Equity investors and special-purpose acquisition companies (SPACs) have billions at their disposal and are spending money at record rates. Perhaps your organization has recently received an infusion. Or maybe your organization is hoping to entice new investor interest. Regardless of whether you are pre or post-infusion, the financial management software you use has significant importance. Investors want to look under the hood at your books before — and after — investing. Will entry-level bookkeeping applications like QuickBooks keep your company from cashing in?
A Tale of Two Lucky Recipients
One client of ours recently upgraded from QuickBooks to Sage Intacct after they received an initial round of investment funding. Armed with that cash infusion, they wisely decided to implement the financial controls necessary to demonstrate their results to their investors.
“We’re experiencing hockey-stick growth that helped us woo investors — but to earn their trust and keep their interest, we needed rock-solid financials.”
Another client, a small but growing startup, sought an investment partner to fund their growth. Wisely, they replaced their entry-level application with Sage Intacct and were able to produce the auditable financials that justified the valuation they were seeking. A savvy investor wrote them a big check.
“Investors want to see audited financials. With Sage Intacct, we’re able to offer potential investors books that are real-time, detailed, and support our valuation.”
Four Key Drivers that Engage Investors
Investors want to see business processes, workflows and controls capable of protecting and growing their investment. When looking for the next big thing, we see some commonalities that seem to keep investors engaged.
- Investors want auditable financials
Companies receiving equity funding must be scrupulous in their accounting and financial management. Investors want to see that their companies that have the financial and operations reports that allow them to deeply understand a business in familiar, industry-standard formats and from a financial management system that is secure and auditable.
Entry-level accounting applications like QuickBooks financial reports do not provide the strict accounting controls and audit trails that businesses seeking outside investment need. For example, QuickBooks doesn’t promote or enforce business process controls, including ensuring a compliant separation of duties. It also doesn’t provide your management team with deep financial and operational performance visibility critical to the achievement of your shared objectives to increase market share, revenue and profitability.
- Investors need to know you can grow
Investors need to know they can grow a company. Companies receiving equity investment are wise to adopt a financial management solution that can unequivocally handle that growth in smart, compliant ways. Investors want to know their investment targets have the infrastructure to grow and generate a return on investment that meets their expectations. You’ll need to prove you can scale end-to-end business processes and garner real-time information about the profitability of your organization. Investors are looking for strong management teams that make fact-based decisions and can act on real-time information.
As you grow, and your business requirements get more sophisticated, you’ll likely run into the frustrating limitations of QuickBooks financial reports. Our clients relate stories of time-consuming consolidations, inter-company transaction processing limitations, slow and unreliable reporting, error-prone manual processes and security issues. The fact is, QuickBooks simply isn’t designed to provide the robust financial-management functions a business preparing for or receiving equity investment needs.
- Investors want actionable insight
Investors want insight into every aspect of your operations. Access to timely relevant data—sliced and diced, detailed and consolidated—enables you and your investment partners to make the right decisions that result in repeatable, profitable growth. Robust and flexible reporting tools providing visibility necessary to navigate market changes, understand performance and make course corrections as needed.
QuickBooks users often export data to spreadsheets to filter and calculate data sets against operational data. Obtaining reports such as profit and loss by location or revenue by employees are difficult, if not impossible. QuickBooks simply cannot offer enough depth and breadth into your company’s financial and operational aspects to satisfy investors that you’re a worthy target and to keep you profitably on track once you receive that investment.
- Competing in the as-a-service economy
Increasingly, companies are moving into the as-a-service economy, selling their products and services through a subscription model—and investors are taking notice. However, contract and subscription billing is inherently complex and most financial applications are only designed to handle the routine, traditional, transactional sales model of selling widgets. If your company sells solutions that combine software subscriptions and services, entry-level applications fall flat.
Suppose you’ve already entered or have plans to enter the Anything-as-a-Service (XaaS) market. In that case, potential investors want to see an accounting solution capable of helping you build and manage and report on recurring revenue streams, with sophisticated subscription billing capabilities—capabilities QuickBooks lacks.
The Investor Happiness Equation
Since their investment is unsecured, an investor needs to become comfortable with the people, processes and technology they are backing.
Sage Intacct is sophisticated yet easy to use financial software with the features investors love: fast consolidations, scalability, multi-entity support, shared charts of accounts, real-time reporting, smart revenue recognition, and more. With rock-solid financials, deep operational insights, easy management of subscription lifecycles, and simplified management of multiple entities, Sage Intacct is an ideal option for companies before, during and after equity investment. It’s notable that many equity investment firms choose Sage Intacct as their own financial management system.
However, the financial management solution you choose is only half the equation. You’ll also need a partner that understands your industry, the software and what it takes to satisfy investors. BT Partners is that partner. We’ve successfully guided dozens of companies through equity investment opportunities and IPOs and would be honored to help yours.