Successfully raising a VC round, be that pre-series A, Series A or beyond, represents a significant milestone in the progress of your business. You won’t have much time to rest, however. As soon as the round closes, your focus must return to supporting growth plans through the provision of accurate and timely management information, as well as meeting the reporting requirements of the VC backers.
Avoiding the post transaction pitfalls facing your finance function
After any VC investment or fundraising transaction, your business will face increased demands for financial information, including accurate forecasts.
If this is your management team and finance function’s first experience of working with external investors, be prepared for a culture shock. For example, once you have VC backing, there may be increased formality and procedures around board meetings and reporting timetables, which your in-house teams may not have had to accommodate before.
Investors will have backed your business based on a financial model that forecasts growth over defined periods, whether the next 12 months, three years or five years. You and your management team now need to deliver the business plan and strategy to drive that growth. VC investors will be looking for regular reporting on how that plan is being delivered and whether the business is performing in line with projected revenues and profits. Your finance and accounting technology and the management information produced therefore needs to be able to provide investors with the detail they require, on a timely basis.
Where should you focus in the first 100 days post transaction?
Finance and accounting technology
Your finance function may be required to cut information in many different ways and provide additional analysis.
Where weaknesses are identified, these can often be addressed simply by making better use of existing system capabilities. It may also be possible to leverage bolt-on solutions to expand functionality. Implementing completely new finance and accounting systems is best avoided in the post-transaction period, as this can be extremely time consuming and would divert your finance team resources away from other potentially more important activities linked to supporting rapid business growth.
Keeping pace with enhanced reporting requirements
Your finance team will face added pressure to ensure financial reporting is accurate. VC investors need to know they can rely on the financial information your business produces. It’s important to check your financial team is equipped and has the resource it needs to produce financial reports to the required quality standard and within expected timeframes.
Management information and reporting on progress against KPIs
Information requests received by finance are likely to increase, as will regular management information reporting requirements. There may be additional requirements for cashflow forecasts and budgets – with regular variance reports.
"Your finance team needs to be able to respond quickly and effectively, providing accurate information – all whilst dealing with ‘business as usual’ activity."
Lead times may be short – so think about whether a spare pair of hands might be beneficial.
Most importantly, it’s vital your finance team knows what KPIs are of most interest to management and the VC investor. What those KPIs will be will differ from one business to another, although revenue run rate and cash flow forecasts are likely to be of high priority.
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Tapping into external support to build resilience within your finance function
Members of your in-house finance team are likely to feel stretched by all the demands being made on them. You might feel the need for additional resource, whether through a permanent increase in headcount, using a temporary subcontractor or turning to an outsourced service provider.
Founders play a substantial role in producing financial information in the early stages of the business, but this is unlikely to be the best use of their time as the business scales.
"Turning to expert external support will free up leadership time to focus on delivering the strategic business plan in line with targets."
A good advisor will also help you to keep one eye on your future accounting technology stack and to work with you to ensure that a switch to a more complex system is implemented at the optimum time, using their breadth of experience to ensure that the right system is selected.
Outsourced accounting advisers can be extremely flexible and tailored to your business needs – ranging from year-end statutory compliance support through to the provision of a full back office finance function. Alternatively, you could simply outsource certain parts of your finance activities. Whatever solution you prefer, your outsource provider ambition is to act as an extension of your existing resources – all part of the same team.
Professional advisers may also be able to provide a secondee to bolster your finance team in the post-transaction period – a professional with experience of working for venture-backed businesses. Where necessary, such an individual can help to professionalise your finance team and embed a high-performance culture.
"Many businesses fail to maximise the knowledge and experience of their advisers, but those that do, regularly use them as a sounding board for discussing a wide range of issues, including technical accounting queries, systems optimisation opportunities and management information improvements – all aimed at helping you meet your 100-day goals and accelerate business development.."
Contact Andy Huddleston for further information on how an outsourced approach can best support your business post-transaction and beyond.
Maximising productivity from your finance function
If you’re looking for further insights into ways to leverage technology and maximise productivity within your finance function, visit our ‘Rethinking the Finance Function of the Future’ hub.
RETHINKING THE FINANCE FUNCTION OF THE FUTURE
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