main menu

Join us on social

A Look at Team Assessment Projects

by

As 8020 Consultants, we focus on issues that produce provable results measured by an increase in our Clients’ bottom line. While financial project execution and interim financial management are our bread and butter, sometimes, operational improvement goals bring our attention to the softer side of a corporation – its people. In the cases where the Client’s situation requires this area of focus, we can perform a team assessment to determine areas of opportunity.

Common Scenarios and Key Questions for a Team Assessment

For many organizations, the desire for greater growth can spur the reexamination of existing staffing and team structures. Some common scenarios that can bring outside Consultants to perform team assessments are when:

  • A new executive inherits an existing team
  • Accounting and/or FP&A teams regularly miss deadlines and/or are not able to provide requested reporting
  • There are many manual processes
  • Tension among departments exists, with significant finger pointing
  • The company has experienced significant change to its revenue structure, be it from expansion, acquisition, contraction or any other reason
  • Other situations arise in which executive leadership senses inefficiency of the existing team

The compelling questions that Clients typically want to answer in these types of scenarios are:

  • Who are the star performers I want to keep and make happy?
  • Who are great people who are misaligned with their current responsibilities who I need to realign to increase the team’s productivity and happiness?
  • Who are the team members who need specific training to become start performers?
  • Who are the ones who do not fit with company’s culture, goals and objectives and would be happier working somewhere else?
  • What is the optimal organizational structure given the current business needs?

An Example Team Assessment Project: First Steps

A recent Client has been in the consumer product industry for more than 30 years distributing kitchen tools and appliances. The Client’s IT team was 20 people strong with 6 programmers. The Managing Director questioned the IT team’s size and makeup and requested a team assessment. Did they need such a large team as a company distributing kitchen tools via various established channels from large online retailers to small mom-and-pop shops?

To find out, we conducted hourlong interviews with each member of the IT team to determine their level of technical knowledge and their level of satisfaction with their current role and responsibilities. We also asked questions centered on the Managing Director’s concerns and softer questions like:

  • What are their aspirations?
  • What would help them to perform their jobs better?
  • What would increase their satisfaction with the workplace?

Related Content

Team Assessments and Proposed Team Structures

It must be noted that the answers to these questions are operationally useless, unless they’re understood in the context of where the company is going and how the specific team is expected to support company-wide goals and objectives. The marriage of these two areas requires an experienced Consultant, who can:

  1. Understand the organizational goals and how people can strategically and tactically align to them.
  2. Identify the star performers, potential star performers and team members who would be more productive in a different environment.

Having all this information, the next step is a proposed best-in-class team structure with associated costs. This means filling positions with team members where appropriate with various recommendations such as:

  1. This star performer is ready to be promoted, and this position is a good fit for them.
  2. This star performer is ready to change responsibilities, and this position is a good fit for them.
  3. This team member requires this specific training to increase their productivity and job satisfaction.
  4. This team member is a great fit for where they are.
  5. This specific position is not a part of the best-in-class org structure.
  6. This position is a new position to reflect the company’s objectives, and here are the suggestions on how to fill it.

A Key Notion: The Answers Aren’t Always Obvious

In the Client’s case, the team assessment project revealed no real investment in the IT infrastructure (i.e., software systems and hardware) in at least 15 years. As such, many on-premise, homegrown pieces of software needed to be maintained. Additionally, the connectivity among these outdated pieces of software required extensive maintenance effort. Furthermore, IT performed a de facto role of project management in all projects that touched IT, even when the project belonged to the business and should have been managed by the business. Thus, IT was overburdened on all fronts.

The recommendations were to upgrade some systems and replace other systems with purchased SaaS cloud-based systems. Additionally, we recommended the Client utilize apps such as Asana and SmartSheet to establish more robust, controlled processes, including those associated with measuring the team’s productivity and helping the team with project management.

Until all those recommendations were put in place, the IT team could not be changed. Even more importantly, the business risk from the outdated IT infrastructure would remain elevated.

Getting the Most from Your Teams

If you feel uncertain about a corporate team’s makeup or effectiveness, it might be time to conduct an assessment. Third-party Consultants can offer a valuable, unbiased perspective as they help you navigate the uncomfortable politics of bringing clarity to a team’s structure and alignment to operational goals. If you’d like to learn more about how our team of accounting and finance Consultants can offer support, then we invite you to contact us to start a conversation!

For readers who suspect their accounting departments might have areas of improvement, but aren’t sure how best-in-class departments operate, we also offer this helpful health-check guide:

accounting department best practices health check guide button

Finance and Operations: The Path to Strategic Alignment

by

When thinking of Finance and Operations, envision two sides of the same coin. Operations executes the company mission and strategic goals while consistently adapting to ever-changing global dynamics. Finance assures resources are allocated properly to these same strategic goals, while working as the gatekeepers of the organization’s financial health. These two departments are more interrelated and interdependent than many companies realize – and understanding how the two areas work in tandem can yield great efficiencies and benefits.

Common Gaps Between Finance and Operations

In most high-growth and startup companies, the Operations department is ambiguous, nonexistent or embedded into multiple departments such as Sales, IT and even Finance. This way of running a business becomes unsustainable in the long run, as lines are blurred, and conflicting priorities arise.

I’ve seen companies in the high-growth/startup phase where all departments are focused purely on driving revenue. Initially, companies can get away with only top-line focus. However, as business scales and without dedicated teams focusing on operational discipline, the profit starts to suffer. When the lightbulb moment to bring operational focus inevitably happens, the companies have to undergo substantial restructuring to mitigate.

Mature companies can have extensive Operations departments, but often they are quite siloed from Finance, which can create misalignment. For example, it’s common for Finance to only become aware of operational obstacles after the fact ⁠– specifically when Operations uses those obstacles as justifications for underperformance in variance reporting. In more aligned circumstances, Finance and Operations will work together in solving various issues as they happen and bring awareness to the key stakeholders.

A good leadership team will focus on creating a culture where partnership is encouraged between these two complementary areas. Finance has a first-hand view of the company’s “report card” (i.e., financial statement) and knowledge of what areas need attention for improvement, and Operations can provide in-depth reasoning behind the data. Both areas can push and question each other to ultimately find common ground.

Alignment of Financial and Operational Practices

With all these considerations in mind, one of the first things I do when starting an engagement is try to understand the end-to-end operations. I focus on pinpointing where financial synergies can add benefit to the financial statements and outlook. This process can include:

Setting KPIs

While a myriad of KPIs in Finance are reported on a recurring basis, these KPIs (e.g., Working Capital, Profit Margin) tend to mainly focus on the financial statements. As these are integral to successfully managing a business, it is also important to incorporate KPIs specifically pertaining to the operations of a company. Below are two commonly used operational KPIs:

  1. Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory. This is a product-based company’s measure of the number of times a company sells and replaces its goods during a given amount of time. It’s important to look for industry benchmarks and assess how they compare. Depending on the results, this may lead to a more in-depth review of SKUs, discounts to clear aging inventory, etc.
  2. Utilization Rate = Billable Hours/Work Hours. This is a service-based company’s measure of the percentage of billable hours an employee works over a particular time period. A review of this KPI can help shift focus of the Sales and HR teams, as they may look to hire employees that are better suited to serve the demands of the market.

It is also important to take the time and walk the Operations team through the company’s current financial statements. This will help them understand the impact of operational decisions on the company. During these conversations some new shared KPIs may be agreed on.

Partnering on Processes

Numerous workstreams exist on the operational front. Whether its supply planning or resourcing, it is important financial checks and balances ensure appropriate protocol is followed from an audit perspective. It is common to ask that Finance receive feedback from Operations to help forecast margins, revenue and cost fluctuations. It is also important that Finance plays an advisory role in the day-to-day work.

A great tool to use in mapping out processes is a RACI (i.e., Responsible, Accountable, Consulted, Informed) matrix. The RACI should be assigned to one person to populate, but it needs buy-in from all departments before implementing. During my time at a service-based company, the process of adding billable personnel was unclear between the Project Management, Finance, Human Resources and Operational teams. Implementing a RACI matrix to the process added accountability and clear roles and responsibilities to each of the departments involved.

Day-to-day operations can be very fluid, and the Operations team needs to be able to pivot quickly with minimal bottlenecks. To efficiently problem solve, it is always better to invite the key stakeholders and have a meeting to mitigate. When the groups come together, full transparency in the data is always the preferred route, which means honest dialogue about the state of the business. The goal is to involve Operations in the discussion and give them a seat at the table – otherwise, constant finger pointing will occur.

Related Posts

Product-based Operations and Finance

When it comes to product management, key steps that Finance and Operations need to collaborate on are Product Review, Demand Planning and Supply Planning. It is best to build scenarios into each of the stages to allow the organization to be nimble.

Product Review

This phase involves working closely with the Product/Business Development team to understand the lifecycle of the product. Key decisions are made in this phase around sunsetting and launching products. Key Finance responsibilities are understanding the forecast by product and foreseeing changes to gross margin based on changes in product differentiation. Illustrating the financial impact of product changes will help the Operations and Product teams to reconfigure their approach as needed.

Demand Planning

The key goal in this phase is to review the forecast by product type. Sales must be involved in this stage, and most companies have a sales management tool (e.g., Salesforce) from which opportunity data can be retrieved. Information around promotions, product seasonality and launching new products needs to be vetted thoroughly in this stage. Finance and Operations will create a game plan for a given quarter based on the pipeline, allowing Operations to prioritize the actions needed to deliver the demand and for Finance to revise the financial outlook.

Supply Planning

This phase takes input from Demand Planning, reviews the sourcing of the product and brings lead time, variability in COGS and inventory management into play. Recently, companies have faced a great deal of challenges in this area with longer lead time for raw and finished goods. The Supply Chain and Procurement teams need to be proactive with vendors to allow optimal lead times to meet the demand. Operations and Finance need to partner on shipment plans of finished goods from a revenue recognition standpoint. Revenue recognition terms by opportunity need to be reviewed by Finance and Operations to determine what can be recognized once the product leaves the warehouse (e.g., Freight on Board Origin) or once the goods are received (e.g., Freight on Board Destination).

Service-based Operations and Finance

For service-based organizations, Project Management plays a key role. it is very important to set clear roles and responsibilities between Project Management and Operations teams. The key responsibilities for Operations in a service business are:

  • Entire-organization-level scoping and management: This enhances utilization across multiple projects. As utilization is one of the the main ingredients that drive revenue, it is important for Finance to work with Operations on this data in creating forecasts. This also allows to build ideal staffing levels for better margins.
  • Providing staffing solutions within cost parameters: When deciding to bring on new employees (who are billable), there needs to be a process established in which finance reviews the margin the person will bring to the company. Usually, margins should range between 45 and 55 percent.

Leading the Way

The pandemic became a catalyst for global disruption in both our personal and professional lives. Companies have had to reinvent themselves and rethink the architecture around running a business. Factors such as inflation, added lead time on shipments and surplus inventory have become a part of the new normal.

Now more than ever, a strong sense of collaboration across areas of the business is the foundation for success. There are macroeconomic challenges that require a focused team across all levels of the organization. Financial professionals must break the perception that the department is just about numbers. We must look to lead the way in understanding the difference processes impacting Supply Chain and Operations. The stakes are high, and no one department can do it alone.

Visit our financial planning and analysis services page to learn how our team of 110+ accounting and finance consultants can offer support in that regard. If you’d like to learn more about how to break down internal silos and gain traction on strategic objectives, you can also download our free guide below:

operational review program ebook

Exploring the Role of Finance in Business Strategy in Three Parts

by

As consumer demand evolves, you might be faced with the challenge of adapting to new trends or adopting new products and lines of business. I had the privilege of working on such a project early in my career, when I learned meaningful lessons on the role of finance in business strategy to evaluate new opportunities and determine whether to jump on the bandwagon or let it pass.

In this blog, I will share the approach my former team took when putting together a strategy presentation for my former company’s top executives before getting the greenlight to go forward with the project. I’ll break it out into three parts:

  1. Research,
  2. Modeling, and
  3. Strategic Clarity.

My team and I used these three steps when we put together the presentation to transition from licensing a product to bringing the product and process in house.

The Role of Finance in Business Strategy, Part One: Research

“No research without action, no action without research”

Kurt Lewin

When you notice innovations or a void in your line of work, start researching. Whether you have an inkling on what your position is on the new idea, or you are in the process of determining where you stand, research can help define, reorient or reinforce your position. Chances are either the specific idea you are considering has been executed by a different company, or something similar to it has. And more likely than not, it’s been attempted by your direct competitors. By analyzing past case studies, you can use your competitor’s strategy to your advantage.

The importance of doing your due diligence and thorough market research cannot be overstated. For example, let’s say your company is considering entering a new market. If your competitor has already taken the leap, it offers a chance to study their every move and evaluate their success. If you can recognize patterns across the industry, you might discover unleveraged opportunities by the competition or learn your company is better suited for success due to unique synergies. You might even find your competitors are struggling to find their footing due to fundamental problems that any company would face, and avoid entering that market.

The Information is Out There

When I first started my job, I was shocked to learn how much information is available… some of it free and some at a premium. For example, you can find a lot of information needed to measure success or failure just by going through a company’s annual and quarterly reports, which might answer questions like:

  • Is the company pivoting to a new strategy to counteract some low numbers?
  • Is the company ramping up and pushing forward even stronger after reflecting significant growth?

Aside from looking at the numbers alone, reading through those reports will offer great insights for your research. Furthermore, with a monthly subscription to some industry-specific websites, you might even be able to get your hands on some revenue data or user data by SKU. As someone straight out of college, I was surprised to learn that competitors have access to this information, but it’s out there.

Lastly, one highly underrated method for conducting research is Googling. Companies get a lot of press coverage, so you might find gems of information by reading through some articles and press coverage.

Benchmarks and Consumer Understanding

Moreover, researching the market helps you determine benchmarks for success. Numerous reports are available for research that can provide market value for the industry and directional forecasts into where the industry is headed. Moreover, reports can provide details into what subcategories of products the consumers are more likely to purchase. You can apply this information to your company’s capabilities and offerings to set more meaningful goals. Perhaps the standard revenue model and projections don’t apply, or the market standard is exactly what you expected. In either case, knowledge and comparison are more productive shooting in the dark.

Furthermore, market research gives insight into arguably the most important player in the field: your consumer. Understanding customer response can help you determine your key demographics, project revenue flow, analyze marketing strategies and assess overall demand.

Going back to the project I worked on for my former employer, we did thorough market research into the industry, consumer patterns and trends, and direct and indirect competitors. We identified some mistakes our competitors made as well as some profitable actions. Some of the factors we considered when comparing ourselves with the competition included:

  • Owning the IP,
  • Having strong intercompany marketing platforms,
  • Already having dipped our toes in the space with the licensing model, and
  • Being large and desirable enough as a company to hire top talent.

The Role of Finance in Business Strategy, Part Two: Modeling

“Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”

Lao Tzu

While financial modeling and strategizing should go hand-in-hand since each feeds the other, for the purpose of this blog, I’m listing it as the second step.

After your market research, you should be informed enough to move into financial modeling. The benefit of financial work compared to purely creative work is that it is quantifiable and—at least to some degree—directionally accurate.

Build or Buy?

One common fork companies reach is the build vs. buy dilemma. (This can be expanded to anything between joint venture to strategic partnership and more.) With a proper financial model, you can offer concrete numbers and projections to help with the decision-making process. Does it make sense to start the new line of business, enter a new market and launch a new product from scratch? Or would it be more strategic to buy a company that already does everything you are looking for, and integrate them into your own company?

To determine the cost of buying a company, you’d need to build a valuation model. There are plenty of resources available that offer insight into how to determine the value of a company, so I will leave that to you (to research!). Alternatively, to project how much a new line of business costs to develop, you would need to build a financial model from scratch using all the knowledge you gained from your market research.

Unlike a valuation model that can be based on the company’s financial statements and growth rates, you would need to build a bottom-up model based on assumptions you set for the business’s operations. This is where industry averages and timelines come into play. The assumptions should reflect the market and your competitors. For example:

  • What will the product release cadence be?
  • What is the average revenue for each product?
  • Is there seasonality?
  • What is the optimal quantity?
  • When does the business become profitable?
  • What will the new organizational chart look like, and how much will it cost?
  • How much does marketing cost? Etc.

Most, if not all, of these questions should be answered in the research portion.

Some assumptions can reflect the value your current operations can provide. Are there any synergies and revenue boosts? Does the company have enough facilities, or will it need to buy/lease? Are there ways to cut costs with already-available resources?

When my team and I built our model, we looked at a few potential acquisition targets. We realized that although we might get a great deal, our company had priorities that wouldn’t be addressed with an acquisition, so we built a model from scratch for the new line of business. We forecasted each line item of our business’s P&L, including the cost of hiring a new team, development, marketing, facilities and other costs to our business. Our revenue forecast included some successful product launches and some failures to get a realistic outlook on how the business would perform.

By putting all your assumptions together, you should be able to build a solid model that forecasts the profitability of the new line of business. And if you identify unquantifiable benefits, you can include them in the strategy with all the quantifiable advantages.

Related Posts

The Role of Finance in Business Strategy, Part Three: Strategic Clarity

“Strategy is simply resource allocation. When you strip away all the noise, that’s what it comes down to. Strategy means making clear cut choices about how to compete.”

Jack Welch

As I mentioned in the section above, strategizing and building financial models go hand-in-hand. The financial models should reflect the strategies under consideration. And many of the questions asked while building financial models are asked when illustrating the strategies.

Now that you’ve built multiple financial models, you can leverage sensitivity analysis and scenario analysis to evaluate which scenario is financially optimal for your company’s needs. You might find your company desires some intangible benefits that may be harder to quantify accurately. For example, between the choice of a strategic partnership or an acquisition, the company might prefer having more ownership of the operations and go with an acquisition. However, if having a say in every single step isn’t a priority, perhaps a strategic partnership is the better option. These types of considerations are harder to quantify in a model, but they often carry a lot of weight in the decision-making process.

One of the key synergies my former employer considered was the relationship between consumer products and media. In a way, a movie/TV show and consumer product market each other. Your TV or local theater is a marketing tool for toys sold in stores, and toys and games are marketing tools for a TV show or movie. You might find subtle or massive boosts in revenue or a cost savings for either business segment. Scenarios like this might sway leadership’s decision when it comes to strategy if it is more prominent in one model vs. another. These considerations could be included in the financial model, if applicable, or added as a few bullets in the presentation/deck.

Clear Explanation and Illustration of the Strategy

A key aspect of strategy is to be able to represent all your research and financial modeling in an easily digestible way that depicts a narrative for your company. The strategy is your proposed plan for the company to go from Point A to Point B, and why it’s the best path to take to stay competitive. As you might be thinking, it should be quantified in the financial models, so all that’s left is to put it into words and graphics. A strategy deck will often be presented in a certain structure that includes:

  • Market research,
  • Competitor case studies,
  • Strategic perspectives and capability, benefits and synergies,
  • The game plan (the strategy itself),
  • Additional growth opportunities and
  • The financials.

Each project’s presentation will differ based on needs, and all the research and thought put into the models need to be captured in the presentation.

For example, in the project I’ve referenced earlier, our strategy deck started with an overview of our strategic perspective and the rest followed the narrative. As mentioned earlier, our goal was to show why taking more ownership of the process would be beneficial to our company in a directly quantifiable and non-quantifiable way. We started by showing the state of the market and why we believed it optimal to enter in the capacity we were outlining. Then we followed with the strengths and weaknesses of our competitor’s entry into the market and why we were better suited to succeed. Then we presented our launch timeline and approach, resource allocation and headcount needs, an overview of synergies and growth opportunities, alternative strategies we rejected and revenue projections.

Learn More

It must be noted that you can have the greatest strategy ever, but it will just be great ideas in a presentation until you execute. To conclude this blog, here’s another quote from Jack Welch, “In real life, strategy is actually very straightforward. You pick a general direction and implement like hell.”

If you’d like to learn more about planning, then download our free timeline template below. You can also visit our financial planning and analysis page to explore how our consultants might offer support for your operational needs.

strategic financial plan project timeline

Accounting & Finance as a Strategic Business Partner or: 3 Ways to Shift from Bean Counter to Bean Grower

by

The bean counter is dead. Long live the bean grower. Finance and Accounting professionals’ role within the corporate ecosystem over the decades has evolved from the proverbial bean counter to emerge as a bean grower. No longer is the finance team viewed as the pocket-protector-sporting, 10-key-toting, necessary annoyance relegated to the back rooms of the office. Now, we have earned a right-hand seat at the strategy table, where we provide key insights on where to plant, how to steward crops, when to worry about weather forecasts and impending draughts, floods or other natural disasters, what to do to mitigate harvest risk and how to maximize yield. Managing these risks and opportunities, from the perspective of a startup ecosystem, calls upon team members to wear multiple hats with responsibilities spanning accounting, FP&A, strategy, treasury, information technology and human resources.

Growing accounting and finance as a strategic business partner for senior management while juggling such competing priorities can prove challenging—to say the least. To assist in coping with such challenges over the years, I’ve employed three key strategies that all finance professionals can seamlessly build into their day-to-day:

  1. Maintain an awareness of the shifting macroeconomic environment.
  2. Stay abreast of functional, niche software developments and new platforms.
  3. Curate a solid professional network sphere.

1. Maintain an awareness of the shifting macroeconomic environment.

Or: How to learn to read macroeconomic tea leaves

Staying informed of the current macroenvironment can ensure that finance can interpret broader economic trends and leverage those learnings internally. For example, a film/TV production company risk mitigation strategy is to produce their films and TV shows in states offering generous tax incentives. Companies will secure single-picture financing or leverage their credit facility established with a banking institution to cover the portion of the budget that will eventually be offset by the collection of the incentive monies.

Depending on the state, a significant divide in timing can exist between the engagement of the financing and the cash inflows from non-transferable incentives, which can expose the company to interest rate volatility risk. The individual or team overseeing the administration of the project financing should be well versed in the day-to-day benchmark interest rate shifts to take advantage of the most economical rate settings.

In May 2019, the yield curve inverted allowing for long-term rate settings to fall below short-term settings. At the time, I was working for a company that had produced a film in a state which provided for a generous non-transferable tax incentive on qualified production spend. However, the incentive was to be reimbursed to the company over a period of four years. (Depending on the threshold of qualified spend of the production, the credit would be reimbursed over the period of two or three years, but the actual timeframe from wrap of post-production to receipt of cash from the state could push out the completion of collection to four years, depending on which state allocation year your project was assigned to.)

While this timing had been factored into the financing model on the film and the tax incentive factored against the credit facility, the film performance was exposed to interest rate fluctuation, which over the four-year collection period had the potential to result in a significant hit to the film P&L. To mitigate this risk, I was vigilant at monitoring rates, and when the yield curve inverted, I engaged an interest rate hedge with our credit facility bank to lock in the lower long-term rate over the four years. Keeping abreast of market fluctuations was as simple as turning on CNBC while having my morning coffee before work and translating that information into a practical work application that resulted in a strategic value-add.

Learn more in these related posts:

2. Stay abreast of functional, niche software developments and new platforms.

Or: How to get out of the tech weeds and expand your digital transformation consciousness

Another way to help management see accounting and finance as a strategic business partner is by reviewing and expanding your company’s digital transformation plan where opportunities exist beyond the traditional general ledger system, ERP or forecasting software. Taking advantage of such opportunities can add additional functional efficiencies that significantly reduce the need for human capital bandwidth on non-value-added activities.

TV and film production companies can have significant fluctuations in cash flow from day-to-day when cycling through physical and post-production on a slate of projects. Managing that cash flow can be a daunting task for most small to mid-sized companies that generally operate leanly.

Many companies still manage their cash forecasting via an Excel model, which can be onerous, clunky and time intensive when updating on a weekly basis. This was the case at a company I worked for recently which was cash flow centric and operated using multiple banking partners. When I discovered (via an unsolicited marketing email in Outlook) an open banking subscription-based platform that instantly lets you know your consolidated cash position and offers accurate and automated cash flow forecasting, I quickly envisioned the incredible efficiencies that implementing such a software could build into daily finance operations.

A forecasting process that would take a week could recognize a significant reduction in preparation time by leveraging the AI and APIs utilized by the software. The bandwidth freed up through employment of such a software product could mean an opportunity to lower overhead costs through reduced headcount or be pivoted to more value-added activities such as analyzing cash usage to find ways to mitigate other operating inefficiencies. Either way, the return on investment should be realized in a short timeframe and prove quantifiable.

This is one example of the ever-expanding universe of niche, cloud-based software platforms that can be a game changer for finance. Take a few minutes out of your day to respond to a request for a demo on a platform you may never have heard of previously—but seems interesting—or ask someone within your network sphere to recommend a product to inquire after. Those few minutes are worth the potential cost/benefit and functionality that you may eventually find yourself in a position to deploy.  

3. Curate a solid professional network sphere.

Or: How to get out of the cubicle and grow your networking sphere

One of the best opportunities to position yourself as a better strategic partner is through leveraging the technical knowledge base and insights on finance and industry trends of your professional network.

Working for startups presents interesting challenges that one may not have been faced with previously during their career. Often, you need to figure things out on the fly or design processes or systems that you previously had no experience implementing. This is where the wealth of knowledge found within a professional network can save the day.

Over the years, I have taken advantage of several opportunities to grow my potential outreach pool. I joined a social group championing women executives in the media space, which has regular meet ups and informational events, RSVP’d for various seminars and sponsored events hosted by various CPA firms and requested connections via LinkedIn—all of which have afforded me access to invaluable professional relationships—both industry related and not.

Some examples of leveraging these relationships into successful strategic initiatives include:

  • Resourcing a specialized IT consulting firm to assist with securing appropriate software products and partnering on a successful systems implementation, which resulted in significantly elevated reporting and data analytics capabilities.
  • Cultivating banking relationships that translated into the negotiation of a credit facility to optimize the capitalization structure for a high-growth startup.
  • Having access to a wide swathe of human capital recommendations when staffing issues arose.

The Continual Shift Toward Accounting and Finance as a Strategic Business Partner

To recap, finance and accounting professionals are being leaned on to provide more strategic value to their organizations, especially within startup environments, where they are called upon to wear multiple hats. Three key approaches to your continued evolution as a finance professional include maintaining an awareness of macro-economic trends, being vigilant of emerging niche software opportunities, and finding ways to expand your network sphere.

If you’d like to keep up with our consulting team’s perspective on optimizing the finance and accounting function, then subscribe to our blog to receive notifications when we post new content. You can also further explore supporting strategic endeavors for your company by downloading our free timeline for building a strategic financial plan:

strategic financial plan project timeline

About the Author

Over the span of 20 years, Jo Ann has curated a strong finance and accounting background within the media industry through experiences working within large public corporations and small, high-growth startups. Through management and leadership roles with such companies as CBS Films, Propagate Content, GK Films, Tennis Channel and Sony Music, Jo Ann’s areas of expertise spans the controllership function, FP&A, financial reporting, modeling and analysis, building successful finance/accounting infrastructure for high-growth startups, post-acquisition restructuring, managing systems and decision analysis, data conversion and ERP implementation management, process improvement, cash flow planning and treasury management including credit facility oversight and banking relationships, working with third-party valuation firms on film library and purchase price asset valuations, film/TV international distribution finance and oversight of multi-entity partnership taxation. Jo Ann studied Engineering for two years at Iowa State University, subsequently completing a Bachelor Business Management at Toronto’s Ryerson University with an emphasis in Accounting. She graduated the two-year Society of Management Accountants of Ontario CMA program in 2001 and holds a CPA with the California Board of Accountancy. In her spare time, Jo Ann is an accomplished pianist, enjoys studying real estate investment and is an avid animal rescue advocate.

6 Signs You Could Make Your Accounting Department More Efficient

by

Diagnosing accounting department efficiency can be difficult. It’s a subjective process that depends on a variety of factors such as company size, department size, industry, business complexity and workload. Are you on the fence about whether this is the right time for your business to take steps to make your accounting department more efficient?

Here are some common indicators that there might be significant gaps in efficiency and productivity:

1. The month-end close process seems to take a long time.

Does your accounting department have a formal month-end close process? Does the department follow any checklist or guidelines each month? Do your accountants seem perpetually busy and never have enough time?

A high-functioning department should be able to fully close its books in fewer than 10 days. Closing the books each month is one of the most important functions of any accounting department as it finalizes your numbers for the period. If these numbers are in a constant state of fluctuation due to ongoing journal entries, invoicing or bills that weren’t recorded previously, tracking company performance will be difficult. Given that management relies heavily on financial data to make decisions that impact the business for the future, delays in closing can significantly impact this decision-making ability and the profitability of the company.

Learn more about month-end close in these related pieces:

2. A process or multiple processes are broken.

Is the accounting department the source of many of the everyday fire drills and bottlenecks? Are there agreed-upon methods for certain processes, or do team members each do things differently?

Your goal should be consistency across the entire department.

Even in 2021, where it is assumed that everything is digital and automated, most companies still operate with very manual processes. Manual processes are time-consuming, inefficient and prone to errors, which can cost the organization time, money and lost business opportunities.

Even having a process that works 80% of the time is a sign the process doesn’t work and needs to be fixed. By automating processes, you can make your accounting department more efficient—and shift their work to managing, analyzing and interpreting data, rather than manual, clerical work. When employees have more time to perform their work, they also feel more empowered to innovate.

Want to learn more? Read about automation and system selection in our Automated Budget & Forecasting Tip Sheet.

3. There are frequent communication gaps.

Is the department overly reliant on email as the primary method of communicating and sharing data across the organization? As good of a tool as email is, it isn’t designed to run your business processes. And, far too often, employees allow email to drive their day. This reactive, rather than proactive, approach often results in miscommunication, inefficiencies and additional delays in work product. Miscommunication may also indicate that the accounting staff are too busy with clerical or manual tasks. These tasks are the source of wasted time and efficiency, which ultimately cost the company in real dollars.

It is important that communication be transparent and that all employees within the accounting department have access to the same information. Through automation and process improvement, your organization can drastically cut down on the volume of daily emails and in turn make your accounting department more efficient. This allows more time for staff to focus on productive activities that drive revenue and profit.

4. Customer satisfaction from the accounting department continues to be poor.

The accounting department should serve as part of the back office for your organization. Poor customer service is nearly always the result of manual or broken processes. Often, an accounting department relies on many separate, manual spreadsheets to help them do their work. While this may appear to increase productivity, if not managed properly, it can also lead to lost productivity, mistakes and inefficiency.

Does the team work well together, or is their work siloed? Are requests to the accounting department handled quickly, or is there a bottleneck due to the accounting department’s workload?

As the saying goes, “garbage in, garbage out.” As all data ultimately flows through the accounting system at one point or another, data-quality issues are often attributable to broken or inefficient processes. The end result is poor customer service from the accounting department to your organization’s internal and external stakeholders. Reports and other financial data should be easy to produce, requests should be handled quickly and the information provided should be accurate, relevant and meaningful.

5. Your accounting team has high turnover.

Is there high turnover in the accounting department? This can be a sign the employees are overworked, which can lead to burnout. Additionally, overwork can drive new employees to look for the exits shortly after they are hired, making it harder to fill new positions. Your more-tenured employees lose critical time for performing the core functions of their jobs if they are constantly training new people. The ripple effect from this vicious cycle inevitably compounds and causes further delays with the work needed for the department to function at a high level. In turn, these pitfalls create additional barriers to further innovation and automation.

6. Accounting systems need an upgrade.

Does your accounting team spend more time wrestling with the accounting system than doing their jobs? If so, you may need to consider whether or not the accounting system is meeting the needs of the business. Accounting systems are designed to make life easier, not more difficult, so if your system isn’t improving your team’s efficiency, it’s not doing its job.

Some of the warning signs to look out for are:

  • Employees work nights and weekends to catch up on basic accounting tasks.
  • Much of the time spent on accounting duties is data-entry heavy.
  • Basic accounting tasks are pulling people away from growing your business.
  • The month-end closing and reporting process is slow.
  • The financial reporting has a high error rate.
  • Financial reporting is not timely.
  • Financial reporting is not meaningful.

Systems can have a significant impact on accounting department efficiency and your whole organization. If your systems are not able to satisfy the reporting requirements of your organization, it might be time to consider implementing a new ERP. Because many businesses have numerous standalone systems that are not integrated with each other, this can also be the root cause of delays for timely and accurate financial reporting.

Seeing signs you can make your accounting department more efficient? Team up with a consultant.

If you find that you need to improve accounting department efficiency, working with a consultant is a viable path forward. This provides several benefits:

  1. The automation process is usually not an ongoing event. The need for consultants is usually temporary.
  2. External consultants will allow your team to continue to focus on their core jobs and your business during the automation process.
  3. Consultants can help you analyze your business and identify inefficient processes and areas of opportunity.
  4. Consultants can focus their individual expertise in many different areas of your company, depending on your needs.

A common myth is that process automation is only for big companies. What many companies don’t realize is that the root cause of their day-to-day problems is a lack of process automation. By attacking the root cause of the problem, you can free up more time to focus on the business.

Inefficiency is an expensive proposition, costing your company money and eating at your bottom line. While automation takes some upfront time to build and implement, the cost savings and gains in efficiency on the back end are significant.

Learn More About Making Your Accounting Department More Efficient

If you’re interested in learning more about other signs it may be time to make your accounting department more efficient, then we invite you to download our new “Accounting Department Health Check” by clicking the image below:

accounting department best practices health check guide button

About the Author

Steve has 20+ years of professional experience in multiple industries including insurance, financial services and travel and hospitality. Prior to joining 8020 Consulting, he held controllership roles with both private equity backed and publicly traded organizations. Steve has a broad range of expertise in corporate strategy, business process improvement, system implementation, post-acquisition integration, regulatory compliance, internal and external audit, month-end close, budgeting and forecasting, consolidations, internal controls, GAAP and statutory financial reporting and accounting. Steve is an active Certified Public Accountant in the State of Georgia and holds a B.A. in Business Administration from Michigan State University, an M.B.A. in Finance from Wayne State University and a M.S. in Accountancy from Georgia State University.

Best Practices for Implementing a Financial System for a Small Business or Target Company

by

As smaller companies grow and expand their businesses, an area which is typically overlooked or neglected is implementing a new ERP system. A financial system for a small business is often put on the backburner behind day-to-day business and strategizing growth opportunities. If an ERP system is considered a low priority, gaps or holes in the current system will tend to be patched with band-aids or workarounds. While these gaps or holes may be workable in the short term, as a company grows, they will develop into areas of risk, which may include errors in data input, data migration issues or accuracy.

In this article, we’ll focus on two common scenarios:

  1. The first is a smaller company (Company A) that is about to be acquired, and as such should plan and organize for the impending implementation of the acquiring company’s ERP.
  2. The second is another smaller company (Company B) that has scaled and grown their business to the point where implementing a more stable and sustainable ERP system is a necessity.

The following discussion will provide five areas to keep in mind in both scenarios: assessment, documentation, data availability, user roles and implementation planning.

Assessment of Existing Processes and Future Opportunities

Early in the process of implementation of a financial system for a small business or target company, the entity (Company A or B) should assess the current ERP and subledger system inefficiencies, limitations, etc., which would be addressed with the new ERP system. Such limitations or inefficiencies might include lack of controls, access limitations depending on the role of staff members or the inability to feed various subledger systems to the main ERP.

This assessment can be done in-house if management is experienced and have dealt with prior implementations in their prior experience. If not, and there is capability to bring in an outside consultant, it would be best to do so early, in this stage of the implementation process.

For Company A, this assessment will help to alert the Implementation Team to the need state as well as potential improvements to be created within a new system.

For Company B, this assessment step serves as the starting point for shifting perspectives and redesigning and optimizing processes to maximize the impact of a new ERP, rather than simply utilizing their current system as-is. For example, Company B might note an existing inability to feed Trade Payables from its subledger system, QuickBooks. But a system such as Oracle or SAP would have the capability to effectively feed Trade Payables from a subledger system. This offers an opportunity to reduce errors and create efficiencies by automating the process.

Detailed assessment may also expose limitations in a new system, which would need to be managed so that all processes are addressed. These limitations may include industry-specific transactions that may not be compatible with the new ERP system. For example, in the ever-evolving tech industry, a static, established system may not take in the data cleanly without custom-designing the new ERP system to fit business needs. By talking through the business and how transactions are structured, stakeholders might find the new, as-is ERP isn’t the final solution. They might decide making it more customized would better suit the company.

Learn more translatable principles of assessment and system selection in our whitepaper:

revenue management software for ASC 606 whitepaper

Documentation of Processes

Proper documentation of all processes (for both Company A & B) will encourage more efficiency in the blueprint phase of the implementation. Each area of the Balance Sheet and Income Statement that is handled by specific members of the Accounting Department should have desktop procedures prepared, and each cycle should be documented to show process and workflow (e.g., the Revenue cycle).

When documentation is requested ahead of the blueprint phase of an implementation, it’d be best for Company A to have documentation ready. This can avoid organizational stress and the risks of hastily putting documentation together last-minute, which can lead to the omission of critical steps or uninformed deficiencies in the new system. For Company B, the documentation can create consistency and inform an optimal implementation of the new ERP by allowing clarity in the translation of processes into the new environment.

Your documentation should be reviewed and updated every two to three months to ensure changes in steps or processes are reflected. It can also be helpful to have new team members review the documentation as they would have a fresh set of eyes to make thoughtful edits.

Learn more about documentation: “The Unnecessary Risk of Poor Accounting Process Documentation”

Data Availability

Before implementing a financial system for a small business or target company, it is also important to gather and organize data that needs to be ingested as a part of the implementation (e.g., vendor data, customer information or chart of accounts), so that it is easier to ingest when the time comes.

For example, let’s say Company A’s position is to reduce the number of general ledger accounts in the new system and to map against the parent company’s chart of accounts. Company A should first place a current list of accounts against the more-condensed list to weed out redundancies, misnamed accounts and so on. Once a draft of the list of accounts is created, vet this list with senior management for their approval, and then finalize the list beforehand so the ingestion is smooth.

Once a chart of accounts is transitioned to the new ERP system, it becomes difficult to amend the list, especially once transactions are generated as unraveling them would be messy.

For Company B, as the business expands and grows, vendor data may be constantly changing.  As such, it would be best to collect and organize the vendor data up until the time of implementation, so that the data would not have to be updated in the new system. Changes that would need to be made after the vendor detail is ingested would cause a disruption in normal day-to-day business and potentially cause delays in invoices being paid. 

User Roles

Understand who the current users of the ERP/subledger systems are versus the future-state users. For example, a user list for the current financial system for a small business may only include people in the Accounting and Finance functions. Post-implementation, a user list might include users who are from other business areas. In this case, it is useful to understand what system roles and access levels these business users will have, the training needed to use the system and who to reach out to for access, system issues, troubleshooting or support—aside from Accounting and Finance team members.

For example, let’s say Company A is a small media technology company that is acquired by a global media company, and they transition from QuickBooks to SAP. In QuickBooks, the sole users of the system are from the Accounting and Finance departments. In SAP, the role of the Accounting and Finance departments is focused on areas specific to these two functions (e.g., Journal Entry creation, consolidations or data warehouse retrieval). In SAP, users in Marketing, Sales, IT and other departments have access to create POs, create Customer Invoices and perform other tasks relevant to their function. As such, gathering all potential users of the new system and identifying what functions they should have going forward (e.g., read or write access) makes the transition smoother. They can be included in appropriate training sessions, can test their access and will be capable of performing their duties appropriately once the system has gone live.

For Company B, where there may not be a structured user list, some users may have multiple roles and user access may not be tightly controlled. This would need to be revised as the business grows. Implementing a new system provides an opportunity to firm up the controls via a revised user list. This would be done by limiting access depending on the activity in the new system (e.g., posting journal entries versus a read-only user). This can also be done by creating a preparer, reviewer and secondary reviewer hierarchy, so junior staff cannot perform approvals within the system. By taking a step back and making sure this list is revised ahead of an implementation, you can ensure that the list does not need to be amended afterwards and there is no disruption to daily activity.

Implementation Planning

As one of the last steps prior to implementation, it is helpful for Company A to determine the core Team to handle the implementation from the perspective of the entity being acquired. The core Team should be assembled based on an understanding of current workload, future system needs, experience level and other relevant factors. The Team should gather the needs for the future system(s) by conducting interviews with the Team and Leadership to understand expectations of the system (e.g., potential useful outputs, reporting needs). This will allow Company A to interface thoughtfully with the Implementation Team (both business and technical sides) of the acquiring company. The Team should set up a meeting cadence with the Implementation Team to address tangible deadlines, create action items and work to address these items and meet the deadlines. This will enable the entire organization to understand the implementation timeline and any deviations, hopefully before they arise, so they can be addressed properly.

In the case of Company B, this planning should be guided by management with the greatest expertise and knowledge of system implementations—and who can facilitate this process with the ERP Vendor. If there is no such in-house expertise and there is a budget in place for the implementation, it would be a good choice to utilize an external consulting firm to assist with this massive undertaking.

Learn more about systems implementations:

Implementing a Financial System for a Small Business or Target Company? Experience Matters.

As a company grows and/or is nearing an acquisition, keeping in mind the areas discussed above will help ensure a smoother ERP implementation as the Team approaches the User Acceptance Testing (UAT), Go Live, parallel testing, support and optimize phases.

It’s common that companies will attempt to perform a financial systems implementation with in-house resources, who add this responsibility onto their day-to-day duties. Due to the complexity and workload inherent in systems implementations, it’s our firm’s view that engaging an external project manager, who can focus on the implementation 100% of the time, substantially reduces the risk of implementation failure. If you’d like to learn more about how 8020 Consulting can help your business, visit our financial systems consulting page. You can also learn more about ERP implementation stages and phases in our downloadable guide:

erp implementation steps guide

About the Author

Radha has 15+ years of finance and accounting experience in various industries, with a specialty in Entertainment. Prior to consulting, she was a Sr. Manager of Financial Reporting at Paramount Pictures, where she managed the consolidated GAAP and cash reporting to DreamWorks Animation and Marvel Studios. As a consultant, Radha has performed financial system implementations, provided accounting services for month-end, quarter-end and year-end close processes, business process re-engineering, created forecasting and budgeting models, and managed the forecast and budget cycles and deliverables within various large clients. Radha is also an alumnus of PwC in Los Angeles, where she was on engagements spanning various industries of varying sizes, such as Valeant Pharmaceuticals, Tetra Tech, Disney, Arbonne and Morgan Creek Productions. Radha holds a B.A. in Business Administration with a concentration in Accounting from California State University, Fullerton.

A Preparation Checklist for When You Hire a Finance Consultant

by

So, you’ve made the decision to hire a finance consultant, and you’re on your way to getting your team the extra help they need! How you prepare for your consultant’s arrival can be extremely important in maximizing the value they bring to your company. Based on our own experiences, we recommend you complete the following six items to successfully onboard your consultant and get them up to speed as quickly as possible:

1. Prepare All Computers & Software.

When your consultant starts their first day on the job, their workstation should be ready to go, so they can hit the ground running. Their computer should have all necessary software pre-installed and any required approvals to access specific programs, drives, files, etc., should already be authorized.

While this seems obvious, it is rarely the case that these things are prepared in advance. Often, a consultant’s first day is spent hunting down an extra computer monitor or mouse or sitting on the phone with IT attempting to get access to the shared drive. In one personal example, I had wait two weeks to get access to the planning system. Not an ideal start, considering my primary responsibility was to update the forecast. Removing these rudimentary housekeeping items from a consultant’s to-do list will free them up to focus on the value-adding activities for which they were hired.

2. Provide All Relevant Documents Up Front.

At the start of any engagement, one of a consultant’s top priorities is to get up to speed as quickly as possible. I often compare the first few days at a new client to being dropped off in the middle of nowhere. Given enough time, most people can figure out how to get where they need to go. However, it’s a lot easier if they’re given a map or GPS device.

Similarly, I find it’s much easier to get the lay of the land at a new client when I’m given the right information. This includes examples of deliverables, process or org charts, presentations, financial models or any other relevant information that can better educate me regarding the client and its needs. Ideally, all of this information would be waiting in my inbox on my first day.

3. Discuss Company Culture & Expectations.

Certain information can’t be gleaned from a deck or training video. Prime examples of this type of information are company culture and expectations.

In my experience, every company is quite unique, and social and cultural expectations can vary dramatically from client to client. Some clients are quite sensitive about who is copied on emails, while others include everyone. Some may have a loose meeting policy, while others have a very formal or distinctive way of running or requesting meetings. A quick discussion of these company norms at the start of an engagement can go a long way toward integrating your consultant into the company’s way of doing things.

4. Set Clear Goals and Objectives for Your Consultant.

Consultants are typically brought on to help a company achieve specific goals or objectives. Whether they are tasked with an EPM implementation, building a new forecast model or just backfilling a role for someone on maternity leave, it’s vital that a consultant understands exactly what is expected of them. While this includes specific objectives (e.g., preparing a specific report each week), it’s also helpful to provide general guidance.

One of my recent projects involved the implementation of a Rights Management System (RMS). The primary objective was to get the system up and running by a specific date, but our client also made it clear they viewed the implementation as an opportunity to improve many of their processes and maximize productivity. Based on this clear guidance, in addition to launching the new system on time, we were able to make significant changes to the company’s workflows that improved the speed of the process and eliminated redundant activities.

5. Include the Consultant in All Relevant Conversations

For your consultant, the first few weeks on a project involve a great deal of information absorption. We’re trained to intake information and process it as quickly as possible, but I’ve found a helpful method for acclimation is to ask to be invited to meetings.

Sitting in on on meetings is an effective way of integrating and immersing a consultant into your company. Even meetings that don’t directly relate to the consultant’s planned tasks can be important opportunities to gain additional insight into the business and other groups and people in the organization. As such, I strongly recommend adding your consultant to that meeting invite in their first month on the job.

6. Schedule Regular Check-Ins

At the beginning of any engagement, I make it a priority to obtain regular feedback from my client. This can be a challenge, as project sponsors often have packed schedules and limited bandwidth to fit additional meetings on the calendar. However, particularly at the start of the project, these feedback sessions are invaluable, and they help ensure that I am staying on course and addressing a client’s needs.

Neither the client nor the consultant want to waste a week’s worth of effort because the consultant prioritized the wrong project. To avoid this scenario, try to schedule regular, even daily, check-ins the first week or two of an engagement. Even when the consultant is settled into their role, I strongly recommend having regular meetings on the calendar to make sure priorities are aligned.

Sign Up for More Insights

You can always explore our website if you’d like to learn more about our accounting and finance consulting services. If you’d like to keep up to date with our consulting team’s perspective on accounting and finance topics, then we invite you to subscribe to our blog. After a simple signup, you’ll receive email notifications when we post new content:

Subscribe to Our Blog Today!

About the Author

Chris has more than 12 years of finance, operations and project management experience in the entertainment, non-profit and bio-medical industries. Prior to joining 8020, he worked as a Senior Manager in FP&A at Paramount Pictures. Additionally, he held various positions at Advanced Bionics, Warner Bros and RLJ Entertainment. His background includes extensive experience in content acquisition and distribution, financial planning and analysis, budgeting and forecasting, financial modeling, valuation analyses, and process improvement. Chris holds an MBA from the University of Southern California’s Marshall School of Business.

Notes on Stakeholder Management: “Sprechen sie Stakeholderitsch?”

by

It’s inevitable in a finance consultant’s career to be confronted with a new industry. One of the first things the client may ask is “How are you going to be able to help?” A standard reply would be to say, “A P&L is a P&L is a P&L,” or “A cash flow is a cash flow is a cash flow,” and so on. Finance skills are transferrable across industries, right?

Not quite. The notion of transferrable skills only carries water from a tactical standpoint. As a consultant gets more familiar with an industry, other partners from different lines of business will lean on them for strategic support in translating their needs into a financial plan (e.g., a budget, a forecast, or a cash flow forecast). Being well-versed in industry knowledge also helps finance folks communicate with rooms full of executives, who might be interested in hearing the story of last quarter, for example. It can also come in handy for stakeholder management, particularly in complex situations.

Stakeholder Management: A Case Study

In some instances, a finance consultant will work primarily with a single department or a single business unit, which requires a unique sort of immersion. That consultant might need to learn how to “speak tech” if they’re working with an IT department, or “speak VOD” if they’re working in the entertainment industry on film ultimates. Then they must be able to translate and interpret financial figures to a general audience and interested executives using that specific language.

Then there are more complex scenarios, in which a finance consultant will work with many stakeholders with a wide range of objectives. In one client engagement, one of our consultants was working for a large organization that acquired a company and then sold off parts of that acquisition to a few other entities. A condition for all these splits was that transitional service agreements (TSAs) would be in place between entities to ensure smooth separations. These agreements included (but were not limited to) accounting, finance and HR support, access to different networks and bifurcating third-party licenses.

Imagine managing the cash flow for each TSA, the ins and outs of all the scope changes and the communications between entity leaders and division leads providing the services. Not only was it important to get the numbers right, but the consultant also had to “speak” Department A-ish, B-ish, C-ish as well as External Stakeholder X-ish, Y-ish and Z-ish. This project necessitated strategic stakeholder management on top of the linguistic gymnastics: intermingled cost sharing meant that communication with stakeholders could not reveal sensitive information about the other stakeholders.

A typical interaction might go like this:

  1. In a weekly meeting with the organization’s project management office (PMO), external Stakeholder X would ask a clarifying question about the fiscal impact of a change request on one of services being received.
  2. The finance representative for the organization would bring the question directly to the department lead for the answer.
  3. That department lead would meet internally with the PMO and the finance rep for the change and how it affects all the external stakeholders (X, Y and Z). For example, it could be a labor rate change or a deal renewal, the details of which would be too sensitive to share.
  4. The finance rep would then boil down the information provided by the department lead to only offer a high-level view of what that department’s changes were, in general enough terms to external Stakeholder X, so as not to reveal information sensitive to the organization or to external Stakeholders Y and Z.
  5. Rinse and repeat.

For our more visual readers, this is another interpretation:

stakeholder management translation venn diagram

Some examples of requests that might require this type of stakeholder management are reporting on:

  • Stakeholder X’s # of active users of an app versus all other Stakeholders as a % of total
  • Stakeholder Y’s costs in $ and what it represents as a % of the total
  • The organization’s general position on passing costs and reasons for making exceptions to the rule

Every now and again in this scenario, an external stakeholder will ask questions that require digging into more detail, not knowing that they are asking for sensitive information. This is where management of expectations becomes important. Having an open dialogue between partners without revealing too much information requires a balance that is developed over time and through experience with each partner. It is the job of the finance consulting professional to gauge the comfort level of the client they are supporting and to touch base with the in-house legal counsel, if available, on what is appropriate to share.

Stakeholders will be sensitive to the changes being made and will have to justify significant dollar variances to their leadership teams as well. That requires them to ask for as much detail as possible, and to drill into root causes at times. The organization can maintain a good relationship with stakeholders through open communication, choosing when and where to divulge details and limiting disputes that could delay payments and/or end up in dispute resolution.

Tailoring the Management to the Project

An important caveat from the Project Management Book of Knowledge is recognition from the PMI that the best practices or standards provided will not necessarily be followed verbatim in all programs or all projects. The guidance therefore needs to be tailored to the individual specific needs of the project at hand. In this instance, the tailoring comes down to stakeholder management. The financial project manager typically maintains a stakeholder register, and lessons learned regarding individuals on that register, as well as a management plan on how to best communicate with each person given their requirements.

One of the challenges to the aforementioned TSA program was that while a regular cadence to discuss scope and timing with these stakeholders was already in place, we needed to develop financial communications over time. It’s one thing to provide a cash flow on a monthly or quarterly cadence. It’s a different animal altogether when the components of the services are not easily distinguishable between different external entities.

While sending a zip file full of everyone’s data to one of the external stakeholders (“Here’s everything we have. Have fun!”) would’ve been quick, doing so would have disclosed information to an outside party that may have invited further unnecessary scrutiny. So calculations would be communicated in tandem with changes in scope. The management of external stakeholder expectations not only includes the receipt of partial, high-level information, but also asking stakeholders to allow for time while the (now white-haired) financial consultant patiently researches the answer.

The Language of Stakeholder Management

If you need someone to support your strategic objectives, translate the language of industry-fluent stakeholders and drive your project forward, consider 8020 Consulting’s team of accounting and finance professionals. Our team offers wide range of specialties, experiences and perspectives that can create provable value and advance the office of the CFO. Contact us to learn more. You can also learn more in our service explainer:

financial consulting firm california

About the Author

Seena has been with 8020 Consulting for more than eight years and has worked in a variety of industries including, but not limited to, entertainment, education, health and retail operations. During that time, he has continued his education to receive several certifications, most notably a Project Management Professional certificate (PMP) and a Certified Valuation Analyst certificate (CVA). Prior to joining 8020 Consulting, Seena served as a retail analyst for Harbor Freight Tools and consulted with a variety of companies executing projects in the financial, academic, food and beverage, retail/wholesale, legal and investigations industries. His specialties include project management, financial modeling, systems implementation, budgeting and forecasting, valuation, compensation, data mining and strategy. He attended the University of Connecticut, where he received his bachelor’s and his master’s degrees with a focus in quantitative sociology, and later on went to Pepperdine University, where he received his MBA.

Prepping for a Successful Series A Funding Round

by

If you are the CEO or CFO of a start-up company that has successfully taken a business concept and built it into an operating company: hats off to you! You may now be looking externally for significant assistance to take your company to the next level of growth, which usually entails an external round of financing. And the process of a successful Series A funding round requires a lot of new skills (e.g., negotiation, financial modeling, relationship building, patience, long-term planning, etc.) that you may not have needed as an operational entrepreneur securing seed funding.

In order to best prepare for a successful round of institutional financing, we have pulled together a few tips and words of general advice.

Is a Series A Funding Round Your Next Best Path?

If your company is a turning point and needs a large cash infusion to continue operating and/or growing, two factors will determine if a Series A funding round is best for you.

One is timing, and the other is the purpose.

If the need is near-term, then you do not have time to initiate a financing round with new investors, as these processes tend to take at least six months to close. Your best bets will be to either reach out to existing investors and their networks or to establish debt or a short-term working capital facility. Your existing relationships will be of greater benefit in this scenario because they understand the existing business plan, and they may be more willing to fund the continuance of it under the existing price structure. Too many small rounds with new investors at different pricing will complicate the value story for future rounds.

If, however, you are currently in a strong financial position but are looking to fund significant growth in excess of what your current investors can provide, then initiating an external round of financing is your best option. This decision usually coincides with shifts in projected growth such as a surge in new customer contracts, new product launches, or the development of a new manufacturing plant. It can also have the advantage of bringing certain funds with perhaps more industry-specific experience and relationships to your team.

Know Your Story

Preparation is key to any successful round of financing. In particular, you should know:

1. How Long Your Current Cash Runway Is

By knowing your financial position, having cash reserves, and having a history of managing to forecast, you will engender internal confidence that the ask during the raise will be sufficient.

2. Your Value Proposition and Story (and How It Will Improve)

Knowing your story is important for selling your story to partners that will help you market your raise.

By sharing this story and knowledge internally across the executive, senior finance and operations teams, you can ensure your messaging remains consistent across all future external discussions. Consistent messaging will lead to a consistent platform from which offers will be based.

3. Your Relative Strategic Position in Your Industry

If you understand your strategic position, value position and key operating metrics, you will be better able to help market your investment effectively to potential partners.

4. (And Most Importantly) The Strength of Your Projected Financial Position

Recognizing the detailed purpose and impact of the financing will justify the total ask.

Additionally, an overall SWOT analysis of the business plan can be helpful in developing and refining the overall story. And to support the financial ask, development of a five-year financial forecast (with three years of historical information) will be generally required. Having these preliminary documents prepared in advance of initiating the raise is suggested as these are support for the overall story.

financial forecasting process guide

Choosing a Partner in the Series A Funding Round

After the financing path is chosen and the story has been developed, the next critical preparation step will be to decide if the company would benefit from the assistance of an investment banking partner to elicit new funding sources and to manage the process from pitch to signing.

This is where your existing partners can be of additional value. Your financial partners’ expertise and networks are critical at each stage of development. Having the right existing partners with contacts in the industry and in banking will aid you in getting access to the perfect next partner. This next partner might be a venture fund directly or an investment bank to source funds across a spectrum of financial and strategic partners during a Series A funding round.

Critical Factors

Critical factors come into play when choosing between managing the process internally or using an investment bank, and then when choosing which investment bank. The arguments for using an investment bank include:

  • a bank’s ability to bring potentially many more varied funding sources to the table,
  • providing ongoing assistance with marketing,
  • pressure-testing financial forecasts and valuations and
  • disseminating ongoing due diligence alongside the Company’s story.

The value of their network and support is weighed against the cost of their network in the form of fees, minimum commissions, potential warrants and constraints such as tail and lock periods.

At each growth stage and new round of financing, it is important to prioritize choosing partners wisely. They will help guide you through the chaos of funding and lead you to success.

Prepare for Chaos in a Series A Funding Round

Most financings are stressful events, and the executive team needs to get accustomed to the amount of effort that often ends with rejection. Set the expectation early that only a few funds will actually get into the end zone.

Know that there will also be multiple asks and revisions to documents that will eventually fill the data room.

Interested in learning more about data rooms? Read our blog post: “Best Practices for Your Data Room in M&A”.

You will feel short-staffed during the raise. It is not uncommon to bring in interim financial management resources to assist with the development of analyses and work alongside the investment bankers. Use your financial partners as a resource. Leverage their expertise on what should and should not be included. They will help the company stand by the story and keep each message on point.

Preparing for Success in a Series A Funding Round

Focus on controlling the outcome now and later.

Remember that this is likely not the end. The executive team needs to remember that there will likely be future rounds of financing. And while one fund may have rejected the opportunity this round, they may be willing to participate in the next round. Continue to manage these relationships after the raise, as they will be beneficial down the line.

Knowing that this raise may not be last is also important when it comes to the ask and pricing. Don’t take more than you need. Control the valuation story. Remember that success may not be getting more than you want at the highest possible valuation right now. Future up rounds are better than down rounds. Success begets success.

By controlling the story, choosing partners wisely, enlisting additional skilled resources, and owning the distribution and amount of the funding ask, the company will be prepared for a successful transaction. 8020 Consulting’s Interim CFOs and our team of 90+ accounting and finance consultants can offer support through the process. Learn more:

Download Our Interim CFO Services Sheet

Treasury Management: The Best Defense is a Good Offense

by

Most organizations do not see their Treasury Department, if they have one at all, as a critical strategic partner until a crisis arises. However, uncertainty can occur suddenly and without a clear endpoint. For example, a key vendor may go out of business, new legislation could make raw material prices skyrocket, banks could freeze the flow of funds, or multiple customers may close operations overnight as the result of pandemic. When operations are running smoothly and cash flow is consistently positive, treasury management is crucial for reviewing, pressure-testing and consistently improving the ability of your company to withstand uncertain times.

Waiting for a crisis to act can allow operations to slowly succumb to external pressures and prevent you from quickly addressing them. Worse, the company could be completely blindsided and handcuffed in its response because the strengths and weaknesses of the current system are not well known.

Other times, the cause of a cash crunch will go unnoticed for a time, only to suddenly become an impediment to the business. Examples of this range from simply not having enough cash in certain accounts because of transfer limits being too low for current disbursement levels, to signers on the accounts being outdated (e.g., due to retirements) preventing certain transactions occurring without them.

That noted, knowing the strengths and weaknesses of your treasury team, their processes and controls and the structure of the treasury system is immediately critical.

Core Functions and Treasury Management Teams

Depending on the size of your company, the nature of its cash flows and liquidity necessitate various treasury department structures. However, companies typically do not change the team’s functions or structure without an exogenous shock.

Often in small companies, the CFO may also function as the Treasurer. In this case, as they tend to monitor end-of-day balances and act as the primary contact for their banks, the analytical or strategic functions of larger treasury teams are not required as the focus remains primarily on a simpler use of banking systems and internal cash processes.

In mid-sized companies, it is typical to still see one-person teams. The single Treasurer will support the FP&A and accounting teams with cash activity and reconciliations. However, these Treasurers will also become responsible for many more complicated transactions on an ad hoc basis – from managing debt agreements and covenant reporting to commercial bank fee negotiations, standby letters of credit, vendor term changes and leasing.

In larger companies, a diverse treasury team with more targeted skillsets is standard. Individual expertise silos, such as in hedging or structuring debt, are not uncommon alongside the team that focuses on transaction specific requirements and daily liquidity movements. These diverse teams usually have both domestic and international components. At this level, teams may also be actively involved in managing corporate insurance programs, assisting with M&A transactions, reviewing collection efforts, managing pension and other funds, or supporting board and investor relations. Regardless of the number of accounts, the number of financial partners or the level of staffing commitments, the Treasurer’s primary role is to safeguard a stable source of funds by working as a risk manager over investments, debt and cash allocation.

To ensure that the Treasury department continues to move in lockstep with the company, a periodic review of the processes and controls should be performed.

Reviewing Treasury Management and Operations

When looking at the treasury operations performed within the company, it is helpful to gauge effectiveness against key metrics (e.g., lowering risk, improving cash management, reducing interest expense and other costs). The goals of these metrics should be to protect the company from potential fraud, to improve the agility of Treasury to respond to cash needs and crises and limit the need to borrow to cover operating cash flow but for identified transactions.

For some companies, the functions of the Treasury department may not have been reviewed in some time. Typically, an overall review of the system will begin with a review of general cash management processes – from disbursements and automations to reviewing fees and credits. This should also include a detailed review of the account structure, activity flows, designated signers and approval limits as part of a consolidated risk management assessment. Many cash management improvements will likely reduce the overall cost structure, thereby improving the company’s cash flow and net debt position.

Alternatively, the treasury team may have functioning systems in place. They may have performed detailed treasury management reviews recently, and the core functions of treasury may be producing positive cash flow for the company. In these situations, the Treasurer should then act as more of a strategic partner to improve the company’s strategic and decision analyses. They can become a cash-focused internal consultant with a toolkit of experience and solutions to partner with the CFO. The results of the treasury reviews will highlight on which areas to focus on first, achieving maximum immediate benefits.

An Organizational Partner

Long term, the ideal role of the Treasury Department is to act as both a Banking Partner and as a Strategic Partner to the organization – while also handling the day-to-day treasury functions. That typically involves the responsibilities listed below.

banking partner strategic partner treasury department

Regardless of the current situation of your company, now is always the best time to initiate a review of treasury processes. An immediate review of treasury processes and controls would highlight both where certain improvements should be made straightaway – from a risk management or cash flow perspective – as well as other enhancements to plan and budget for in the longer term.

Leveraging Treasury Management to Your Advantage

If a good defense is your best offense, Treasury can be one of your best executive team players. If you’d like to bring in third-party support, then contact 8020 Consulting to explore our team of treasury management consultants.

You can also learn more about our suite of services custom-fit to these economic times by downloading the resource below:

business stabilization and contingency planning