You may have heard it said, it’s the “Year of Efficiency,” as technology companies seek solutions that save on costs, drive faster innovation and better manage processes. While accounting may not be every entrepreneur’s favorite topic, it is ours! In Part 1 of this short series, Chase Wright, leader of our Accounting Advisory practice, and Graham Michitsch, Accounting Advisory Senior Manager, discuss how the accounting and finance back office is an essential function of a company, and why awareness of the underlying process is just as important as adopting new technology.
Tune in to this episode to learn more about:
- Improving internal processes more rationally rather than in crisis mode
- Identifying the proper technology and tools for the maturity of the business cycle
- Maintaining accurate reporting from an investor’s point of view
Does your team have an overall understanding of what process optimization looks like?
Let our advisors work with you to create a prioritized solution roadmap for your company. Our tailored, facilitated workshop helps you create quick wins for your accounting function that align with your company’s finance and overall business strategies.
Listen to the rest of this series:
- The Year of Efficiency Part 2: Leveraging Automation
- The Year of Efficiency Part 3: Empowering Your Employees
- The Year of Efficiency Part 4: Growth Through Innovation
GRAHAM MIKICCH: Today's discussion is about the idea of a "year of efficiency." Earlier this year, Mark Zuckerberg and Meta coined that phrase to improve operational and financial performance. Wall Street analysts began looking for savings and pricing into the large-cap tech industry.
GRAHAM MIKICCH: Our interpretation is that the term applies to the middle market as well as large-cap companies. With me today is Chase Wright, leader of Accounting Advisory for Cherry Bekaert. We have significant touch points with technology companies due to their growth and unique accounting needs.
GRAHAM MIKICCH: I am a senior manager within Chase's group and work with middle-market controllers and CFOs to help them understand what this really means. Chase, do you want to jump into what "year of efficiency" means when you hear it?
CHASE WRIGHT: We ask ourselves and our clients whether the efficiencies Meta and other large-cap tech companies are pursuing are relevant to emerging and middle-market tech companies. We believe the answer is yes.
CHASE WRIGHT: Many of our clients are products of entrepreneurs who disrupted an industry with technology. Their accounting functions were often bootstrapped to scale with the business, relying on manual processes, Excel, or Google Sheets.
CHASE WRIGHT: Companies often wake up one day with a real need for their accounting organization to mature because they suddenly have investors or an opportunity to go public. While market activity has slowed in the middle market, private equity transactions continue, though fewer, and SPAC activity is minimal.
CHASE WRIGHT: This can be a year of efficiency for tech companies to focus on improvements that help manage growth more rationally, rather than waiting until an imminent transaction forces them into crisis mode. Graham, you do this work day to day; how do you hear companies describing their needs?
GRAHAM MIKICCH: The current state of many middle-market accounting shops is that they are lean and often heavily dependent on the CEO. They generally follow the path of least resistance to keep the lights on, people paid, and customers happy, and they lack capacity to be strategic beyond closing month to month.
GRAHAM MIKICCH: To identify process, technology, or personnel improvements, we first need to understand where the company is today. One practical starting point is any identified issue in the back office, such as a payroll error, procurement duplication, or an incorrect vendor payment.
GRAHAM MIKICCH: From a single issue, we analyze the underlying process and control environment that led to the error. One small insight can help target our discovery questions and reveal larger potential issues.
GRAHAM MIKICCH: We assess the complexity and maturity of business cycles, the underlying processes, the technology in use, and the people executing the work. That starting point is essential to understanding how to gain efficiencies.
CHASE WRIGHT: Another trend over the past three to four months is the talent gap in accounting becoming more apparent. Many tech companies have only a couple of key accounting personnel, turnover is high, and there is strong demand for qualified accountants. Fewer graduates are taking the CPA exam, which exacerbates the shortage.
CHASE WRIGHT: These issues are a good place to start. Reporting requirements for private equity or public companies are significant, and if an entrepreneur's accounting function has uncertainties, it can understate the company's value during a transaction. Time is of the essence in those situations.
CHASE WRIGHT: Graham's approach of meeting a company where it is makes sense. No two tech companies are identical; each has strengths and areas to focus on.
GRAHAM MIKICCH: To evaluate a company, we look at the three legs of the stool: people, processes, and tools. One macro trend under the "year of efficiency" banner is adoption of new technology, including AI and automation. Better tools exist for month-end close, high-volume cash application, and AP processing.
GRAHAM MIKICCH: Companies willing to invest in upgrading their tools have a good first step, but the underlying processes are equally important. New technology requires data management, accurate on-ramps and off-ramps, and internal controls to be effective.
GRAHAM MIKICCH: We often see implementations of NetSuite or Sage Intacct that provide real value, but many projects are challenged because the people and processes are not aligned. If a company's shop is not in order, the technology has a lower chance of success.
CHASE WRIGHT: Without mature, repeatable processes and people who are ready to embrace technology, companies will not realize the full benefits. We sometimes return to clients two years later to recapture the benefits of an ERP like Sage Intacct or NetSuite.
CHASE WRIGHT: Graham, how do you help entrepreneurs who know they need change but find accounting ambiguous? What are practical ways to start, and how much time and cost might be involved?
GRAHAM MIKICCH: Accounting and finance can be the central nervous system of a company. If there's a known trigger event or recurring issue, that's a targeted area to address. When the problem is less obvious, feedback often surfaces in comments like "month-end close takes too long" or "we can't produce financials quickly."
GRAHAM MIKICCH: One effective vehicle is an accounting workshop: a facilitated half-day session with representation from accounting, IT, operations, and sometimes the CEO. The session surfaces what's working and what's challenging from the people in the trenches.
GRAHAM MIKICCH: We group the outputs thematically. A workshop might produce 20 to 30 items across vendor payments and financial reporting, often touching month-end close. We then work with management to prioritize those items, balancing staff capacity, budget, timeline, and future strategy.
GRAHAM MIKICCH: The workshop yields a prioritized roadmap that the company can execute over time. The workshop fee is typically $10,000 to $20,000 depending on complexity, and clients often roll that fee into the implementation phase as a credit.
CHASE WRIGHT: The C-suite needs timely information, including ARR trends disaggregated by product. Tech companies pivot frequently, and their metrics drive valuation in public and private markets, so delivering accurate, timely reports is critical.
CHASE WRIGHT: Investing half a day to drive meaningful change has proven valuable. C-suite participants often gain new, pertinent information and sometimes discover contradictions between assumptions and the reality of the accounting shop.
GRAHAM MIKICCH: The workshop is tailored to the company's needs. We align with executive sponsors prior to the session and focus on specific areas management wants to address. Staff feedback often highlights operational pain points that leadership was unaware of.
CHASE WRIGHT: Driving efficiencies often requires granular work. Many companies lack the capacity or the experience to define what a process optimization should look like. We bring leading practices and lessons learned from other clients to inform potential solutions.
GRAHAM MIKICCH: Our Accounting Advisory team can support clients through personnel transitions by providing interim staff or by addressing complex accounting topics such as revenue recognition, capitalization of costs, or R&D tax credit identification.
GRAHAM MIKICCH: Engagements can lead into various areas depending on the company's needs, including internal dashboard development, incentive tax credit analysis for internal software development, or integration efforts tied to transactions or regulatory changes.
CHASE WRIGHT: This discussion is timely as we move through 2023. Technology companies continue to create value across industries, and developments like AI are affecting accounting advisory and other services. The industry is meaningful to the economy.
CHASE WRIGHT: It's never too early or too late to discuss optimization, transformation, and efficiency gains. If a company wants an evaluation of where it stands in accounting optimization and how to gain efficiencies this year, we can help.
GRAHAM MIKICCH: Congratulations to the entrepreneurs making a difference across industries. Thank you, Chase, for the discussion and time today.
