Compliance Risk & The Fast-Growing Company


Many startup businesses and more mature mid-sized companies are growing at a fast clip these days, and rapidly entering new global markets and geographies. While operations personnel inside these businesses are focused on maintaining this pace, the finance organization must ensure compliance with disparate and evolving accounting standards and reporting regulations across these regions.

As the CFO of a company expanding its global footprint, I can attest that it’s a delicate balance to maintain regulatory compliance and not slow down the engine of market expansion. Fortunately, we’re in the business of selling accounting and finance solutions that automate accounting tasks. Our accountants are largely freed from manual, labor-intensive tasks to provide value-added insights on regulatory compliance.

This is not the case at many other companies. That’s because their accountants are consumed by manual activities, collecting, scanning, faxing and even personally delivering paper forms to ensure the financial data is accurate. Sometimes these files are misplaced or lost—not the best situation to be in as the clock ticks toward closing the books. It’s also no way to set the stage for an efficient audit.

Worst of all, smart accountants become little more than bean counters, and stressed out ones at that. They have little time left to lend their experience to insights on compliance risks, much less the many other strategic concerns of import to the Office of Finance.

Finding Mistakes

This is especially problematic when companies are rapidly expanding their global footprint, since the brisk pace adds to the risk of technical accounting errors. Before the monthly, quarterly, or yearly period-end, accountants must identify these mistakes and determine where they originated. The manual work piles up, compounding the possibility of a miscalculation. Without an automated system helping management oversee the performance of accounting tasks worldwide, audit risks in a fast-growing company rise, especially in cases where the controls may be hastily designed as an afterthought.

Rapid market expansion also creates resource allocation challenges for the CFO, who must ensure that the right level of capital is in place to support the growth strategy in each region and market. This is a difficult proposition when there is little if any visibility into capital flowing in and out of the business. The CFO can be perceived as a “wet blanket,” reminding personnel to stick to the budget or saying “No, you can’t spend money” on this or that. No one wants to be thought of as the person who curtailed the company’s market growth at a critical juncture.

This brings to mind an interesting article I read a few years back about what was then the fastest-growing business in the world. The company’s CFO didn’t want to slow down the locomotive by restricting the capital that fueled it. At the same time, he was concerned that the organization’s accounting environment and control structure were failing to keep pace with its rapid growth.

Money poured in, but from where? This was troubling, as each new region where the business planted a flag had its own accounting rules and reporting standards.

This story may resonate with the CFOs of other businesses growing leaps and bounds: the startup with a disruptive product looking to capitalize on its early mover advantage or the growing mid-size company with a hot new product or compelling upgrade. Without automated accounting processes, they too may be forced to make difficult decisions that stall the growth engine.

BlackLine’s Experience

Thankfully, the accounting aspects of our growing pains at BlackLine have been mitigated by automation. We’ve deployed our own cloud-based solutions and those of other software providers, automating our accounting, billing, sales, expenses, and so many other processes. We’re nearly paperless and headed in that direction.

As a customer of our own products, we’ve reduced the time it takes to close the books from 15 days at the inception of the company to four days today. F&A staff members at our headquarters in Southern California don’t lug hard copy binders jammed with paper files or hang out at the photocopier and the fax machines.

Other fast-growing businesses can do the same.

By implementing Continuous Accounting, which embeds the period-end tasks within accountants’ day-to-day activities, companies can mitigate their accounting and control risks. Costs are lower, since there is less need to employ additional accountants or other temporary help at closing time, while automated tools free up the accountants to provide value-added insights and services. That’s great news for fast-growing companies confronting the hodgepodge of accounting regulations and reporting standards worldwide.

Rather than be the naysayer when operations come calling for capital to grow the business, the CFO is a strategic partner in the market expansion. With visibility into the flow of capital, the CFO can confidently say, “Yes, you can” do this or that, as the engine of growth accelerates.