The Strategic CFO: Balancing Agility with Financial Controls Optimization

Megan - 0:21: Today, my guest is Matt Collis. Matt believes that accounting is more than financial statements and reconciliations. Accounting provides insight into the health and opportunity of a company, and financials should provide timely and accurate information to the key stakeholders to allow for well informed and timely decisions. Matt is chief financial officer at PairSoft. Parasoft is one of the strongest financial automation platforms for mid market and enterprise organizations and comprises a product lineup that natively integrates with Microsoft Dynamics, Blackbaud, Oracle NetSuite, Oracle Financials, and Sage Intacct ERPs, among others. From procure to pay to fundraising and document management, PairSoft's automation solutions have been tailored over two decades to boost financial teams to the top of their industries. Matt, thank you so much for being my guest on today's episode of CFO Weekly.

Matt - 1:46: Thanks, Megan. Happy to be here.

Megan - 1:48: Today, our discussion is going to focus on scaling smart, the CFO's role in crafting a financial narrative that drives growth, And I'm really looking forward to this topic and learning about you and from your experiences. So let's jump right in.

Matt - 2:02: Super.

Megan - 2:02: So to start, you've had a diverse career scaling companies across different industries. So when you look back at this journey, what would you say was the most pivotal moment that shaped your approach to financial leadership?

Matt - 2:15: Interesting. I will say I started my career the traditional route, accounting, bank reconciliations, large companies, spent seven, eight years in audit. So really heavy on the technical accounting. But I always wanted to be a lot closer to the operations. I always, like, really felt that draw more than just doing the month end close. And really I would say the pivotal was when I had opportunities to start working directly with owners and CEOs. And then when I was able to join my first private equity backed business and was able to sit on the board and really get, talk tracks around the vision of the company and how my role as a CFO can play a part of leading the business to where we want to go. So really understanding the vision on how do I help guide the decisions and get us to those growth objectives. I had all the experience on the diagnostic and reading the financials, but really sitting in those decisions and those meetings on driving the business forward was crucial for me.

Megan - 3:22: Just along those lines, I'm always surprised that more companies don't do, like, rotational programs within finance because these days, it's so important for accountants and financial analysts to really understand the business.

Matt - 3:36: Exactly. They generally, like a lot of financial operatives, don't even sit and meet with the other counterparts, like in customer support or sales or on the development side. And so they're just reading the financial readouts. And the good thing about, I would say like some of the large organizations or private equity backed businesses is when you have really engaged leadership teams and you're doing monthly or quarterly off sites and you're really diving into all the different areas of the business, a rotational path would be, like, phenomenal. It would actually be interesting to see finance people actually, like, answering a customer service call. That would be I would like to see that. And

Megan - 4:17: from your experience, what do you believe is the critical financial narrative that CFOs should be crafting in early stages of scaling a business?

Matt - 4:27: Mostly, it really needs to be the CFO has to understand where the company is going and really believe it and be willing to, in some cases, challenge or bring objectively up to the leadership, the CEO, or other SLT members, the ability to get to those goals. Because sometimes what'll happen is when you're going to scale, many times a CFO might just say, well, I'm kind of on the sidelines, and I'm just reporting the numbers. Oftentimes, though, the leadership really looks to a CFO to say, like, are we going to achieve the objectives based on the actions we're taking? So if we expect to sign up so many new customers or grow revenue or invest in the sales and marketing, the CFO really has to run those, like, return the CACs. Are we getting the right return on investment? Are we getting the right sales quality that's going to convert to cash to get our sales goals? But so the CFO really should be taking the understanding the operational goals and objectives, running that through, like, financially and understanding, like, yeah, we're on track. And if we're not, to really circle back to the leadership and the CEO to say, this is what I'm seeing. These are the changes that we should look to make to make sure that we're aligned on the goal. So it is important when you're scaling and growing fast, really understand, like, what those key drivers are so you can play a pivotal role from a financial standpoint.

Megan - 5:57: And at PairSoft, you focus on automating financial processes for mid market and enterprise organizations. So how does streamlining financial operations support scalability, and how can CFOs ensure that automation tools are aligning with their long term growth strategies?

Matt - 6:17: Great question. Because when you're scaling and you're scaling fast, especially if you're in the mid market, two things are really important, timeliness and accuracy. You want to make sure that you've got a good system, which is kind of where Parasoft sits in this mid market. We provide a lot of really good, accounts payable and accounts receivable automation software applications and really making sure that you can process the transactions very efficiently, but then also making sure that the software that you're using provides enough granular reporting detail so that when you're doing your reporting and you're kind of understanding the business and you're kind of matching up, okay, this is where the vision is, where I expect to be. Now we've done the reporting. How are we lined up? And we want to make sure that that data is timely. So efficiency is key, but then also accurate. So you want to make sure that you can course correct in a timely fashion, especially when you're scaling quickly. That becomes very crucial.

Megan - 7:17: I'm just curious, but for organizations out there that haven't fully embraced automation, especially things like AP and AR? What do you think is holding them back from doing so?

Matt - 7:30: There is a bit of the unknown. I think that their accountants traditionally tend to stick with what they know. That mold is breaking. I mean, I think, you know, as everybody's getting more and more familiar and comfortable with AI automation, which we provide some AI automation features within our software. But the more that they can embrace and understand the benefits of having, like, tools that can really help them out and move quicker and faster, it's remarkable the speed at which you can go and just the accuracy. That's some of the things that are really, like, undervalued, in my opinion, is really, like, understanding the capabilities of the software and then matching up with the companies or consultants that can help to get you there faster. So sometimes I think CFOs or people in finance underestimate the value of just bringing on a third party and saying, hey, help me get to where I want to be. You're not alone. You can reach out, and we've got the right team members to get you there.

Megan - 8:31: That's great advice. And in your experience, what are the most common financial pitfalls that businesses face when they're trying to scale, and how can CFOs proactively address these?

Matt - 8:43: With scaling, generally, you're going to have a multiple, like, new business growth ideas. And so when you're scaling, it's important for CFOs to understand, okay, what are what are the areas of growth? Which areas growth present the highest risk? So it might be like a new revenue stream, a new product, a new geographical area that you're trying to go out and capture. The biggest pitfalls is if you're not tracking these growth initiatives to make sure that your course correcting fast enough. And so in high growth businesses, there's an old saying they call it cash is king. So for your listeners that are like longer in the tooth around finance, everybody's probably experienced a cash flow crunch, and that's generally because you want to grow and you want to reinvest. And so it's really that managing of the investment, but then making sure that you're investing in the right area. So in my career, really understanding where the risky areas are in the growth strategy, making sure that we're tracking and monitoring there, and then also making sure that I'm providing the right feedback to the leadership team on what's working, what's not working, and where should we course correct.

Megan - 9:56: And storytelling is such an important topic these days and really seems to be part of the evolution of the role of a CFO. So in your opinion, how important is it for the CFO to be able to effectively communicate key financial data to nonfinancial stakeholders? And do you have any examples of this in your previous roles of where this was important and how you did it?

Matt - 10:23: I would say that it's almost going to be like a course requirement here. In, like, the next five years, I feel like having accountants do speeches and being able to to articulate how the business is performing versus saying, like, we're up 10% or down 5% of revenues, but really saying our sales were this product was down by 5% or the marketing efforts weren't returning this level of activity. But when I generally do my storytelling, I try not to focus so much on the specific numbers, but I might more talk about the underlying activities. So it might be like in software specifically, we focused on retaining customers. So a large amount of our revenue is really around customer retention. So if I'm talking about our revenue goals and how we're achieving those goals or not achieving the goals, I'll spend more time talking about our retention. Like, how well are we doing retaining our customers? Are we above target or under target on losing customers? How much revenue are we growing within our customers? Because ultimately, those are the drivers that mean something to the operators of the business, and they can really understand that. And then so I try to tie in non financial metrics to the financial metrics. And then like operational side, we look at like headcount, total, like maybe some headcount costs. This is a headcount we are expecting to invest in the new area to do drive more value or to invest in more software applications or features or functions. And so I try to get beyond just the financial side and really kind of get it to the operational metrics that the team are looking at. So oftentimes what I'll do in each company is when we are meeting cross functionally with the other leaders of, like, the developers or customer support or sales, I look at their metrics that they run their business and then I will then speak to their metrics as to how that's impacting the business. And so it really becomes something that they can relate to versus finance being completely separate. So it is a little bit different for each company, but in my past, specifically here at Parasoft and my last couple companies that are software related, a lot is tied to the retention. But it could be very different in manufacturing or another, like, product services that you're selling.

Megan - 12:44: And how does the CFO's role evolve as a company grows from startup to more mature, particularly when it comes to crafting a financial narrative that speaks to investors and other external stakeholders?

Matt - 12:58: In the beginning, your CFO will wear as many hats throughout the journey. Yeah. But the role definitely changes from where you might initially be really focused on scaling the team. So I would say, like, in the beginning, probably somewhere that 40,000,000, maybe a 100, a 150 employees to close to a 100,000,000 revenue and 300 to 400 employees. You're really focused on making sure that you've got the right systems in place and the right people in place to scale. That's crucial. That big jump from, I would say, more of, like, your company as maybe, like, a founder based company that gets you to that $3,040,000,000 in revenue mark to getting that business scaled up to that 80 to 90,000,000 in revenue. That jump, the CFO, really should be making sure that they are getting the right systems in place, the right people in place, the right processes in place. So you're really focused on building that. Then once you get over a 100,000,000, you're now coaching that that that team, the systems in place, the people are in place, and now you're really more focused on how do we now integrate probably more M and A. So now you're transitioning your phase into making sure that we've got right culture strategy, product strategy, go to market strategy, and we're rolling at the right rate. So there are different phases, which I've done all three phases, and they're fun and challenging at the same time.

Megan - 14:29: And as you look back on your career, what financial strategies or metrics have been most essential for positioning a company for growth, and how have you used them to attract investments?

Matt - 14:41: I would say the number one strategy is understanding where your product sits and in today's market and what features are you bringing to the market? Where is the market heading? There's an old Wayne Gretzky. Hockey quote says you skate to where the puck's going to be, not to where this puck is. And that holds true in business. You always have to look to see where is the market going and the company making sure that it's aligned on its go to market strategy. In my role, it's heavy on the product and making sure that our product strategy I mean, here at Parasoft, we meet monthly and do a deep dive on our product strategy because we oftentimes might have to pivot month to month, not completely re craft it, but we're looking to see where is the market going, making sure that we're aligned, making sure that we're bringing the right value to those customers and where the customers are going, where we they think they're going to need it. And that's definitely going to be critical as companies grow as they really have to really have their fingers on the pulse of where the market's going and how do we continue to bring value to our customers.

Megan - 15:51: And successfully scaling requires improvements in processes and efficiency. So how is it that you approach developing a scalable financial infrastructure and what technology platforms have been most effective in supporting that?

Matt - 16:06: A lot has to do with the scaling is making sure it's the right fit for the company at the right time. Companies, as they grow, your traditional, like, accounting systems, which might be like QuickBooks when you're really small, then you might have your Sage into NetSuite, which is like your mid market. And then you get to, like, full enterprise. You're kind of in that, like, SAP and Oracle. And making sure that as you scale, that you are matching that right system for the company's needs. And I've done the jumps from your QuickBooks, your small, to your Sage and your NetSuite as you went to grow but it's also making sure that you've got the right ERP and the right I would say like additional system applications. So, like, where Parasoft sets is, like, we do the additional stuff that is much more robust than what you get, like, out of the box or, like, your standard, like, Sage or NetSuite that allow the customizations to the workflow strategy so that you don't have an employee that's doing a bunch of manual coding work or manual steps that can really be automated. So it is very critical to understand the process. So oftentimes, you know, as we're scaling the business, I'm doing a every six month check on the team. Because oftentimes, just checking on the team to understand what their pain points are, I can then identify, is that a pain point due to a system or process? And whenever we can involve a better, like, either process or application, that's what's important to really set us up for the right scaling to grow.

Megan - 17:44: And as you're scaling, how is it that you balance the need for controls with the need to remain nimble and continue to take risks?

Matt - 17:53: Risks. Do CFOs take risks?

Megan - 17:56: Hard for that, I know.

Matt - 17:58: So I would say from my experience and background, really understanding, do we have, I would say, adequate compensating controls? You don't want to overburden the system if the risk is really small, to your point. And making sure that there's, like, an adequate like, when the company's small, oftentimes, the CFO will probably review. They won't let it cut every check, but they'll probably review to every payable that goes out. As they grow, they won't. So it it becomes very important that as you grow and scale, you get to a point where you go, okay. Now I've entrusted my controller to review all the payable checks that go out because that's a control. But then I might have, as long as I know I have somebody else, like, doing the bank rec. Okay. I've got, like, segregation of duties and compensating controls. So it just becomes important that in order to make sure you have a you want to get as much capital to grow the business. And to do that, you don't want to overburden operations. So like in finance, it's more of an operational back office activity. It provides tremendous amounts of insight into how we're doing as a business, but at the same time, we want to make sure that we're effective and efficient so that we can deploy as much capital as possible to grow the revenue side of the business. So that's really it's a balance as you grow and just making sure that you've got the right systems in place and and processes of segregation of duties where there's always going to be a level of risk. But to your point, it's an acceptable risk that you can kind of manage as you grow on scale.

Megan - 19:31: And as a CFO, you work closely with various departments to drive growth. So how is it that you foster cross functional collaboration to ensure financial narratives align with overall business goals?

Matt - 19:45: I do spend a lot of time really understanding my cross functional leader counterparts and really understanding their business and maybe the struggles they're going through. Because I want to make sure that when I'm building like my forecast or my budget and I want to make sure I understand like, oh, they've got a pain point where they might be short staffed or they might need a new application. So asking those questions around, do you have what you need? Are you going to be able to deliver on the growth and goal strategy? And and to be open and honest and say, like, it's okay if you're not. Like, I'd rather know if we have challenges that we need to adjust our our plan or our strategy. And and oftentimes, they, as an operator, might not know what capabilities they have from a financial standpoint. And I say, well, you know, we could do this strategy. We do this strategy, and this is how we can redeploy some of the costs to really help you meet those goals and really making sure that you'd form that relationship. And it's not just you're in your lane and I'm in my lane, that that really we're all part of the same organizational team trying to make sure we get to the same strategies. So I do really make sure I take the extra effort to understand where they are as a leader and what challenges they're they're facing.

Megan - 21:06: And when you're going through that budgeting process, is it collaborative, or is it something that's top down or bottom up? How does that process look for you guys?

Matt - 21:17: I would say we try to strike a fair balance in the middle. We have our financial goals and metrics being a high growth company with really good, profitability margins that we're maintaining our profitability margins. We're also hitting our growth strategy. But fundamentally, it generally starts with what is our strategy from a go to market, like, what are we trying to deliver? What are we trying to grow? And then working down to say, like, do we have the right tools in place to get there? Then we'll say, okay. Now that we've kind of built out the strategy from a cost growth standpoint, we look back and we say, okay. Where are we from metrics? And so we track what was our gross profit percentage? Where do we want to be? What do we want to spend as a percent of sales and marketing as a percent of revenue and development? Are we capitalizing enough software? Would in and of the ways of saying, like, are we reinvesting enough developer time to grow our software application? So we'll just take a step back and make sure, like, now we have all these metrics and now how do we bridge those two together? So it becomes very, very collaborative. But also if we have anything that does not align, really meeting as a team and saying, my job as the CFO is really to explain why this metric might be important, what is this growth strategy, and really making sure that there is buy-in and understanding across the leadership team. That it's not your CFO's job isn't to just say like, here's the number and this is what we're going to manage to. Because I actually want to have the push and pull of the leadership for them to say, well, hey, maybe we should spend a little more in sales and marketing and less in G&A or vice versa. Like, nothing is completely cut in stone just as long as we are achieving our long term objectives.

Megan - 23:09: And looking ahead, what are some of the emerging trends that CFOs should be prepared for, especially when it comes to scaling their company?

Matt - 23:18: The biggest trend that I am seeing is really making sure that you're managing the growth and maximizing your cash flow. So you have to make sure that you're hitting your right revenue metrics. But it's when you look at understanding where you're deploying your dollars to say like, are we deploying our dollars in the most efficient and effective manner to really grow the business? And oftentimes what'll happen is like a company might just be set and, like, this is how we run the business. And what I like to do is I actually kind of like to look at the business and say, is that really the best way we can spend the money? Is there another way that we could look to redeploy our dollars and really grow? Then the front may cross functional, like, you can't bring up being the storyteller, is the CFO. The trend is getting beyond just how did you report on the numbers, but really being part of the leadership story, being part of leadership team, and being, really a seat at the table to kind of help drive those decisions to say, like, these are other opportunities that you're seeing from a financial and because some things might come up and say, little things like, surprisingly enough, is bringing up, this is our margin on this product. We might make 80% margin on this product. We may make 50% margin on this product. But oftentimes, a CFO might see these different margin of these different products, but it might not be articulated to the go to market or some of the developers. And so, really, they bring this around and, like, the information that they're seeing that they can really say, like, hey, what if we take this product at the better margin and we really start trying to push that product out into this new region? Because if we do that, that has a better margin than its other product, product A or product B. Some of these things that I'm saying might sound like everybody should be doing that. You'd be surprised how many CFOs don't do that. How many CFOs see the information, but just say, well, that's not really my role. That's really like the sales and market or the marketing role. And not being afraid to kind of voice what they're seeing and and bring that value to the table is a great opportunity for a CFO to play a larger role.

Megan - 25:37: And just one last question, but working for a company on the cutting edge of automation and AI, where do you see that headed? Do you foresee a day where there's no need for accountants, or where is the profession heading?

Matt - 25:53: I would say that it's very similar in finance as it is in other areas that are not finance, that there was a quote, it was like a year ago, and it was, AI is not going to replace somebody's role. Somebody not learning AI is going to lose their role. And so this is where I think that in finance, it's more about embracing AI as a tool to provide more insights and throughput to the business, not so much to worry about their role being removed because what I've found is as long as you're embracing all the technology that has to offer, it just allows you to bring more value. It actually, like, it makes you more valuable than it does the other way around. And so it's more, I think, that when a company or a leader doesn't embrace it is when they have the bigger risk of potentially not being as valued in the business. But embracing technology, embracing the opportunities of AI, which is where Parasoft has really spent a lot of investment to grow in that area, both internally and externally for our customers, is where I think it's, like, fun and exciting.

Megan - 27:07: Matt, thank you so much for being my guest today.

Matt - 27:10: Thank you for having me. This was a lot of fun.

Megan - 27:12: Really enjoyed speaking with you, and thanks for finding the time today to be here with us to share your experience and knowledge.

Matt - 27:19: Appreciate it. Thank you, Megan.