ISSUES & INSIGHTS's's

by Tom Mescall

High growth companies are focused on new products, building revenue and ex-panding, leaving little time or inclina-tion to manage back office operations. Constantly being asked to do more with less, many CFOs have turned to creative forms of outsourcing and cloud-based automation to improve their financial systems and staffing. This is especially true of high growth companies that want to keep the major-ity of their staff focused on developing products, finding and servicing cus-tomers. Collaborative Outsourcing of-fers an advantageous balance of value and control for today’s CFO.

Today’s Cloud Financial Services SolutionsOne way companies are saving money in the finance department is automa-tion of routine tasks. A multitude of cloud financial services solutions have gained market share, including but not limited to:• Financial management and ac-

counting solutions like Intacct, NetSuite, and Xero

• Tax software such as GruntWorx and SpeedTax

• Stock plan software packages like EASi and OptionEase

• Customer relationship manage-ment tools such as Microsoft Dy-namics CRM and Salesforce.com

Companies that use these technolo-gies internally take a “do it yourself” approach to managing their back

office operations. With Software as a Service (SaaS) arrangements, there is no requirement to purchase soft-ware and the solution adds value right away. Department leaders seeking to cut their individual IT expense line items are eager to make the leap to the cloud. Often, the IT department is not consulted before a cloud accounting services contract is signed.

Collaborative Outsourcing: Best of Both WorldsWe believe a future market trend will be Collaborative Outsourcing. This is where your outsource vendor will deliver their services utilizing a cloud technology. This allows the CFO and management team to access its sys-tem anywhere, anytime and allow the outsource vendor to access the same technology to carry out its services.A great example is outsourced account-

ing. The outsource vendor can pay bills, process transactions and produce financials using a cloud accounting so-lution. The CFO or finance executive can access the same system to approve expenses and run financial reports…Collaborative Outsourcing.

Firms that merge cloud software and outsourcing services to create Col-laborative Outsourcing solutions help the CFO organization remain focused on strategy, rather than the details of in-house staffing or IT sprawl. With Collaborative Outsourcing, control over financial data resides with you (the company), while the service pro-vider has the expertise to capitalize on cloud software for the management of day-to-day operations.

For instance, a growing technology firm may seek to bring order and disci-

© 2011 Armanino McKenna LLP. All Rights Reserved.

Emerging Trends: High Growth Companies Focus on Collaborative Outsourcing—Cloud Software Systems + Staffing Solutions

ISSUES & INSIGHTS's's

pline to its stock option program. The firm’s CFO has seen a few SaaS stock option systems on the market, but he does not have a manager with the full set of skills to manage the software and related reporting. Instead of conduct-ing the necessary activity in-house, the CFO can rely on an accounting firm with a Collaborative Outsourcing model that leverages technology for its clients.

Our firm conducted extensive research of all SaaS stock option programs and now recommends a turnkey solution to all pre-IPO firms. Armanino Consult-ing’s Equity Compensation Outsourc-ing solution includes:• Automated administration and

tracking of awards, vesting and exercising with a SaaS tool

• Set up and maintenance of the technology and staff training

• Periodic independent valuation of common stock (409A) for GAAP and tax purposes

• Quarterly/annual ASC 718 (FAS 123R) reporting and technical ac-counting support

This arrangement gives the CFO ac-cess to equity compensation expertise from a professional finance team and access to the stock option data without

barriers, while eliminating the burden of software implementation and main-tenance.

Armanino Consulting’s client Digital Chocolate engages with our firm for Equity Compensation Outsourcing services. “You’re not going to be a hero for getting stock option reporting right, but you will get a lot of grief for getting it wrong,” said Jack Chiew, Corporate Controller of Digital Choco-late.

The combination of financial manage-ment outsourcing and cloud comput-ing provides an improved platform for seamless and integrated financial processes and it supports management decision making by offering access to real-time key performance indica-tors. Collaborative Outsourcing allows companies to use the same technol-ogy as its outsourced accounting firm, so both the client and the accountant are accessing the same data, the same software application and speaking the same language.

CFOs who are evaluating cloud solutions, traditional outsourcing and Collaborative Outsourcing should ask themselves: Is this task part of our core competencies? If the answer is yes, then the company can manage the task internally with the use of leading cloud solutions. If the answer is no, the company can turn to its external team of experts who will use first-rate cloud solutions to manage the task. With Collaborative Outsourcing, the accounting firm implements the SaaS solution, trains the client, and main-tains the software and related data.

The CFO just logs on and consumes information. It’s as simple as using a smartphone app.

ConclusionCollaborative Outsourcing is great for high growth companies that don’t want to hire human resource managers, pay-roll managers, controllers, IT staff, and so on. Future Collaborative Outsourc-ing offerings may include management dashboards that offer a fresh, collab-orative and dynamic service in contrast to the dated, static financial reporting that accounting outsourcing has of-fered in the past. The accounting firm will design the dashboards, maintain stability, and provide added analytics. The CEO and senior management will log on from anywhere in the world to view his/her dashboard and analyze the organization’s business performance.

Rapidly changing business needs have placed a premium on the ability to stay nimble and flexible. In this environ-ment, Collaborative Outsourcing will play an increasingly important role, striking a perfect balance between value and control, for growing busi-nesses.

Tom Mescall is Partner-in-Charge of the Consulting practice at Armanino McKenna. He has over 20 years’ expe-rience in public accounting, manage-ment consulting and software develop-ment. Tom has extensive experience with Enterprise Resource Planning, E-Business, Customer Relationship Management and organizational Change Management for technology companies. Contact him at tom.mes-call@amllp.com.

© 2011 Armanino McKenna LLP. All Rights Reserved.

Collaborative Outsourcing: Best of Both Worlds