finance & accounting can help to lay this groundwork, with an outsourced accounting team swinging into action. Every step matters for the company’s success later on through the business life cycle stages. Then, as the company grows quickly, the small business life cycle stage will wind down—and things tend to get more complicated.

2. Growth Life Cycle Stage

There is a mix of positives (e.g., high growth) with some of the downsides (very, very fast pace) that can come with the success of hitting a nerve and gaining traction in the marketplace. At this point, your marketing efforts are paying off yet your finance organization may be overwhelmed.

The balancing act continues to be an everyday concern as you do not want to overhire yet you do not want to burn anyone out either. The need for CFO-level guaidnce becomes more constant, as the business and its strategic goals become more complex, and it may also be time to bring in an interim CMO as the marketing function becomes more prominent and more in need of attention.

3. Maturity & Expansion Life Cycle Stage

When a company and its brand is established, there is still work to be done. Accounting systems and the marketing technology (martech) stack may need to be revisited if they have not kept pace with the company. The sales and marketing teams may be on divergent paths—unless an evaluation can reveal ways they can be better aligned and working toward the same goals.

Effectiveness of how the company operates, and its output, should be questioned, to ensure that the operations among the finance and accounting, and marketing teams, are as efficient as possible and doing what they have set out to do.

At the same time, the company may be pursuing new strategic goals, such as a merger or acquisition, or an initial public offering. Is it ready? Could the underlying operations be streamlined, to get at better, mre decision-ready information? Outside expertise can help with the preparation leading up to such big events along with the after effects.

4. Evolving Through Challenges Life Cycle Stage

Amid an economic downturn, a change in strategy, or some other cause for headwinds, the company may need to revisit its current state and undergo a restructuring or divest a division. It may lean on marketing to help it through a new product launch that’s unique to the company thus far. Or it may need help filling leadership gaps after a big restructure. Whatever happens during this stage, there is often a need for expert advice to get through it.

What Are the Stages of a Business Life Cycle?

Typically, companies that are able to survive the startup phase advance through a period of relatively high growth, and then pursue a strategic change, such as an IPO or M&A transaction, before they enter a mature phase that may require a restructuring or divestiture. Along every stage, specialized experience can get a company through the tough times and help them maximize the opportunities that arise.

What stage is your company in its journey, and how can RoseRyan help you? Reach out to one of our experts today to find out.

 

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How to Navigate the Market Downturn and Be Ready for the Rebound

We are in familiar yet unpredictable territory. All of us entered into 2023 with a sense of uncertainty about this year’s economic future, surrounded by a lot of conflicting information, which is indicative of a volatile market. After riding and surviving market cycles over the years, including very memorable downturns, RoseRyan understands a thing or two about what we can expect in the months ahead and how to navigate through the turmoil. Times like this call for some tough questions, to prepare your company for whatever is next.

How Is 2023 Going to Shake Out?

First, let’s go over the state of things now: Nearly two-thirds of CEOs expect global economic growth to decline over the next 12 months, according to a late 2022 PwC survey. Contrast that to the 77% of CEOs who expected an increase in growth a year ago, and we’re facing the most pessimistic outlook reported in over a decade. Companies are feeling the pressure now as they report slowing growth and unprofitable quarters. Inflation may finally be cooling but prognostications about what to expect will continue to dog senior leaders as the Fed fiddles with interest rates and consumers and businesses consider tightening their spending.

However, despite a spate of headlines about tens of thousands of layoffs, mostly in the tech sector, the labor market is considered to be in good shape as many companies across the US are still in hiring mode and in fact struggling to fill spots as the unemployment rate remains low. So-called “quiet quitting” has led to lots of movement and role changes, as companies create or explore more flexible options for bringing in expertise and getting the work done.

Amid all the hand-wringing about the state of the economy, whether your company is doing well or on the brink of feeling a pinch, taking an inward look at your readiness for change is always advisable. Three big questions should be considered during a time of uncertainty: Asking them does not necessarily mean you have to act on them just yet—but going through the process will put your company in preparatory mode rather than trying to make up for lost time if things really do go downhill later this year.

Are your FP&A capabilities providing a full picture of how to act now and when the economy shifts?

Every decision is a trade-off—for every project you green light, there is something that doesn’t get funded. How do you balance economic viability, make the necessary investments for growth and make sure you have the right team in place? Skillful planning and forecasting become more important than ever. Developing a flexible model with multiple scenarios and various sensitivities built in will help identify triggers that would cause you to take action and execute on cost-cutting plans, or conversely, when to hire for critical skills. What information do you need to evaluate in order to know if you are making the right decision, and how often do you need to check in and revisit?

This isn’t a time of “business as usual” for your FP&A team—this is when FP&A needs to use their super powers to ask the right questions, gather the critical inputs and pull together robust scenario planning to facilitate quick decisions about where to cut and where to invest during this volatile economic phase. If these capabilities are missing, then outside experts can help to fill in the gaps.

How will you retain top talent if you must reduce headcount?

If you do find yourself in a position of needing to eliminate headcount, think about the key people you really need to retain. These are the MVPs that are going to help you weather the storm. But uncertainty often causes people to seek safety elsewhere, so focus on retention. What are you doing to make sure your MVPs are feeling valued and safe? How will you keep the lines of communication open, even if the news isn’t good?

Preventing burnout during a hiring freeze is not easy; many deadlines can’t be extended. The burden can be alleviated when the company allows for the use of occasional, timely outside expertise to provide key employees with support when they need it most.

What exit strategies are available to your company—and how ready would you be?

While SPAC acquisitions and traditional IPOs have slowed way down, the M&A world is still active. Would you be ready to share information about your company if a promising partnership arose?

We’re seeing plenty of companies extending their timeframe for exit—waiting out the downturn and using the time to be ready for when that window opens and valuations are more robust. Stretching your funding to get you through is a reasonable strategy, but cutting back on costs to the extent that your infrastructure isn’t ready for an exit, your books and records aren’t up to snuff for the due diligence process that’s coming, your systems can’t scale when business picks up and you are missing key talent—that’s a plan that could cause you to miss your opportunity. Valuations may be lower, but you want to be able to present your best version to attract the most interest, to keep your options open. (To start the process, see “M&A Strategies: Make a Match Made in Heaven,” a guide for both buyers and sellers on preparing to make the best deal.)

We can’t predict with certainty what’s going to happen to the economy at large, but we all need to be prepared for potential changes. The companies that will manage to do well are those that are self-aware, have a strong, engaged workforce to support them, along with clear, reliable information about the state of the business and plans for various scenarios.

Pat Voll is a vice president at RoseRyan, where she guides and develops new solutions for our strategic advisory practice, which includes corporate governance, strategic projects and operational accounting. She also manages multiple client relationships and oversees strategic initiatives for the firm. Pat previously held senior finance level positions at public companies and worked as an auditor with a Big 4 firm.

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How Technology Is Changing Financial Outsourcing and Other Business Functions

There are many benefits of financial services outsourcing and outsourcing for other essential business functions, like marketing: It’s how companies can cost-effectively scale the business and gain access to specialized expertise and skills whenever it’s needed. And because of recent advances in technology, this method of temporarily adding talent or supporting current staff across the finance and accounting, and marketing functions, is easier and more efficient than ever.

How Access to Outsourcing Financial Skills Has Changed

A silver lining amid the many downsides of the pandemic has been companies’ ability and realization that they can acquire the skills they need, whenever they need, from pretty much anywhere. Geographic location is no longer a limitation, as long as you have a strong internet connection and know where and how to find reputable finance and accounting outsourcing companies. In fact, whether you prefer Zoom or Microsoft Teams, adding an expert to your team can be seamless. By now, pretty much everyone is accustomed to collaborating virtually, with the only potential barrier being finding mutual time that works across different time zones.

When the pandemic added to the already tight talent war across finance and accounting, companies had to get creative. At the same time, people entered the consulting world to outsource their financial skills and talent—at RoseRyan, for instance, we were able to add to our consulting workforce.

Outsourcing Technology: Companies Become More Efficient

Technology is probably the most common service that companies of all sizes feel comfortable outsourcing. Emerging growth companies may start out with a one-person, outsourced IT function to get the business going on a minimal number of systems and equipment, and use the service as a help-desk resource. This practice can extend to the finance and accounting function, as an outsourced team of experts can establish the organization’s tech stack—from the communications software to the billing, expense tracking, payroll tools and core accounting systems, this tech stack sets the finance function on a foundation to not only operate efficiently but to be fully informed on what’s happening in the business.

Understanding Cybersecurity Risks

There is risk involved whether employees are working altogether or working closely yet physically apart, including when using outsourcing financial expertise. Closely in tune with corporate governance best practices and requirements (for companies subject to SOX compliance), finance and accounting outsourcing pros are mindful of internal controls over financial reporting and are especially careful with sensitive information.

Technology advances have made such efforts both easier and harder; double layers of authentication, for instance, help to provide a barrier when outsourcing partners need to access files and documents. At the same time, complacency is never possible when hackers and phishing experts continue to get savvier. Caution and discerning attitudes are musts as is constant communication between the company and its outsourcing partner (this is where collaboration tools in the tech stack, such as Slack, can be helpful for quick check-ins).

Finding the Right Outsourcing Partners

Where you operate from is less important than how you operate. When looking into your company’s outsourcing options, you will want to keep this in mind as you look to partner with a team that says what they say will do and works efficiently. You may want to start by outsourcing your finance function and expand into using your outsourcing partner for marketing expertise as well.

Whether you are not ready to fill a role full-time or you need a particular skill set or a guidance for a particular purpose, your outsourcing partner can be there for you, with a team of experts or one consultant at a time, perhaps for a few hours a week. The best type of outsourcing partners are open to working with your company’s exact needs and figure out a flexible solution that meets your company where it is today.

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Transaction Advisory Services for Startups

Whether your startup is looking to sell or is being courted, you will need to have an understanding of available transaction advisory services. 

Buying or selling a company, or pursuing an initial public offering (IPO) are huge undertakings, particularly for startups that are new to these prospects, and it helps to know where to turn when these strategic plans turn into immediate moves. Companies offering transaction advisory services vary in their definition and range of these services, so it helps to know ahead of time where to turn and what these services may or may not entail.

What Are Transaction Advisory Services?

Transaction advisory services involve the prep work, due diligence, financial planning, and corporate governance changes necessary both before and after a major transaction, such as a merger, acquisition, special purchase acquisition company (SPAC) agreement, or IPO. These are unusual, transformative events in a company’s lifecycle, so outside expertise from pros who have experience with similar companies and similar deals become important, to ensure the company is doing what it needs to do, and is prepared for the deal signing or bell ringing, in addition to the transition and changes ahead.

Advisory & Transaction Services Your Startup May Need

While it helps to be prepared and have access to transaction advisory services when the time comes, the truth is companies that embark on a major transaction rarely have a lot of time to prepare. Ideally, they would be ready if an acquisitive company came knocking on the door or they would already be operating like a publicly traded company before going IPO, but, as with most things, time and resources are limited. A team of mergers and acquisition advisory or deal advisory consultants can help companies act efficiently and cover the many bases in the following ways, depending on the type of transaction advisory services required: 

Becoming More Attractive to M&A Suitors, Investors

A company shopping around for a strategic acquisition has the upper hand if this aligns with your own exit strategy. Your company’s valuation will depend on what they see once they start taking a closer look at how you operate, your market potential, your existing talent, and your executive management team. How much of a handle the company has of its own worth—your plans, your products, your scalability, your brand recognition—will go a long way to favorable negotiations and terms.

If an IPO is in your future or you are trying to raise capital, you may need to prepare by, among other things:

  • Streamlining your financial operations.
  • Regularly undergoing an audit of the financial statements.
  • Being able to carry out repeatable, practical processes for meeting Securities and Exchange Commission reporting requirements.

Preparing for the Transaction

With expert advice and insights from finance and accounting & marketing consultants, you can make the shift to communications that match the understanding and interests of investors. Why is your company worth their time and money? How should you present your company in the language they understand? At this stage, you can clean up any inconsistencies, as it will make the due diligence process that much smoother.

If by this point your startup has not undergone an audit of the financial statements, know that the entire process usually takes up more time than expected. An auditor liaison can streamline this process, but you can still expect a lot of back and forth and questions the first time around.

Will your systems be able to keep up with the changes ahead? Pre-IPO companies need to ensure their systems have adequate internal controls and automation capabilities in order to keep up with their bigger, busier selves.

You’ll need a thorough assessment of your company’s capabilities, in addition to an expert team and loads of documentation to get you through the due diligence process of an M&A deal or as smooth an IPO as possible (there will always be issues that pop up but transaction advisory experts can keep the disruption to a minimum).

Preparing for the Transition

As much as the company will be focused on getting through the M&A, SPAC, or IPO transaction itself, there is also a need to prepare for the transition to this next version of the company. Not everyone on the team is going to want to be a part of it, and you may find that some do not have the capabilities (working for a private company is a completely different experience than working at a public company). Leadership changes may be in order. New processes and systems will be needed.

Post-IPO, there will be no time to waste as public companies are heavily scrutinized, and books must be closed on a timely and accurate basis, in accordance with GAAP. Companies need help getting accustomed to the quarterly financial reporting and SOX compliance requirement, in addition to improving forecasting capabilities so that the information shared with investors and analysts is as close to reality as possible.

Dealing With the Post-Transaction

The company is never going to be the same, whether it has been absorbed into another entity, taken on a new, talented team through an acquisition, or now has publicly traded stock and inquisitive investors. Big changes are likely to hit the culture under these new circumstances, particularly if the company is now bigger and facing an entirely new set of expectations. The need to be accountable is likely higher—if the company now has a parent to report to and promises to live up to, and if it’s now subject to SEC regulations as a public company and the scrutiny of the public. There is a rhythm to get accustomed to for when financial information needs to be shared. Experts who have gone through a similar experience can help the team get through the transitional time and be prepared for all the exciting things that lie ahead.

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The Benefits of Outsourcing Finance: Cleaning Up the Books

The financial side is sometimes a lagging concern for emerging growth companies as they work toward getting their product or service off the ground—but it soon becomes an issue once the bills pile up, future cash flow becomes unclear, and accounting cleanup is desperately needed. They need to make significant investments in moving the company forward, such as starting an extensive marketing effort. To make the right strategic decisions, they need to understand how the business is really performing—a fuzzy financial outlook will interfere with this capability.

Sound familiar? If the idea of building a financial organization from scratch and hiring for this organization seems overwhelming, at least in the short term, you may want to consider outsourcing. Outsourcing to finance and accounting consultants requires very little ramp-up time as these pros are accustomed to joining a company and taking over the day-to-day accounting, improving the financial operations, and keeping everything running smoothly, whether you need this expertise and support to get your financial function going, you only need it for a short period of time, or you need it indefinitely as you figure out your next steps.

Steps to Cleaning Up Accounting Records

Is it time to clean up the books? While an accounting cleanup is an area of the business that needs immediate attention, it’s not uncommon for fast-moving companies that have become complacent with manual processes, haphazard ways of approving and paying expenses, and a workforce that is doing the best they can with limited resources and time. Many companies start out with a part-time bookkeeper, sometimes with someone the owner knows who happens to have some knowledge of accounting—but at some point that person reaches their limit and outsourced financial experts are needed to create repeatable, practical processes and to get a hold of the complexity.

Finding the Right Company to Develop a Worry-Free Finance Function

A smooth-running finance function is not always top-of-mind for management unless specific information is needed. But when this organization mired in chaos, and accounting cleanup is necessary, this area of the business becomes a constant worry and concern to those who are ultimately responsible for the company having tight controls, clean audits, trustworthy financial statements, and so on.

When you have people on board with you, day in and day out, who know what they are doing, those concerns are lifted. You can trust that the outsourced team will keep you in the loop when necessary and point out improvements and issues.

When looking for finance and accounting help to develop and then run your financial organization, consider your company’s needs over time. While you may simply need the equivalent of a staff accountant at this time, to fix your accounting mess and clean up accounting records, you will need a different set of skills over time for filling in all the layers of the financial organization. These roles do not need to be fully formed at all at once, as they may not fill up 40 hours of the week. Appropriate systems in place will cut the amount of man-hours you need to expend while enabling you to see what’s going on in the business, right now, and minimize errors.

Staying Organized and Benefiting From Valuable Advice, Insights

Enthusiastic entrepreneurs are inclined to do it all, often because that’s what’s necessary to get the business going—but it’s not possible to keep up the pace and keep moving the business forward.

Lack of enough hours in the day is one reason but the other is tunnel vision. Data-driven, fresh insights will open up your perspective to the areas of the business that need to be improved or that risk bringing your business down. Is your company’s spend too much for where your company is at this point in time? What’s happening in your industry, the economy, and how can it affect your company’s future? Scenario planning can help you think through the next moves, and the risks involved. Even if your company is not yet ready to fill out the entire C-suite with a CFO, you can benefit from CFO-level guidance and the unique perspective that only this position can bring.

More Time to Do What You Do Best

When messy accounting records are cleaned up and you are able to have consistent access to reliable, timely financial information about the business—and when you can sleep at night knowing you’re not going to run out of cash tomorrow—then you will able to turn your attention to what should be your primary focus: running the business. Unless you are running an accounting firm yourself, you are more interested in innovating, leading, and managing your talented team than what’s going on with the company’s finances. When you have outsourcing finance experts you can trust, you can keep your attention on what matters most to you.

 

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Strategic Initiatives for Emerging Growth

When startups graduate from being in “survival mode” to strengthening their foundation and exploring opportunities, the focus turns to potential strategic growth initiatives. Whether they are organic or inorganic, incremental or transformational, growth initiatives should be carefully assessed with a steep understanding of the current state of the business. Here are the categories they fall under and some key considerations to keep in mind.

What Are Strategic Growth Initiatives?

What’s your company’s long-term growth goals, and how will you achieve them? The set of strategic growth initiatives you develop can help you work your way to significant milestones, as a larger company (if that’s the goal), or even a global organization. To get there, you may need to increase headcount; expand the company’s physical footprint, with additional office or warehouse space; add to your product portfolio; and increase revenue. These would all be considered growth initiatives.

What Are the Different Types of Strategic Growth Initiatives?

Emerging growth companies take an organic or inorganic approach to growth, depending on their goals and their current resources. Scaling up the company in a diligent, sustainable way can bring you to your goals over time, with attention paid to not wearing out your current employees yet also not running out of cash. A balanced mix of outsourced expertise and skill sets could support your intention to not overhire in the meantime.

As for what type would be best for your company, using what you have may seem like the ideal situation when you first look into your options, but you may be surprised at what you discover. You may find that another company offers a turnkey surge to growth, with the type of talent you need or software or client base. Or, for one of your business growth initiatives, you may find an ideal partnership with a company that aligns with yours and also possesses similar values and goals. An extensive research effort can help you see the many options out there—a full picture is invaluable.

Developing Growth Strategies That Will Be Effective

You may be convinced that your innovative product has a built-in customer base, but does it really? Some companies, in an attempt to cast a wide net as they pursue a business growth initiative, end up targeting many types of customers but don’t devote enough of their focus on any one area—and instead experience disappointing traction in the marketplace. Hard data becomes your friend when planning out the future, with guidance on what the data all means. Financial modeling and scenario planning takes the leadership team away from assumptions to more fact-based strategizing and planning. 

Growth Initiatives From the Pros

As you consider how to move forward, either through a geographic expansion, an acquisition, or a steady trot toward higher revenue, you will want to understand how companies like yours have successfully (or unsuccessfully) followed the same path. You could ask your trusted advisors, What are some examples of growth strategies that worked? This would be a smart question to ask as you interview potential advisory firms that can help you on this growth journey—listen for real examples in addition to strategies that both worked and didn’t work. You want advisors who will be open and honest with you along every step toward growth. 

Building a Base for Strong Growth Initiatives

No matter what direction you decide to take your emerging growth company, you want your choice to be based on data that is up-to-date and reliable. Giving the go-ahead on a plan that is based on assumptions our outdated information could be a costly risk. Some companies need to first get their financial house in order, with efficient systems and processes, to acquire the information and insights needed to make smart choices. Otherwise, the growth initiatives being explored could be incredibly unrealistic and potentially a waste of time. Experts can help guide you toward the right decision for your company at this time—whatever that may be. Ready to explore potential growth initiatives for your fast-moving company? Contact RoseRyan to start the process.

 

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Learn When and Why You Should Use a Virtual Accounting Service

Is it time for a change? The reasons why companies start looking into outsourced accounting services vary and quickly multiply as they explore the many benefits, from providing virtual bookkeeping services to improving accounting processes and systems; developing a multilayered, smooth-running finance function; and helping you truly understand your cash flow situation; and even helping you scale the business.

With the right virtual accounting service for your growing business, you can have access to many types of skills—not only accountants but an interim controller and CFO, too, in some cases remotely if that is preferable. Here is when and why you’ll want to start looking into virtual accounting companies.

What Is Virtual Accounting?

Virtual accounting can be equated to outsourced accounting and may occur away from your home office, as virtual bookkeeping companies and virtual accounting companies are typically able to offer flexible, remote services if you wish. For outsourced accounting, these are some of the many benefits:

Your financial operations will be streamlined. If a lack of processes has made getting up-to-date, reliable information next to impossible, then it’s time to streamline. Outsourced accounting and finance experts bring their A game and best practices to every company, and can introduce practical processes and technologies that will make your financial operations more efficient, such as setting up a workable monthly close process. 

You’ll have access to specialized skills—on your terms. For various reasons, your company may not need a full-time, in-house finance and accounting team right now. With a virtual or outsourced accounting team, you have a flexible solution that can adjust depending on your company’s exact needs.

Over time, as the company grows, you may need more than one person helping you or a higher level of expertise or strategic advice, such as from an outsourced controller and/or CFO, and you’ll have an easy connection to those skills through your virtual accounting provider as well. With access to an ecosystem of business partners, including recruitment expertise, this team can help you hire for full-time roles when the time comes. 

You can focus on growing the business—not the day-to-day concerns. “Overwhelmed” is an understatement when entrepreneurs and emerging growth companies get in a groove as the business gains traction in the marketplace. Having to track down payments, losing sight of what’s happening, and messy books can distract you from what you do best—continuing to build your business and making it successful.

You’ll get a fresh perspective. Are you spending wisely? Do you have a plan for the next three to five years? Do you have cash flow projections so that you can tell if you’re making smart moves today—or whether something needs to change soon? Outsourced finance pros and virtual accounting experts can take a fresh look and give an accurate lay of the land.

You’ll have reliable, updated information. If you’re not closing the books on a timely basis, if the financial records are in disarray, there’s a lack of clarity that can hamper your ability to make smart decisions. Having up-to-date financial records can help you as well as investors who will want to see what’s really going on in the business before they’re willing to work with you.

You’ll be ready for most anything. With your financial house in order, you won’t have to panic when it’s time for an audit. In fact, your virtual accounting service may include expertise on preparing your company for a first-time audit. You’ll have experts you trust ready to help you prepare and they can help you answer questions.

What to Look for in a Virtual or Outsourced Accounting Team

When a startup begins to take off, knowing the right level of in-house talent versus outsourced talent can be a challenge. An experienced team of finance and accounting consultants can help you determine your exact needs, depending on your current resources and aspirations for the business.

With a range of skills, a team approach means you have access to more than one virtual accounting consultant if the need arises—and that consultant you do work with has a team behind them for added support, at all times. Ready to develop or transform your financial operations? Contact RoseRyan today to find out how we can help.

 

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Scaling for Growth: Tips to Help You Do It Right

Growth is a persistent goal by most companies, but scaling for growth is what successful companies have managed to do well. When a startup has shown its mettle in the marketplace—its first couple of years have proven that there is a market for its offerings, further confirmed by investor interest—then it becomes time to consider how to move the company to the next step. Here is what scaling an emerging growth company entails and how to do it right.

Scaling Up Your Business

What does it mean to scale up your operations? It’s not enough to desire that more customers will want what the company is selling—you also need a plan for meeting those orders day after day, in a cost-efficient, sustainable way. Does your company have the systems in place that can keep up with the faster pace and higher volume? The bigger and more complex the company gets, the more of a strain it can have on the current ways of operating—particularly the people involved.

This is why scaling the business is a delicate balance act, as it’s not as simple as hiring more people across the board or upgrading every system within the company (such as upgrading from the “small business” version to the enterprise one). Spending too much too fast can lead to an abrupt end of the cash runway—from the system upgrades to the additions made to payroll. During transitional growth periods such as this, trusted advisors can provide expertise from companies that have skillfully built up without burning out.

Determining Readiness

How can you determine if your business is ready to scale up its operations? Scaling the business is an ongoing endeavor—many aspects are involved and some will progress slower than others.

As you build up resources—and the capital—to work toward the next level for your startup, the scaling up begins. Ideally, this begins with a careful evaluation of current operations and a plan, but some companies start the process too early and have to go back to evaluate whether they took the right steps or need to revisit some of their decisions. You may see this with companies that hire senior leaders who end up not being a good fit for the kind of company that is being refined.

Common Challenges When Businesses Scale Up Their Operations

Here some of common regrets that companies experience as they scale:

  • Hiring mistakes: Bringing in people who are not a cultural fit for a fast-moving startup; filling full-time roles that may not be necessary when the company is bigger; hiring too quickly before knowing whether expansion efforts will be successful—these are few of the many human capital challenges when scaling for growth.
  • Overly high optimism: Positive attitudes are most welcome in the business environment, but there also needs to be realism when planning for the future. This often falls under the purview of the CFO role. On an interim or part-time basis, a CFO expert can help right size expectations and projections.
  • Choosing appropriate systems: A wide selection of choices for managing accounting, payroll, invoices, expenses, cash, and equity can be overwhelming when a company is looking to grow in a sustainable way. Experts in these areas and in smart growth for emerging growth companies can save the business significant time in recommending the systems that would be the right choice while also offering critical support during implementation efforts.
  • Employee engagement: When you want to retain your star employees, you need to keep in mind the hours they are putting in, their interest in the company as it evolves into another iteration of itself, as well as making them feel involved along the way. Open communication and transparency are musts for keeping a connection with them and being alerted if they feel any sense of dissatisfaction with the way things are going.
  • Aversion to change: Change is afoot in the company—but not everyone will be on board, even when the changes in store are positive. Some employees, either because of their personality, where they are in their career or their home life, or simply how they feel about the company in general, may not want to take this journey.

Best Practices for Scaling Up Business Operations

With strategic growth advisors who have helped companies similar to yours set a business scaling strategy and go on to thrive, you can include the following best practices in your plans as you consider what will work at your company. Here are a few:

  • Keep evaluating skills gaps and resources: Where are the strengths and weaknesses on your current team, and what gaps can or should you fill now? What resources do you have to build up in a smart way, and what will you need to acquire as you proceed (is your company “investor ready” or do you have some work with the financial operations to undertake before taking on significant strategic moves)?
  • Be creative when addressing skills gaps: Making full-time hires across the organization does not need to be the default—in fact this can be a risky move. By outsourcing some roles, such as in marketing and finance, you can fill in critical gaps for now while taking the time needed to find the right people for those positions down the line. Consultants who are known for being adaptable and highly experienced can jump right in to get the work done—so that your company won’t miss a bit in its business scaling.
  • Trust the type of expertise that only a CFO can provide: If your company is not yet ready for a full-time CFO, you can still tap this expertise. CFO experts have a unique perspective and a knack for helping companies in this exact type of situation, when they are looking to scale up business. Whether you need CFO expertise, an entire accounting team, or advice on when and how to scale your company, RoseRyan can be there for you. Contact us to find out how we can help your growing company.

 

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