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Case Study 2020 Business Services Assignment

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Issue:
The Board of a recently acquired Private Equity portfolio company had identified significant deficiencies in the accounting/finance function, most importantly the department’s inability to produce accurate and timely financial statements/reports. There was no confidence in the finance department and the company lacked a permanent CFO.  The company needed an assessment of the situation and recommendations on how to fix the problems.

 

What We Did:

We first performed an assessment and reported back to the Board, identifying multiple deficiencies, many of which contributed to the inability to produce accurate and timely financials. We also completed a staff assessment and worked with an executive search firm to develop a profile for a CFO. We provided specific examples of each deficiency and possible remedial actions. CFOCP was then engaged to address the deficiencies, and work with company personnel to remediate them.  CFOCP worked with the finance staff to develop a detailed closing calendar and identify and execute steps needed to remediate the deficiencies. Along the way, CFOCP made several recommendations to improve the tools and processes used by the accounting department, implement best practices and improve internal controls.

 

How We did It:

During the engagement, we encountered some accounts with unsupportable general ledger activity. In accounts such as Accounts Receivable, which should tie to the subsidiary ledger, netting entries were being recorded by the client to ensure that the balances agreed. This practice resulted in some GL accounts not having subsidiary ledger that supported the GL balance. In addition, the reconciliations included a significant amount of aged reconciling items which lacked adequate support.
The client’s allowance for loan losses policy was aligned with its UK parent, however, it was not GAAP compliant. We drafted and implemented a new policy to ensure compliance.
We also helped the remaining staff to step up and expand their knowledge and understanding of the systems and processes. Previously they had done some processes by rote at the direction of the former controller. We provided training for both the local and international finance teams and documented the processes as we went along.

 

Conclusion:

In this engagement, we collaborated closely with local and international finance teams and the auditors. In the end we were successful in ensuring the client’s financial statements and supporting documentation were complete and accurate and the auditors issued a clean audit opinion on a timely basis as required by the regulators. We also provided the CFO with documentation of the financial and reconciliation processes.
by Dave Northrup, Director, CFO Consulting Partners

Case Study – Improving the Finance Function of a Private Equity Backed Technology Company

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Industry: Private Equity
Type of Service: Accounting & Finance Outsourcing

Issue

The Board of a recently acquired Private Equity portfolio company had identified significant deficiencies in the accounting/finance function, most importantly the department’s inability to produce accurate and timely financial statements/reports. There was no confidence in the finance department and the company lacked a permanent CFO.  The company needed an assessment of the situation and recommendations on how to fix the problems.

What We Did

We first performed an assessment and reported back to the Board, identifying multiple deficiencies, many of which contributed to the inability to produce accurate and timely financials. We also completed a staff assessment and worked with an executive search firm to develop a profile for a CFO. We provided specific examples of each deficiency and possible remedial actions. CFOCP was then engaged to address the deficiencies, and work with company personnel to remediate them.  CFOCP worked with the finance staff to develop a detailed closing calendar and identify and execute steps needed to remediate the deficiencies. Along the way, CFOCP made several recommendations to improve the tools and processes used by the accounting department, implement best practices and improve internal controls.

Results

The Company was able for the first time to prepare timely and accurate monthly financial statements. In addition, we facilitated the creation and implementation of “dashboards” to help senior management and the Board monitor the key business metrics of the company. CFOCP also commenced implementing several of the processes and tools recommended by CFOCP.  The Company also moved forward with hiring of a permanent CFO and implementing CFOCP’s recommendation for the reorganization of the accounting department.

Case Study – Turnaround of Accounting and Finance Function

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Industry: Private Equity
Type of Service: Accounting & Finance Outsourcing

 

Issue:

The Board of a Private Equity portfolio company had decided to replace the current CFO, primarily due to its lack of confidence resulting from inaccurate projections and improper accounting treatment. An additional complication was that the company was running out of cash and needed to raise funds quickly, which muddied the issue of hiring a permanent CFO. The company was in the process of raising additional debt and needed the immediate support of a CFO in whom it could have confidence to lead the finance function, to become an effective member of the management team, and to partner with the CEO in the fund-raising process. Concurrently, the Company was also considering divesting a portion of its business.

What We Did:

We “hit the ground running” and immediately commenced working with the CEO and management team to construct a credible business plan and forecast, including both short and longer-term cash flows in order to facilitate effective conversations with the Board and investors/lenders. In addition, we actively participated in the negotiation of successful bridge financing, working closely with legal advisors and the Board. We also created and maintained a data room to facilitate discussions with potential investors or buyers, including responding to multiple due diligence requests, and discussions with potential buyers.

At the same time, we assumed the day-to-day management of the finance/accounting team, and we implemented best practices in terms of cash management and internal controls. Further, we simplified the forecasting process, which resulted in more accurate projections, and we provided accounting policy guidance and confirmed the proper treatment of significant transactions, which had been misstated in prior periods.

Outcome:

Despite its poor performance and prior lack of credibility, the Company was able to negotiate a successful short-term bridge financing, and subsequent financing. It also was able to effectively manage its cash flow to meet the forecast on which the financing was based. The credibility with the Board was restored. The key accounting staff were retained during this challenging period and we exceeded the original objectives of the engagement, which contributed to the Company extending the engagement from the originally estimated 3-4 months to a full year.
by John Gross, Director, CFO Consulting Partners

Case Study – Cutting the Cord – Creating Infrastructure for a Carve Out

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Industry: Media

Type of Service: Determine requirements to operate the business independent of its former owner and help design new systems and assist with integration so that the business can operate independently of its previous owner.

Background
An Asia based family office acquired the assets of a 90-year-old magazine brand from a U.S. based publishing conglomerate. The acquirer intends to grow the brand internationally and utilize the brand’s significant name recognition and storied reputation to expand revenue stream opportunities.

Issue
The acquirer is based in Asia and has no current infrastructure to operate the business. As typical in the consolidated magazine industry, operating and financial functions were handled by the seller on a multi-brand basis by specific departments, (Finance, Production, Circulation, Ad Sales, etc.) and therefore most existing staff, systems and vendor relationships remained with the seller. Specifically, the entire finance staff, as well as the accounting systems, remained with the seller.

The parties agreed that the seller would continue to operate the business for a short period to allow the buyer to create the infrastructure and hire the staff to operate on its own.

What we did
The project manager for the acquirer reached out to CFO Consulting Partners (CFOCP) to provide a consultant to lead the transition of the finance and accounting function for the acquirer, including the implementation of accounting systems and assist with the hiring of permanent staff for the office of the CFO.
During the transition period, the consultant, working with others on the transition team, assumed the CFO function of the acquirer and performed the following:
• Set up international banking and credit card processing relationships
• Developed a global chart of accounts, complicated by a complex international tax structure, multi-country operations, and multi-currency issues
• Migrated data from the seller’s ERP
• Assisted with integration into the ERP of ancillary systems such as Salesforce and Concur (payables management) as well as industry-specific software utilized for functions such as international licensing, circulation, newsstand and ad sales
• Upon multiple interviews with the seller’s operating and finance team, created an accounting manual addressing the go-forward business processes as well as complex issues such as international accounting policy, revenue recognition, Vat accounting, 3rd party licensing, consolidation procedures and tax reporting structures
• Provided cash flow projections
• Managed tax reporting during the transition
• Negotiated new vendor and advertiser relationships
• Interviewed auditors for the acquirer
• Assisted in hiring and transitioning of the finance function to the permanent staff

Results
CFOCP, which specializes in providing senior-level financial management services, supported the acquirer by providing interim finance leadership while developing policies and procedures to allow the acquirer to operate the finance function on a stand-alone basis. CFOCP helped identify and manage the implementation of systems, including NetSuite and Concur. The CFOCP member became an integral member of the transition management team. Day-to-day finance functions were properly handled during the transition, systems were identified and implemented, procedures were documented, and the finance function was successfully transitioned to the new team.

by John DeLorenzo, Director, CFO Consulting Partners

CFO Consulting Partners is a proud sponsor of the Exit Planning Exchange (XPX). XPX is a multi-disciplinary community of professional advisors who work collaboratively to help owners build a valuable business and assist them in preparing and executing a successful transition.

CFO Consulting Partners XPX Advisors:
Oliver Brooks
Steven Crowley
David DeMuth
John Kovacs
Mark Sloan
Allan Tepper
Joseph VonEhr

Case Study – Nonprofit CFO Monthly Board Presentation

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Industry: Nonprofit
Type of Service: Planning & Analysis

Issue

A new CFO joined at non-profit educational institution, and she found it very time-consuming to produce the monthly financial presentation to the board. Due to its complexity, she was the only one in the department who could produce the report. Finally, many of the reports contained errors, and there was no time for analysis.

What We Did

The CFO engaged CFO Consulting Partners (“CFOCP”) to streamline the report preparation process, and to fix data integrity problems. CFOCP reorganized the chart of accounts, reformatted the management report and mapped the numbers from the revised chart of accounts to the new management report.

Outcome

The result was a report that could be produced in minutes versus many hours, and the problems causing the report to be inaccurate were eliminated. With more time for analysis and an impactful report layout, the Board of Directors received a much improved presentation. Compliments to the CFO were in abundance.

Case Study – Nonprofit Audit

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Industry: Nonprofit
Type of Service: Pre-audit

Issue

The CFO of a nonprofit desired to mitigate a number of accounting weaknesses identified by its auditors, and wished to have the audit completed much sooner and more efficiently than in the prior year.

What We Did

The CFO engaged CFO Consulting Partners (“CFOCPs”) to identify and mitigate internal control weaknesses over financial reporting, and to develop an internal control manual for approval by the Board of Directors. In addition, the CFO asked CFOCPs to streamline accounting processes to be more efficient and to prepare pre-audit workpapers and final drafts of the financial statements, including footnotes.

Outcome

The Board of Directors approved the internal control manual, accounting processes were streamlined, and the books are now being closed in a couple of days. Further, the auditors completed the audit in an efficient manner, with no repeat management comments and only one new suggestion, which has already been mitigated.

 

Case Study – Private Equity Firm Sells Portfolio Company

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Industry: Private Equity
Type of Service: Accounting & Finance Outsourcing

Background

A private equity firm desired to sell one of its portfolio companies. The company, with sales of $75 million, was a leader in the fashion industry. The incumbent Chief Financial Officer and Controller left at the start of the sale process.

Issue

The company could not hire another full-time Chief Financial Officer and Controller as it was actively engaged in the sale process. It needed two people for the short term who could work with its PE owner, the investment banker, the potential buyers, lenders and other stakeholders, and at the same time, continue to produce required financial information and to liaison with its auditors.

What We Did

The PE firm reached out to CFO Consulting Partners (CFOCP) to provide an Interim CFO who could handle both the CFO and controllership responsibilities, and who could provide financial management leadership to the company during the sale process. One of CFOCP member’s was retained by the company.

During the initial phase of the engagement, the Interim CFO took total charge of the Finance Area. The Interim CFO’s direct areas of responsibility included Accounting & Finance, Information Technology, Human Resources and Legal. He was instrumental in accelerating the closing process by up to two weeks, and he enhanced the HR area by outsourcing a portion of the function. In addition, he was able to recover certain funds by investigating nuances of certain long term contracts and participated in direct negotiations of certain contracts and leases.

During the potential buyers’ due diligence processes, the Interim CFO fielded and directed all due diligence responses. He also played an active role in the Management Presentations. This posed a tremendous challenge as the sale process was not disclosed throughout the Company.

Results

CFOCP, which specializes in providing senior-level financial management services, provided such an experienced CFO from its team. CFOCP supported the Company with various accounting and M&A services. The CFOCP member became an integral member of the management team. The needs of all stakeholders were met, and the sale was successfully completed. Subsequent to the sale, the buyer group retained the CFOCP member to assist with accounting integration, purchase price accounting and a subsequent refinancing

Case Study – Preparing US GAAP Financial Statements for Review and Audit

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Industry: Financial Services
Type of Service: Pre-audit

Issue

CFO Consulting Partners was engaged by a start up FinTech Company to assist in the preparation of US GAAP financial statements for a Review and eventual audit. The Company is a pioneer in its industry and needed the Review report to be included in its application for regulatory approval. The Company also needed CFO CP to prepare an accounting policy and procedures manual.

What We Did

CFO CP assisted in getting the Company ready for the Review and eventual audit. CFO CP reviewed the trial balance, general ledger from date of inception to the Review period and all the underlying accounting records for propriety and accuracy/completeness. CFO CP ensured that all the Prepared-By-Client (PBCc) were accurate and reflected the transactions that transpired during the period and also ensured that the PBCs were such that they each had an audit trail. In certain instances, CFO CP prepared the relevant schedules/analyses for some account balances. Since the client is a start-up, CFO CP prepared the financial statements from date of inception to the relevant period end, together with detailed footnotes for the auditors’ review. CFO CP liaised with the auditors throughout the duration of fieldwork and assisted in resolving Review issues with the auditors.

CFO CP delivered a complete accounting policy and procedures manual, which serves as both a key tool necessary to maintain the books and records of the Company on a consistent basis, and also provided accounting policy documentation for the Company’s auditors and regulators. The procedures manual is the roadmap necessary for maintenance of the books and records of the Company and for the preparation of its consolidated financial statements.

Outcome

The auditors completed the Review process and issued their Review report within five (5) business days and consequently, the financial statements and footnotes required for regulatory approval were filed on time. As a result of CFO CP’s involvement, the books and records had clear Review trail and the Company had a chart of accounts that is specifically designed for its business. Also, all the significant accounting policies and internal controls were well documented. CFO CP was well commended by the Company’s CFO and management for exceptional work. CFO CP also received commendations from the Company’s CPA firm.

Case Study – Private Equity Firm Portfolio Company Sale

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Background:

A private equity firm desired to sell one of its portfolio companies. The company, with sales of $75 million, was a leader in the fashion industry. The incumbent Chief Financial Officer and Controller left at the start of the sale process.

Problem:

The company could not hire another full-time Chief Financial Officer and Controller as it was actively engaged in the sale process. It needed two people for the short term who could work with its PE owner, the investment banker, the potential buyers, lenders and other stakeholders, and at the same time, continue to produce required financial information and to liaison with its auditors.

Contributions:

The PE firm reached out to CFO Consulting Partners (CFOCP) to provide an Interim CFO who could handle both the CFO and controllership responsibilities, and who could provide financial management leadership to the company during the sale process. One of CFOCP member’s was retained by the company.

During the initial phase of the engagement, the Interim CFO took total charge of the Finance Area. The Interim CFO’s direct areas of responsibility included Accounting & Finance, Information Technology, Human Resources and Legal. He was instrumental in accelerating the closing process by up to two weeks, and he enhanced the HR area by outsourcing a portion of the function. In addition, he was able to recover certain funds by investigating nuances of certain long term contracts and participated in direct negotiations of certain contracts and leases.

During the potential buyers’ due diligence processes, the Interim CFO fielded and directed all due diligence responses. He also played an active role in the Management Presentations. This posed a tremendous challenge as the sale process was not disclosed throughout the Company.

Results:

CFOCP, which specializes in providing senior-level financial management services, provided such an experienced CFO from its team. CFOCP supported the Company with various accounting and M&A services. The CFOCP member became an integral member of the management team. The needs of all stakeholders were met, and the sale was successfully completed. Subsequent to the sale, the buyer group retained the CFOCP member to assist with accounting integration, purchase price accounting and a subsequent refinancing. In addition, the CFOCP member provided valuable institutional knowledge to the buyer group.

Case Study – Finance Transformation for Professional Services Firm

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Industry: Business Services
Type of Service: Finance Transformation

Issue

Our client, a 100+ professional, multi-office professional services firm was ending its affiliation with an International Firm. As part of the separation, our client was required to migrate off the International Firm’s infrastructure, including their Enterprise Resource Planning (“ERP”) and Billing systems, at a date certain (approximately three months from the time CFOCP was engaged). The client had selected a cloud-based ERP system and several add-in products to form the core of their new accounting infrastructure and had engaged the ERP vendor to assist with the technical aspects of the migration. However, our client realized that they did not have the depth of staff to complete the migration using their Finance resources. They hired CFOCP to manage and execute the migration on a day-to-day basis, driving project planning and execution; ensuring that all tasks were completed on a timely basis and existing Finance resources were used as efficiently as possible.

What We Did

Working with the Controller and two key members of his staff, our activities included:

  • Development and management of an overall project plan including status reporting to the CFO
  • Diagnosis and documentation of their existing accounting processes
  • Understanding exactly how the International Firm’s PeopleSoft based accounting systems worked and how their data was structured
  • Designing a new, much more simple process, keeping the key capabilities needed by our client while eliminating the International Firm’s legacy complexity. Among the items addressed was a change from a 52-week fiscal year to a calendar fiscal year.
  • Creating and coordinating a master integration plan between ERP system and the three non-ERP satellite systems. While part of the “ERP environment”, each had differing levels of integration with ERP system, from seamless to almost non-existent.
  • Writing three Business Requirements documents
  • Developing a report and dashboard migration plan
  • Developing and executing a data migration plan. This included migration of all key master files; seven years of history in summary form, and four months (fiscal year to date) of every recorded transaction in the old system (approximately 400,000 entries). Reconciled all balances and activity to the penny.
  • Development and execution of test cases
  • Post migration support and training

Outcome

The implementation was time-bound. The cutover date was 90 days from the time we commenced work. Moreover, the International Firm’s PeopleSoft system was only partially understood by the client. This made the diagnosis and documentation work particularly challenging was well as increasing the degree of difficulty of the data migration effort. Despite these challenges, the migration was successful and by 120 days, the system was fully stabilized and operating efficiently.

We are a proud sponsor of XPX. XPX is a multi-disciplinary community of professional advisors who work collaboratively to help owners build valuable businesses and assist them in preparing and executing a successful transition. Learn more...

We are a proud member of FINACA. FINACA is a nationwide network of independent finance and accounting consulting firms focused on delivering exceptional client service. Learn more...

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