From cash-basis chaos to a clean audit in 4 months.

The situation

A ten year old industrial SaaS / analytics company whose main product line was driven from hardware sensor installation was acquired by a strategic investor looking to streamline and scale the business through operational efficiency improvements and industry connections. The problem was that accounting had always been done on a cash-basis, no product line or customer segmentation existed, and given the investor wanted the organization to continue to exist on its own, rather than folding it into the larger existing business, the new executive team needed insights on where to focus their attention, but they couldn't trust the financial data they were reviewing.

What we did

The Ibex team was engaged to transform the past two years of financial data to GAAP-compliant accounting, with a heavy focus on recurring revenue recognition for multi-year contracts vs one-off projects and consulting revenue. The Ibex team looked through two years worth of contracts and invoices (roughly 3,500 transactions across 400+ customers and 4 product lines), analyzed the data, and:

• Created recurring and non-recurring revenue accounts as well as deferred revenue balances.
• Developed a new chart of accounts and class splits to showcase the different revenue and expense drivers of the business, namely splitting personnel costs between a single payroll account to COGS, R&D, Sales and Marketing, and G&A personnel costs, allowing departmental and product-line profitability analysis and driving major insights into pricing decisions and contract negotiations.
• Helped coordinate a migration from Paychex payroll / 401k to Gusto/Guideline, significantly reducing cost and drastically increasing the user experience from both administrators and employees.
• Implemented Ramp for automated expense coding and streamlined close process, removing employee reimbursement lag and enabling real-time spend analysis and cost-savings insights.

The result

Within four months of engagement kickoff, the Ibex team completed a multi-year cleanup in time for prompt tax filing and a quarterly board meeting. Board members had been asking for GAAP financials since the transaction and were delighted to receive access to financial reporting that met the quality they expected. The analysis of the financials performed by Ibex raised strategic questions around unprofitable business lines, and whether or not they created enough strategic value to be a loss leader. Finally, the work done by Ibex and their guidance during the audit process allowed the organization to pass its first audit ever within two months, surpassing both board and auditor expectations.