We talked to flinder’s Alastair Barlow to find out more about their approach to driving a start-up’s growth.
What’s an example of a typical flinder client?
We are a little different to other accounting firms because the reason we exist is not to fulfil year-end compliance requirements. flinder is actually about supporting businesses meet their objectives, achieve their vision and helping them to get there faster.
Given our backgrounds, we tend to work with more challenging businesses that other accounting firms may struggle with. Those that are quite complex by nature, like a marketplace. Here, the flow of transactions is hard to follow, understand and account for; with lots of data involved and possibly multiple entities. Other clients may include technology businesses and quite often developers of technologies like VR, medtech, fintech, etc. About 80 per cent of our clients are fast-growing technology businesses that are equity-backed and based in or around the London area. On average, our clients received 2.7m from investors in the last 12 months; which indicates the type of support they need to demonstrate strong control but also insight for themselves and their experienced investor groups. They do need investment as they’re in a growth phase with very exciting business dynamics, and with fast growth comes continually increasing demands from other functions to keep pace.
You have a lot of start-up clients. In your experience, what are the key points that make start-ups interesting for investors?
Obviously, high growth rates and a clear business plan are important. But so is a great founding team, which is quite literally the foundation of it all. And to stand out from the crowd of other businesses competing for investors’ interest you also need to show a clear and up-to-date picture of all your key business metrics.
Something immature businesses often struggle with is having the right processes and infrastructure in place for proper control. Thinking about efficient controls might not be a favourite but investors really care about that, and lack of control is a big turn-off for them. Investors always check out the possible risks and what kind of controls have been set up, whether they can trust the numbers presented. Control is not sexy, true. But it’s simply indispensable for any business in order to scale sensibly. Investors want to know how the funds will be deployed and monitored.
The most successful founders tend to be those that put an obsessive focus on their KPIs and constantly experiment to optimise them. So, it’s important to keep on top of the following metrics: CAC (customer acquisition costs), LTV (lifetime value of a customer), LTV:CAC (ratio of LTV to CAC), CAC recovery time, FCB (forecasted cash burn), MAU (monthly active users) and CRR (customer retention rate). It’s these metrics that tell investors (and even more importantly, the founders) if there is a future for the business.
So, how does flinder help businesses achieve this?
We transform and leverage their finance function, we call it “the flinder effect”. The value drivers for such a transformation are efficiency, control, insight and these are enabled by people, processes, technologies and data. Data is valuable as it opens up new ways for making better decisions. With accurate data, finance professionals become a business storyteller when they partner with a company on strategy. Standard processes that leverage technology are absolutely key to delivering the required value drivers, they will enable efficient transaction processing with embedded controls.
What kind of technology are you using to advance data, processes and people?
On the technology side, we apply selected software to enrich the information rendered by management reporting: Xero for most cases as well as ApprovalMax for multi-entity companies coming to a mature state that requires sufficient control in terms of data governance.
Technology is crucial for obtaining meaningful data. Xero is great for structuring data properly, and ApprovalMax provides effective data validation capabilities and well-tuned processes so that high-quality data can be obtained in the quickest and most efficient way. The software we use compiles all data at the level of management information, which enables people to make better decisions. It’s critical to have structured, validated data – we all know GIGO, “garbage in, garbage out”. Management information, and in turn decision-making, in particular relies on good data sources.
How do you achieve high-quality data to facilitate a well-founded decision-making process?
One of our clients, a co-working space, is a multitude of legal entities in one business, so it needed a very robust control environment. All these entities are active, and there is a lot of spend in or around the group. For them we worked out what their delivery model could look like and set up several Xero instances as well as several ApprovalMax accounts.
Now, the process is much more seamless and they also have much more control in terms of data governance. They’re able to get the monthly information on each entity much faster; the painful exercise they had to go through before is a thing of the past.
We use Receipt Bank to publish invoices to ApprovalMax, and then into Xero. It gives our client a real insight into their expenses. They have a wide range of accounting codes, something you don’t necessarily see with your average client. ApprovalMax allows comments and the validation of all coding, a great benefit because this ensures that all data is accurate and ready for further processing – exactly what we’re after.