Managing the Evolving Role of Finance to Empower Enterprise Growth
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The role of Finance continues to rapidly evolve and is becoming increasingly strategic. Senior finance professionals are being asked to increase value-added services across the entire organization, and are taking on a greater role in facilitating growth-related initiatives across the enterprise. Attend this session to understand the shift in how finance leaders are spending their time and the implications of that change. Learn how they align strategy, scorecards and systems to be more effective in driving growth initiatives within and beyond the finance function. Hear how finance executives in leading-edge organizations are approaching this transformational shift in their roles and functions, and successfully elevating the view of the Finance function, while empowering growth across the enterprise. Speakers: Mike Forman, VP Finance & Corporate Controller, NetSuite Carl Cox, CFO and EVP of Operations, LightSpeed Technologies Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com Track: Managing Change | Session: 1
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Managing the Evolving Role of Finance to Empower Enterprise Growth
- 1. Managing the Evolving Role of Finance to Empower Enterprise Growth Mike Forman VP Finance & Corporate Controller, NetSuite
- 2. NetSuite: World‟s #1 Cloud ERP Background Performance Founded 1998 World’s most deployed cloud ERP Publicly traded on NYSE: “N” Used by 16,000+ organizations Offices in 10 countries Fastest growing top 10 ERP 2,200+ employees Used across 100+ countries $400 M+ revenue FY13 (~33% Growth) 1,000+ Software companies #1 Cloud ERP Suite Industry Recognition Best Financial Management Best Cloud Infrastructure 2 © 2014 Proformative Fastest Growing Top 10 FMS Vendor 3rd Year Running Top 10 Cloud Companies to Watch
- 3. Is Your Company Prepared for Growth? “It‟s important for a company to determine which processes will come under particular stress when it grows. Unscalable processes are an area that companies often overlook when they are growing.” McKinsey Quarterly: Preparing your organization for growth [May 2011] 3 © 2014 Proformative
- 4. The Controller Role Has Changed in the Past Three Years How Controller Time Has Changed in the Past Three Years Role is evolving to include: • More higher value-added activities • Support of more strategic outlook • Driving productivity improvements IMA: The Evolving Role of the Controller [January 2014] 4 © 2014 Proformative
- 5. But Financial Accounting Responsibilities Still Remain • Implementing Controls and Compliance • Changing regulations and the convergence of accounting principles requires more time and increases operational costs to perform technical accounting and financial reporting • Creating accurate financial and management reports and disclosure documents • Data for financial reports and disclosure documents are in disparate systems, making this process error-prone and time-consuming • Timely close and consolidation • With multiple versions of the truth, the process is inefficient and takes too long 5 © 2014 Proformative
- 6. Volume for Information Requests Is Also Increasing for Financial and Non-Financial Data Change in Support Requested in the Past Three Years But, increased access exposes new challenges: • Limits on reporting capabilities • Limits on ability to access data in real time • Limits on information system capacity IMA: The Evolving Role of the Controller [January 2014] 6 © 2014 Proformative
- 7. The Difficulty in Managing Change with Scarce Resources “Things take longer to happen than you think it will, and then they happen faster than you thought they could.” Rudiger Dornbusch, Economist 7 © 2014 Proformative
- 8. Growth Introduces Change and Complexity for Global Businesses • Inability to customize systems and processes as the company grows • Error-prone, inefficient, time-consuming manual processes • Lack of confidence in financial data • Significant resources, effort and attention just to keep current system running • “Siloed” data; no 360o view of corporate performance • Lengthy cycle to roll up financial results from subsidiaries • Lack of current visibility into subsidiaries‟ financials • Challenge of scaling processes across geographies • Lack of IT resources in distributed locations 8 © 2014 Proformative
- 9. Customer Example – Pain Points “We were running on about five different systems, and that led to a real inability to connect records between two systems. We had no 360o view of our customers and activities, and I was constantly starved for information.” 9 © 2014 Proformative
- 10. A Typical Applications Journey…. • Started with on-premise ERP system (i.e. QuickBooks, MS Dynamics, etc.) • Added Excel for analytics • Added CRM system (i.e. Act!, GoldMine, Salesforce.com) • Built a homegrown website • Add more seats Over time: more money, more resources, more integrations 10 © 2014 Proformative
- 11. …Ends Up Being an Application Hairball: Opaque Visibility & Slow, Error-Prone Reporting 11 © 2014 Proformative
- 12. A Business Suite in the Cloud Helps Unlock Value Typical Way – Manual, Disconnected Mess After – Integrated, Dynamic Platform PSA ECOMMERCE SINGLE DATA SOURCE CRM ERP ERP Company A • Disparate data • One version of truth • Disparate processes • Streamlined, integrated processes • Slow, reactive decision making • Real time, proactive decision making 12 © 2014 Proformative
- 13. Customer Example - Solution “We sell multi-period engagements and have to manage complicated revenue recognition schedules. Our business was growing and NetSuite was able to render the scalability needed without incurring incremental spend for IT-related resources or headcount.” 13 © 2014 Proformative
- 14. Background of My Company • More than 15 subsidiaries and about same number of functional currencies • Maintain more than 35 currencies • Revenue recognition • Amortize subscription, POC for Services • Amortize revenue in accordance with EITF 08-1 • Global Finance Team 14 © 2014 Proformative
- 15. Outcome of Using a Business Suite in the Cloud • Monthly/Quarterly/Annual Financial Close • • Finalize financial results in 5 days • Close/FP&A team spread between the US and Philippines • Permits FP&A to share results in timely fashion with business partners • • Same hard close each month Rolling monthly forecast based on timely updated actuals Order-to-Revenue Process • • • Lead → Estimate → Sales Order → Invoice → Revenue → Collect Respective steps between Sales and Finance can be performed anywhere with an internet connections Procure-to-Pay Process • • • Purchase Request → Purchase Order → Bill → Bill Payment Decentralized purchasing system coupled with a centralized disbursement group Quarterly Reviews and Annual Audit • • 15 Provide auditors with limited role to access system System notes provide an audit trail to support transaction history and the key controls that are tested as a part of SOX © 2014 Proformative
- 16. Dashboard Example 16 © 2014 Proformative
- 17. Consolidated Financials Example 17 © 2014 Proformative
- 18. A Suite in the Cloud Supports the Evolving Controller Function • Manage the Entire Business in the Cloud • Lead → Estimate → Sales Order → Billing → Financial Reporting • Single System, Single Database • No data warehouse • Everyone Logs into the Same System / Global Finance Organization • Access to information from any location; control by role • Real time Consolidated Data • Full drill-down from financial statements to individual transactions • Multi-Dimensional Views • Worldwide, regional and country-based views • Local Control, Global Roll-up • Localized UI and currency; regional and global visibility in context 18 © 2014 Proformative
- 19. Lightspeed Technologies – Tualatin, Oregon Carl Cox EVP of Operations & CFO, Lightspeed 19 © 2014 Proformative
- 20. Why Lightspeed Exists – To Make a Difference • ANSI classroom standard should not exceed 35dB • Voice 15dB above ambient noise • The standard classroom is like teaching on a noisy street corner (60dB) • 70% of children with mild hearing loss will fall behind in at least one subject • Our systems can help children hear 15,000 words instead of 10,000 EVERY DAY! 20 © 2014 Proformative
- 21. Changing Our View • But to make a difference in the classroom…we had to make a difference ourselves • Why NetSuite? • Changing our work from What to Why? • How did NetSuite help us make a difference for our customers? 21 © 2014 Proformative
- 22. We Had a Big Challenge! • Growing at 25% annually • Peachtree & FileMaker & Excel & Outlook…& • All systems were separate • The “What” and “Will it hold up” 22 © 2014 Proformative
- 23. Who Me? Worry… Will these systems make it another night? 23 © 2014 Proformative
- 24. So We Looked at Everything 24 © 2014 Proformative
- 25. The Final Two: The On-premise Solution or NetSuite SINGLE DATA SOURCE CRM 3PL SINGLE DATA SOURCE ERP Traditional ERP solution 25 © 2014 Proformative NetSuite SFA
- 26. Final Phase – The Customer References • The early slight favorite was the on-premise solution • Do your work and research – • Ask and find customer references • This is a must! • Don‟t trust the sales person – go directly to the customers 26 © 2014 Proformative
- 27. The Answers Were Like Comparing… The on-premise solution… • Difficult implementation • Used outside consulting firm • Talked with IT NetSuite… • Changed our company • Access anywhere - insight • Talked with business owners 27 © 2014 Proformative
- 28. So We Took the Leap! • We were live in 3 months from signing the license agreement • Eliminated double-entry • Finally connected with the sales force • Access anywhere in the world • No more servers • Access to the latest updates 28 © 2014 Proformative
- 29. In the Past, IT and Accounting Were Bean Counters • Keep the servers up • Close the books • Always looking in the past 29 © 2014 Proformative
- 30. Highly Skilled Workforce - PROBLEM SOLVING - COMMUNICATION - EDUCATION 30 © 2014 Proformative
- 31. Today, They Have Become Business Consultants…Literally! Head in the Cloud Development • IT were DBA‟s, Case Managers • As the need to „maintain‟ was removed… • We changed their job to value-add • And they made a huge difference • Writing over 200 scripts • Continuous Improvement 31 © 2014 Proformative
- 32. Are We Managing Through the Windshield? 32 © 2014 Proformative
- 33. Or Through the Review Mirror? 33 © 2014 Proformative
- 34. From Accounting Manager to Small Company Controller • Issue monthly financials via e-mail to bankers and auditors • Accounting and IT departments are smaller; although we are 2 ½ times larger • Integration of systems and processes reduced order entry from 3 days to 1 hour • Accuracy improved – last financial audit – zero findings • Adaptive Planning budgets have decreased planning significantly 34 © 2014 Proformative
- 35. Serving Our Customers 35 © 2014 Proformative
- 36. Hearing From Our Customers 36 © 2014 Proformative
- 37. Net Promoter Score The Net Promoter score for the first half of FY14. The results are as follows: Promoters: 403 Neutral: 44 Detractors: 16 Total: 463 Percent Promoters: 87.04% Percent Detractors: 3.46% Net Promoter Score: 83.59% For reference, our NPS for FY13 Q4 was 82.67% © 2014 Proformative 37
- 38. Customer Satisfaction (2013) NPS 30+ NPS 60+ Google – 53% Costco - 78% American Express – 41% Apple – Laptop 76% Kaiser – 35% Lightspeed – 83.6% Nordstrom – 75% Verizon – 32% NPS 80+ Amazon – 69% USAA – Insurance – 80% Southwest Airlines – 66% © 2014 Proformative 38
- 39. Upcoming Sessions • Educational Session: • Delivering Value with Financial Performance: Leading FP&A Practices of High-Growth Companies • 2:35PM-3:25PM, Veronese Room 2501 • Speakers: Eileen Tobias, Director of FP&A, NetSuite and Eric Zimmerman, Manager of FP&A, Infusionsoft • Technical Demonstrations: • NetSuite Financial Planning: Integrated Budgeting, Planning and Forecasting in the Cloud • 11:30AM-12:20PM, Veronese Room 2505 • Speakers: Robert Israch, VP of Global Marketing Programs, NetSuite Philip Adams, Solutions Consultant, NetSuite • NetSuite ERP/Financials: The System of Choice for Over 16,000 Organizations • • 39 1:30PM-2:20PM, Veronese Room 2505 Speakers: Robert Israch, VP of Global Marketing Programs, NetSuite Philip Adams, Solutions Consultant, NetSuite © 2014 Proformative
- 41. Thank You For Attending Managing the Evolving Role of Finance to Empower Enterprise Growth
Hinweis der Redaktion
- Before we jump into the heart of the discussion today, I’d like to share some background information with you regarding NetSuite. NetSuite was founded in 1998 and went public in 2007. We generated more than $400M in revenue in 2013 and currently employ more than 2,200 employees worldwide. NetSuite provides a cloud-based financials/ERP software suite. In addition to financials/ERP, the Company offers a broad suite of applications, including accounting, CRM, Professional Services Automation and Ecommerce that enable companies to manage most of their core business operations in a single integrated suite. The Company delivers its suite over the Internet as a subscription service using the software-as-a-service model. In addition to 16,000+ organizations using the NetSuite service, NetSuite, itself utilizes the service to run its own business.
- In my nearly 10 years at NetSuite and my prior Controller and external auditor experiences, the topic of preparing for the next million or hundred million dollars of revenue has been a recurring theme. What will the company look like? What must it do between now and that next milestone to achieve the goal and be prepared to meet the next set of milestones? This includes looking at personnel, processes and systems. We can’t afford to wait for the next process or system to break. We need to hire the right people that can grow with the company and that can be instrumental in constantly looking at processes and systems to ensure we’re on track. When I first started with NetSuite, from a systems perspective, we knew that we had to have a system that would handle our growing revenue base and international expansion. And what that, we spoke to our development team to create our OneWorld and Revenue Recognition modules as Excel was not going to cut it. We’re now consolidating 15 subsidiaries and creating revenue recognition journal entries from more than 120k revenue recognition schedules.
- In a recent survey conducted by the Institute of Management Accountants, the members were asked to identify how their time has changed over the last three years. The top 3 answers included (1) more higher value-added activities; (2) support of more strategic outlook; and (3) driving productivity improvements. I think many of these areas resonate of with most of us who are trying to keep up with the increasing demands of our CFO’s who themselves are taking on more strategic roles. All three of these areas demand that we and our staffs get more out of our systems from both an analysis and process perspective. There’s also pressure to drive down costs and pursue more timely analytics to drive decision making throughout our organizations.
- While Controllers are now having to step up to more value-added areas of challenge, we are still expected to tackle the basics like controls and compliance and financial reporting. The continued focus on Sarbanes-Oxley, convergence of IFRS and FASB and the introduction of XBRL raises those expectations around the basics. And if you haven’t heard your auditors mention the PCAOB’s focus on management review controls, you’ll need to start allocating additional resources around meeting these documentation requirements. Another challenge has to do with pulling together the necessary information from a variety of systems to produce timely and accurate financial and management reports and associated disclosures. Many systems don’t talk to each other in the same language and require complicated integrations which have a tendency to break when one system is further customized. A significant percentage of companies are using ERP and other key systems that are outdated and are not capable of keeping up with today’s reporting and operational requirements.
- In the same IMA survey referenced earlier, the members were asked to identify the change in support requested over the last three years. The top 4 answers included increased access to (1) financial or budget data; (2) operational data; and (3) data through KPI’s and dashboards; and (4) new business performance and customer data. Unfortunately, the expansion of this access highlights typical limits with many of today’s on-premise systems in the areas of reporting capabilities, real-time data and information system capacity. I experienced these same challenges in my prior company where I couldn’t provide real-time data until the month was fully closed; and when I had to depend on my accounting manager, who had a degree in MIS, to construct various financial reports from a system that was external from our ERP system. Today’s cloud environment removes many of these obstacles in that you can construct your own real-time reporting with straight-forward UI’s that don’t require an MIS degree. In addition, since the data is real-time, you have the ability to stay on top of key metrics through easy-to-construct KPI’s and dashboards. And finally, you can set up recurring reporting for non-finance departments which allows those internal customers to provide for themselves cutting down on their day-to-day reliance on the IT and Finance departments.
- I think this quote reminds us all about how we can underestimate the time and resources required to adapt to new and changing regulations or the challenges in growing our systems to keep up with evolving business requirements. And most of us don’t have the luxury of simply adding resources to meet these ongoing demands due to pressures to keep costs down. The use of an integrated cloud-based ERP system has certainly facilitated my approach to these challenges. For instance, when we first adopted EITF 08-01, we took advantage of a sandbox environment to report our revenue results under our prior revenue recognition policy while utilizing our production environment for the current policy. We plan to do the same as we prepare for the latest set of revenue rules to be adopted in 2017.
- Relying on many of today’s aging disparate systems with the requirement to grow the business can often mean that (1) you’ll face significant challenges in customizing systems and processes; (2) you’ll need to adopt error-prone, inefficient, time-consuming manual processes; (3) the level of confidence in financial and management data will decline; (4) significant IT resources are required to simply maintain the separate systems resulting in a poor use of capital; (5) “siloed” data, in the sense that you have key data kept in separate systems that can’t be consolidated to provide the necessary views. And with companies that have global operations, which isn’t just a big company issue anymore, a lack of well-integrated systems that aren’t in the cloud present other challenges such as (1) an extended close cycle for rolling up subsidiary financials; (2) lack of visibility into subsidiary operations; (3) scaling processes across geographies; and (4) lack of IT resources in distributed locations. I, myself, experienced this same set of challenges at my first Controller job out of public accounting. My company, while only employing about 40, already had a UK subsidiary where a critical R&D function was located. Due to the fact that we were using an on-premise ERP solution in the US, we had no visibility to the UK operations until our month was closed. So we were basically in the dark throughout the month without the ability to access the day-to-day results and operations of our foreign R&D efforts.
- A statement that may sound familiar to you, and a problem I have encountered in many organizations that I’ve worked with during my public accounting days as well as in my prior controller job. Not only from a management perspective, but the lack of well-integrated systems causes compliance headaches when you’re trying to satisfy your auditors’ requirements to support transaction flows and related controls. As an external auditor, I recall having to spend significant time trying to get comfortable with standard processes such as order to cash and procure to pay due to the number of disparate systems involved. This time spent simply getting comfortable with the workflows resulted in taking up significant client resources and incremental billings which none of us appreciate (except the audit firms).
- Here is the typical journey that most of our businesses go through. We start with a basic ERP system, incorporate some Excel files for analytics, add a separate application to deal with sales activities, construct a homegrown website to sell our services and products and then add more licenses for the above as the business grows. This typical evolution requires more and more complex integrations and incremental costs to maintain them.
- The result is an applications “hairball” over time. Because most businesses are running multiple point systems for financials, sales, inventory, support, website, they’re burdened with manual tasks and productivity bottlenecks.Businesses have:Substantial resources spent on supporting manual processes, rather than strategic tasks.Lack of employee and executive visibility necessary to maximize performance.Error ridden customer information, outdated business information, and spreadsheet nightmares.
- Here’s a visual comparison of what a lot of companies suffer from today versus what technologically progressive businesses are adopting today. On the one hand, you have various applications with single-purpose processes, often connected with other applications in a disorganized fashion, creating manual processes and reconciliation nightmares. And then on the other hand, you have a single data source providing the same information to a number of different processes contained in one suite giving visibility throughout the organization. This integrated, dynamic platform gives you one accurate answer, easily allows collaboration and real-time decision making.
- Here’s another success story of leveraging a cloud-based integrated ERP solution. Prior to their adoption of NetSuite, they were using spreadsheets to manage and record subscription revenue for more than 600 customers. They could not longer scale without a revenue recognition solution as the use of Excel was resulting in a rising number of errors. Ultimately, Glassdoor adopted the revenue recognition functionality which provided them confidence in their month end revenue numbers, provided them customer revenue reporting and became accessible to more than just the owner of the Excel file. The incremental system cost was far less than the cost of an additional revenue accountant and provided much more reliability around the numbers.
- Before I dive into some of the specifics of the financial processes at my company, I wanted to share some background information regarding our company to give you some context. While we’re not the most complicated business, we are a publically-traded company running more than 15 subsidiaries with various functional currencies on top of managing 35 currencies for various transactions. From a revenue perspective, we amortize our subscription services, recognize our professional services on a % of completion basis and allocate our multiple-element agreements in accordance with EITF 08-01. Our Finance Team is primarily located in the US and Philippines with both G/L and FP&A team members located in both locations.
- The first advantage of working in the cloud/suite environment is in the area of our standard financial close. We perform the same hard close every month. We’re able to finalize our monthly consolidated results in about 5 days as we’re able to avoid time required to reconcile the interactions of numerous systems given that we perform all of our core processes in one system. And since everybody is looking at the same data on a real-time basis, we can spread our close/FP&A resources between our headquarters and our shared service center w/out having to wait for one group to roll up their separate financials. With the ability to quickly finalize our actuals, our FP&A team can update their forecasts with their business partners in a timely fashion which forms the basis for new strategic decisions. A couple of key processes, order to revenue and procure to pay, also leverage the cloud/suite platform. Sales and Finance operate in numerous geographies/time zones with the ability to convert a lead to an estimate to a SO and then invoice that SO, book the revenue and apply the cash to the invoice with all of those records and transactions linked leaving an easy to follow audit trail. The procure to pay process works very much the same in the sense that even with a de-centralized purchasing function, our AP group can follow the purchase request to PO to bill and bill payment through the same system as they are all linked and processed in one system leaving nothing to reconcile. We can spend more of our time analyzing results rather than trying to reconcile various systems. Our auditors also leverage the cloud concept by being able to view transactions and supporting documentation from anywhere with a custom role that we develop for them. The system notes that document movements through the suite also provide them with a solid audit trail as they perform internal control and SOX testing to form the basis of their review and audit conclusions. And by processing nearly all of our transactions in one system, the auditors can reduce their testing of integrations and key IT controls of numerous systems.
- Here’s an example of the kind of dashboard that I, and my finance team, use to monitor and manage my company’s performance. And you may be surprised to hear that we achieved it without having to spend any time tying together multiple systems and spreadsheets.On my dashboard and as a finance organization as a whole, we have real time visibility across the key drivers for the business, across sales, expenses, billings, renewals and more.I also have developed reminders, using simple saved searches, to identify various transactions and workflows, that are awaiting my review and approval. This monitoring of outstanding requests helps to ensure that I’m staying on top of critical decisions that impact the operations of both Finance and other departments in the company.
- Here is an example of what a detailed income statement looks like with the subsidiary structure noted in the header section along with the elimination entity and the consolidated results. We maintain our GAAP income statement and balance sheet inside the system with very few modifications needed as we add subsidiaries and accounts. The cloud/suite approach also facilitates the integration of entities that we acquire as you can simply use your existing account structure, import/create the necessary entity records (i.e. customers, vendors, employees) and leverage the existing workflows with your new employees wherever they may be located. We have been successful in getting our acquired entities up and running within 60-90 days.
- So to summarize, here’s why a cloud/suite environment supports the Controller Function: (1) Being able to manage the business through a single system and database from anywhere that you have an internet connection; (2) Where all employees log into the same system and see the same data, only limited by the roles and permissions that you establish; (3) Consolidated data can be viewed and analyzed on a real-time basis with the ability to customize various geographical views; (4) Control can be localized and customized while at the same time allowing for a global roll-up within the same system; and (5) It facilitates a global finance organization regardless of how centralized or de-centralized you wish it to be given the access point of the internet.OK, so at this time I want to turn your attention to our other speaker, Carl Cox, EVP of Operations and CFO at Lightspeed. Carl will share with you some of his experiences and advice about working in the cloud with an integrated system.
- On the operational and customer service side…