How best-in-class accounting software can support scaling private equity backed companies

Whether you are a CFO that’s attracting funding, currently working with a private equity (PE) investor, or have experienced multiple rounds of investment, selecting best-in-class accounting software can support your growth journey, whatever your strategy. Understanding how the right accounting software can enhance your value creation journey, regardless of how you plan to maximise the exit value, can assist you in achieving your business objectives.

Every business is different but some of the fundamentals when you operate in a PE environment are the same; as CFO, your role is to drive value creation through your knowledge of the business strategy, your handle on the data and insight, and your management of the relationship between your investors and the Boardroom.  In most cases, the growth comes from two sources; organic growth and acquisitions. In both instances, or through a mixture of the two, the right accounting software can support what you are trying to achieve.

Accounting software to support organic growth

There are three ways that PE backed companies grow organically: 

1. Selling more in existing markets - maximising current channels of customer acquisition by scaling what you already do well, or launching new offerings in existing markets to increase value-creation. 
2. Entering new markets - Expanding what you do in areas you’ve not yet explored such as international expansion.
3. Reducing operating costs to optimise the bottom line - making essential cost savings through building operational efficiency.
   

With all three organic growth strategies, insight from data is essential to knowing how to maximise the opportunity and that is what the right accounting solution can deliver for you:

Insight-led decision making

Best-in-class accounting solutions improve your ability to deliver critical strategic management information. 

With real-time reporting and dimensional analysis, CFOs and their teams have the ability to share insights that really matter. Understanding metrics such as the cost to service, your most profitable clients, or industry sectors that are most profitable for you to sell into, enables the Board to make better, faster decisions about where to invest for growth and unlock opportunities. Highlighting areas where operational efficiency can be deployed also assists leaders to reduce costs and promote sustainable growth across the business. 

With modern, cloud based accounting solutions you are operating with real-time data that is pulled from the source across your operational, people and finance systems into one source of truth. Reporting is also made easy with the option to manipulate data in popular applications such as spreadsheets. And, access to reporting dashboards can be made available to key decision makers so they have insights that help them to make better decisions on a daily basis.

Improved efficiency in the finance function

As a very process heavy area of the business, there are many efficiency gains to be had from investing in top quality accounting and finance software. 

 Every finance process can benefit from a system that improves usability for the finance team, and utilises best practice processes to reduce manual entry of data, maximise automation and deliver a ‘right-first-time’ approach.

The right accounting solution can be the driver to reduce time to payment through improvements in processes such as purchase to pay cycles, sup

plier payments and quote to cash. This enables the finance function to collect cash quickly and secure favourable payment discounts on costs to improve cash flow and unlock working capital to fuel and sustain growth.

Expanding into new territories

When adopting an expansion model into new markets internationally, ease of accounting is essential. There are already enough challenges to face such as cultural differences, new legislation and international tariffs, without the additional headache of how you’ll manage this new territory as a finance function.

A multi-currency and multi-legislation accounting solution is essential when taking your business into new international markets. A solution that allows you to manage multiple global entities at a local level whilst providing a consolidated view for those that need it, means you can expand knowing you have full visibility across currencies and territories.

Accounting software for your buy-and-build strategy

When looking outside of organic growth for value creation, buy-and-build is a strategy adopted by many private equity backed businesses. Having a best-in-class accounting solution that supports this can help your business to access new markets quickly, integrate new entities efficiently and build the value of new acquisitions effectively. Your software solution should be able to support you in maximising the value of these investments and create incremental value:

Integrating acquisitions easily

Once you’ve acquired a new entity, integration is essential to reduce duplicated workload, enable visibility of performance and maximise opportunities. The integration of the acquired business into the core accounting solution will reduce errors, improve accuracy, streamline reporting and maximise visibility. Your accounting solution should support that through the ability to add new entities quickly and easily. This will mean that a centralised finance function has access to the data it needs for multi-entity consolidation and a holistic view of performance.

Integrating software effectively

With new acquisitions, there could be operational software that needs to interact effectively with the core accounting solution and best-in-class solutions will have the ability to integrate with best-in-class operational solutions. This software integration capability will mean that the purchased business can continue to operate effectively while reducing manual data entry into the core accounting solution. A robust, open API architecture can enable automatic data transfer ensuring data integrity, accuracy and increased visibility.

Budgeting and planning for future growth

Before the purchase of an acquisition, and once in place, the finance function will be focused on planning how to maximise a return on the investment of the purchase. Scenario analysis & planning can be made easier with an accounting solution that supports the budgeting, planning & forecasting required - allowing you to quickly build scenarios to understand how they may impact the business and unlock enterprise value. This visibility will reduce risk in decision making and support the business to realise the true value of acquisitions. 

Accounting software to support exit readiness 

Once you are within a private equity investment cycle, you and the investors will have an eye on the exit. Having a best-in-class accounting solution that supports you in preparing for exit throughout will ensure a smooth, data-driven transition to the next round of investment, an IPO or strategic exit.

Due diligence support

Whenever preparing for exit, financial due diligence is an essential part of the process and key to that is accuracy of the data. With a core accounting solution, integrated with the essential operating solutions, you can rely on your data to be right, up to date and provide insight. Audits will be able to take place easily, reducing the time it takes to gather and report on what is requested and the ability to present data in multiple ways quickly. Built in automation limits the risk of data errors ensuring you trust what’s there ahead of the final audit.

Adhere to compliance and regulatory requirements

No investor likes surprises and when it comes to ensuring the business is compliant and adhering to the necessary regulation, your accounting software should support this. A best-in-class accounting solution should have compliance and regulation at its core, building trust and accuracy as standard. Your data should be safeguarded, auditable and prevent fraud with controls and measures that matter. Data integrity and security of your financials should be an utmost priority throughout your investment cycle so that when exit comes along you know you can trust the accounting software can withstand the scrutiny.

Future proof accounting software

Selecting a finance and accounting solution that is going to support your business growth is essential for a private equity backed business. 

Your investors will be expecting value creation at scale and having the systems and processes in place that can cope with that, whether through organic growth or acquisition, will be essential.

Accounting solutions underpinned by cloud technology can future proof your investment. Whether you are investing for now or in the future, with a cloud accounting solution you’ll know that the scale is there when you need it. You will be able to add new entities, functionality and software integrations easily without worrying about additional hardware costs and unexpected expenses. 

The above-the-line pricing structure of cloud based solutions also means that you can invest in new software without the need to make capital expenditure that realises value over time. An accounting solution that brings best practice through quick deployment will ensure that you realise the value of your investment quickly and throughout your investment cycle.

A cloud solution can also support your exit strategy, improving the attractiveness and value through having systems in place that are future-proofed and will continue to support the business on its growth journey.

Summary: Selecting accounting software for private equity businesses

As a business looking for or within a private equity investment, selecting a best-in-class accounting solution that is designed for the unique environment of high growth businesses is essential to provide value quickly. Whether you are growing through organic growth in existing markets, through expanding into new markets, or through a buy-and-build strategy, you’re unique requirements as a private equity backed business require a software solution that caters for your needs.

Here are my top tips for assessing any accounting solution as a private equity backed business:

1. Will it support your growth? Look at whether the solution is cloud based, scalable and supports your strategy - can you add new new-entities, operate in new markets and integrate software solutions easily as you scale?
2. Will it give you the insight you need? Assess whether you can surface the insights required by the business and the investors easily and quickly. Are they based on real time data and easily manipulated in the format required by decision makers?
3. Will it support the exit? Determine if the compliance and due diligence required for a successful exit are built in. Does the system support compliance with regulatory requirements and facilitate easy auditing.

Whether you are implementing the first best-in-class finance solution for the business following private equity investment or looking to future proof the business with a solution that will scale and grow, understanding what you need and how an accounting solution can support your business through its investment cycle, and beyond, is essential to maximise the value you get from the investment in a solution.

Sage Intacct for private equity backed CFOs

When considering best-in-class accounting software for your private equity backed business, Sage Intacct could be a natural choice for your business. As a scalable cloud based solution, Sage Intacct provides best-in-class accounting and finance functionality to provide the data insights required for a growth focus. Sage Intacct implementation with Datel can happen in as little as 6-8 weeks, and with built-in multi-entity, multi-currency and legislation capabilities, your organic and acquisition strategies can be managed easily. Datel’s capability to improve processes with best practice design and software integration, coupled with our experience of implementing solutions for private equity backed CFOs, ensures your requirements are understood and align to your objectives.