First-time FD for a growing software company

Sep 06 2017

Background:

The company had just completed a significant equity raise to fund a pivot from games making to building a platform for distribution of games. The investors required a finance person to free up the time of the MD, implement appropriate financial processes, improve the quality of management information and external reporting, and work with the company towards a fresh rise in 9-12 months.

Challenges:

Quick start and learning process with a major software development project ongoing
The company is virtual, with no central office and team members working remotely
Managing cash flow and controlling the cash burn with limited revenue and rigorous milestones imposed by investors
Implement financial discipline in an owner managed company
To create a budget and long-term forecasts to better inform financial decisions and provide structure for the next funding round

Solutions:

Working closely with the MD I created a clear summary cashflow which shows intuitively for non-finance professionals where the company is spending investors’ money
With input from the MD, sales director and product director I created a 5 year financial model that allowed the company to make projections with considerable flexibility on assumptions and the commercial model
Working with the external accounting firm I made monthly closes more routine, and redesigned the chart of accounts to better suit the company’s operations and future shape
Processes that are now better designed for the size and nature of the company are invoice approvals and payments, international transfers of funds, overseas payroll and admin, invoicing customers and receiving cash on a timely basis
Communication with investors has been more regular and informative.

Benefits:

In working through the above challenges the company has gained the trust of investors
The company now has clarity on cash burn and cash flow management, often in tight moments
The company is now more able to raise fresh funds
The MD has found additional time to work on commercial and operational challenges, without the burden of finance which he previously carried alone.

“Edward’s work has been important in the development of the company this year. We are way more organised than before, have clarity on our cash burn, and have credible forecasts that we are discussing with investors for our next fund raise.”

Case Study: Edward Leek

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