EXCLUSIVE: “Hiding in plain sight” – Mark Aubin, Aptitude Software in ‘The Fintech Magazine’
Financial data and how it is presented can make or break a fund-raise. Mark Aubin, Aptitude’s VP of Solutions Consulting in North America, explains how its software solution can make life a lot less stressful for capital-seeking CFOs
The spectacular corporate shambles and real-life consequences for employees and investors that can result from not having the right revenue recognition and reporting systems in place – informing strategy and telling an accurate story of business performance – prior to a major fund-raising event has been reflected in the headlines around many an initial public offering (IPO).
At the eye of the storm is the chief financial officer (CFO) – a role that has morphed from passive reporting of historic financial positions and compliance to a figure with considerable influence at board level, vis-à-vis a company’s future potential and the investment needed to realise it, from angels, venture capitalists, existing shareholders or the markets. Financial transparency, specifically how accurate and retrievable the data is around revenue recognition and management, comes under intense scrutiny in the run-up to a fund raise and especially an IPO. And the CFO can find him or herself in an uncomfortable spotlight if that data is not squeaky-clean and presented honestly and accurately.
“A CFO needs to ask ‘do I have the necessary access to my data?’,” says Mark Aubin, VP of solutions consulting in North America for Aptitude, which specialises in accounting compliance and financial guidance tools for the CFO office.
“When you become a public company, you are going to be scrutinised by your new investors, the regulator and analysts, as well as your own board and employees. If a company isn’t prepared for its IPO and the regulator has questions about how it’s accounting for revenue, that could delay its access to sorely-needed capital. So, if it doesn’t have its revenue management processes, data, and reporting in place, the cost to that company could be substantial.”
The disaster that was WeWork’s aborted IPO in 2019 probably ranks as the highest-profile revenue management mess of recent years. The shared office space business finally went public in October via the mechanism of a special acquisition company (SAC), but at a value of $9billion compared to the $47billion valuation given by its principle investor SoftBank back in 2019. In the eyes of analysts, WeWork’s failure was employing the tactic so loved by cash-burning, loss-making technology firms – non-GAAP (generally accepted accounting principles) earnings figures, to give a polished spin on its potential for profit.
Media commentators tore its management to shreds over metrics such as ‘community-adjusted EBITDA’, which took an already-complimentary EBITDA (earnings before interest, tax, depreciation and amortisation) figure, then subtracted costs such as rent and tenancy expenses, utility and internet costs, building staff salaries and the cost of building amenities. The use of EBITDA in earnings calls with analysts has apparently soared among tech and media firms. Last year, the Daily Telegraph reported that its analysis of data from Amenity Analytics showed non-GAAP figures were mentioned 19,398 times in earnings calls in 2019, compared to 8,573 times during 2010.
Meanwhile, even a long track record of stringent auditing is no guarantee an IPO will go well. Madhur Deora, CFO of Indian payments giant Paytm, said his business had been opening its books for a full audit for 13 years in order to meet the demands of investors when Paytm was still a private concern. In an interview with India’s Economic Times, not long before it hit the market in late 2021, Deora stressed that ‘with regard to revenue and the path to profitability, we’ve been able to demonstrate in the financials… that we have come a long way in the last two or three years’. But Paytm shares still crashed by 27 per cent on their launch day in November, wiping $5billion off Paytm’s value.
Company shares aren’t known as ‘risk capital’ for nothing, but having as clear a view of a business’ financial position as possible is vital for bosses and their investors. Indeed, even outside of a funding round, Aptitude would argue that it’s essential for determining whether a company is in a position to make strategic change of any sort. Its Accounting Hub suite is designed to give CFOs that insight.
“The CFO’s office has traditionally focussed on two areas,” says Aubin. ”Those are compliance and stewardship of the business – everything to do with cash flows, accounting, regulatory reporting disclosures. And then financial planning and analysis, or FP&A. This has always been under the stewardship or guidance of the CFO’s office but we’re starting to see a big change in the connection between those two. It was more of a handshake before; now it’s becoming an interactive activity between the past and the future, to be able to make sure the company is making strategic decisions based on what’s going on in the company today, and where it might go tomorrow.”
Aubin reveals that Aptitude Software staff listen in to the analyst calls of its publicly listed clients to assess how clued-up their executives are: “Because we want to know what those KPIs are and what they are reporting back to investors about the company’s health. It’s always interesting to hear the investor analysts ask questions on the fly, and see how quickly the CEO and CFO are prepared with the answers. Because, if they’re giving good answers on the fly, it means they have good access to the data.”
Aptitude’s Accounting Hub software aims to be the solution that meets all accounting needs, from automating accounting for a business’ various teams, departments or subsidiaries, meeting the needs of regulatory reporting, and then harnessing data so that it can be used to guide forecasting and strategy.
“We have products to address various compliance guidances and our core product, the Aptitude Accounting Hub, is an enterprise accounting rules engine and subledger,” adds Aubin. “It takes all the business events, all the calculations, creates the accounting entries and establishes an enterprise subledger, with balances, to a level of deep granularity and attribution, before sending summarised journals into the general ledger. We like to say we’re ‘putting the general back into the general ledger’.
“We want the Aptitude Accounting Hub to be the business’ thick enterprise subledger, to support management reporting, regulatory reporting, strategic reporting, so that the company can be as nimble as possible.
“CFO offices are realising there’s a lot of data that can immediately influence strategic decisions,” Aubin continues. “A CFO already has a seat at the table for strategic decisions, but now they’re often the enabler of those decisions because they have the best view of the company’s health. Rather than being in a reactive mode, answering the CEO’s questions, the CFO can present opportunities, they can say, ‘this is where we can go as a company’.”
Aubin adds that being able to harness data to look forward can improve a business’ agility at a time when digitisation is allowing firms to look afresh at their business models – a subscription-driven revenue model being one example. With a clear line of sight on the data, a clued-up CFO can help lead that change rather than scrabbling to react to it.
“The CFO will have been focussed on ensuring the company is running as optimally as possible, then the business model gets flipped. The sales team may want to hit a new market or move onto a subscription model,” says Aubin. “Does the business have archaic systems and processes that are going to stifle its progress? Or does it operate in line with best practice and have everyone at the table, finance included, pulling in the same direction? In my opinion, the CFO’s team needs to be there in new market discussions, providing the data that will justify pricing and bundling decisions, based on past, current and future financial analytics.”