Controllers Council recently held a CPE training webinar titled, Mastering PE Reporting: What Every PortCo Finance Leader Should Know, sponsored by Planful.
Our subject matter experts were Deirdre Mullen, VP of Finance at Planful, and Kyle Steep, Solutions Consultant at Planful.
Following are key takeaways to this discussion. If you are interested in learning more, view the full webinar archive video here.
“Many PE firms rely on spreadsheets or a static report sent by email to monitor portfolio companies. 54% of PE port co-respondents in our next in survey use an email with an attachment to collect data and respond to requests. 36% simply write a text only response via email.” – PwC
Reporting Challenges
The first is data. And reporting required for PE firms typically comes from a variety of systems. You could have to pull your “historicals” from your ERP, your AR and pipeline numbers from your CRM, employee data from your HRIS, and then you need to also pull in your forecast, however those are, whether it’s in a tool, or it’s in Excel or Sheets, and then somehow aggregate all of that, do calculations on it, and put it in a presentable format for your owner. It can be messy, incredibly manual, very prone to error, and data can be different from system to system or change historically, and you don’t know why.
Another challenge is timeliness. Not only are those reports messy, but they take time to put together if you don’t have them standardized. If your PE backer wants reporting quickly every month, it can be difficult to turn this around. Especially when you must have accounting closed and you have to update your rolling forecast and then you have to put all of this into a report. It takes some time.
Standardization: you might have to report to different providers. Maybe you have to do one report for your PE firm monthly or a quarterly basis. Then you might have different reporting requirements for a lender, for instance, and so it makes it difficult to standardize if you have all these different parties that you’re sending these to.
Forecasting and forecasting accurately and timely: if this is all being done in Excel sheets, it’s a lot more prone to errors. Updating with actuals is much more difficult. It’s harder to build and lock various scenarios or do look backs on them.
Resources and talent constraints: in finance, you are generally told do more with less. Reporting takes time to set up and operationalize. It’s also tends to be a lower priority sometimes because we’re trying to run the business and don’t have the bandwidth to set it up to scale. Integration of operational data. As mentioned in data, the data point, a lot of reporting requirements are beyond financials. You might have to say, how is a particular revenue segment? How is their pipeline looking month over month? As you know, that’s something we’re focused on. And it can be tough to integrate that into your reporting and standardize it because, you know, it’s coming from your CRM, for instance.
And lastly change management, if you have a new owner or asked to follow new reporting processes that you have in the past, it can be tough to not only get used to that change but set it up and set it up to scale.
Best Practices
If you have reporting packages already set up, it’s an easy format. You’re not building it every time you get a request. It’s easy to update with actuals. I think that is, as we just saw, one of the biggest pain points. In my past life, when I was more in VC-backed multiple owners, not just one PE owner, and you would get a zillion requests every quarter, and all slightly different outputs. I built a standardized reporting package to just push to all of our owners when I was there. Not only does it make you look like a more responsible port co, because you’re giving them information before they even ask for it, but truly, it made my life a lot easier because I wouldn’t have to fill out 12 different templates every quarter. So I can’t recommend it enough.
Centralized data and tools: aggregate the data into one tool and you can make it easily available to different stakeholders through self-service dashboards, et cetera. Strong data governance, so align with other teams on what the single source of truth is, ownership of data definitions, KPIs, et cetera. As a leader, I truly believe that good data is the most important thing you can have in finance. And one of the first things I did at Planful was create a data group with our various ops teams so we could all be aligned on how we’re looking at the data, pulling it, et cetera, just because I’m sure a lot of people can relate to this. Our sales team was looking at pipeline one way. We were looking at finances again another way. It would cause conflicts at the leadership level, or we would report slightly differently to the board from team to team. So, getting aligned there can make life a lot easier.
Accelerated close and forecasting processes: this is a lot easier if you have an FP&A or reporting tool in place but trying to make your close as quick as possible and then improve upon your rolling forecast with various scenarios. It just makes you better respond to any changes in the business as quickly as possible and lets you focus on other things rather than reporting.
Dedicated portfolio operations and finance team: having a member of your team be the designated liaison for the PE firm and just partnering better with the PE firm on best practices. They’re a resource for you as well, and they want to make sure that your team succeeds. And so being in lockstep with their team is incredibly important. By doing all the above, you’ll have more time to focus on the actual analysis of the business and forecast and ensure you’re growing as efficiently as possible.
And then lastly is cultural alignment. It is getting aligned with your PE owner is very important in terms of expectation setting, you know, when do you need these quarterly reporting packages for me? Is there anything else we need to be aware of? When would you like the board deck pre-read, for instance? And then also doing that internally with all the different stakeholders that you would rely on for your various PE reporting. Just making sure that the ops teams have, or Deal Desk has your CRM closed by “X” Day. So, you can do pipeline reporting by “Y” Day. So just trying to get everyone aligned internally.
To learn more about PE Reporting, watch the full webinar here.
ABOUT THE SPONSOR:
Planful helps customers achieve peak performance, driving prosperity for their shareholders, their employees, and the communities they impact. When businesses run better, they create a better society. Planful products help Finance and Accounting plan, close, and report with speed and accuracy; Human Resources build winning people strategies; Marketing plan for and deliver more business value; and others across the business thrive in any environment. Learn more at www.planful.com
