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Collate, Centralize, Manage - Why an investor (VC) should encourage portfolio compa

Light bulbs hanging against the cloud

I met David and Angela in the summer of 2016 to speak about how to manage the numbers for their portfolio companies. Their investment management company held interests in several entities across the UK, Beijing and Singapore. Their issue – extreme difficulty in understanding financial performance of the group companies. With the companies maintaining their books of accounts in each individual jurisdiction to suit its audit and compliance requirements, there was no centralised system that depicted the whole picture.

Beijing was a specific challenge as the ground records were kept in Mandarin (to suit tax and compliance reasons). To have the details extricated and presented in English took time and effort – costs being spend on it was not justified. Their question to me was simple, “Is there a way to streamline this and for us to be able to see what is going on?”

My solution – consolidate them on the cloud. And, accounting professionals who work with the cloud will agree to that thought in a heartbeat.

The pain point of the story is real. Over the years, I have spoken to VCs, equity firms and even some individual investors, who have similar concerns. There is no one way of doing things – but I believe a combination of man and machine could bring the desired outcomes in terms of visibility.

Here are the top reasons why I recommend anyone who manage a portfolio of companies to have their finances consolidated on the cloud.

Note – I have cited examples from Xero in this article as it is my software of choice. Other cloud software could offer similar facilities.

Data that’s visible and accessible

This is a no brainer, and yet: even now, companies are stuck with archaic methods of maintaining accounts. Consolidating data belonging to different companies under one umbrella is a significant step – one that brings the power of the “instant” to financial records.

With software like Xero, an investor can access different companies where he has stakes via a single platform. You simply click on the organisation you need to see from a list of companies you have access to,

My Xero Landing page

Image Credit – Xero blog -

At login, you have a dashboard that summarises key data – bank account balances, cash position, pending invoices, payments to be made etc.

Xero Demo company screenshot

You don’t have to wait for your portfolio company to send you the reports you need to see. The interface is easy to use and mostly self-explanatory. It can also be customised to show you the things you need to see on your landing page.

Trend Analysis

Some amount of effortless data analysis is possible on well-engineered software like Xero. I say effortless since Xero has these clever hacks that’s very visual. Like the blue graph that appears below the cash/ bank accounts – tracing the daily balances over the month. (See image below)

Or, the graphical representation of money owed under Sales,

Xero Assurance Dashboard

David (from the above example) shared an incident when we were going through the numbers once. A former employee needed to book a flight ticket and insisted that the usual spend on the same was in the region of “XXX” dollars. As a frequent traveler, David felt this was excessive, but he had to go through a few bank statements to check the historical spend on travel to satisfy his curiosity. Should I explain why he is a “former employee?”

Once we had this data on Xero, the information became available in a consistent format with the relevant details. Better still, it is just a click away. A marked improvement over pouring through bank accounts to trace your spending. For David and Angela, this meant immense peace of mind – that a system is available to check your numbers when you need it.

Cost and time save

This particular feature is attached with almost all new technology. After all, any new tech that does not save time or cost or both, is useless to modern business.

Is cloud accounting a cost saver – Yes.


There is usually a question of – does it get rid of people who do the j0b? Technically, yes if you like to handle admin, you could replace your bookkeeper. Practically – I would say it doesn’t eliminate the need for a professional who knows the job. It would make life easier and simpler in terms of updated numbers and the same being accessible. Noticeable cost saves include lower set-up and maintenance costs.

Nevertheless, a significant save for any business - It takes less time and associated costs to make a decision. We will stretch that thought a bit and think about what should happen during a funding round. As we know, the financials at this stage are crucial. If a company’s numbers are available in a consistent format that can be accessed by the right people, the decision to provide funding could be reached a lot faster, from the financial perspective.

From the perspective of a portfolio company, there is a tremendous amount of time and cost saved by eliminating the need for expensive clean-ups just prior to a funding round. This is equally true for early stage investors looking to exit at a Series A or B or larger funding rounds. Engage the investor with the ability to display your numbers in a non-fussy and transparent manner.

And, collating the information that’s required by the investor’s finance team is a lot easier with the right cloud tools. Here is a representation of a simple virtual financial due-diligence room.

A Virtual Financial Due-diligence room

1. This is a simple representation to show that much of a financial due diligence process can be managed online with the right tools.

2. We have shown different stages / phases in the process and it’s not exhaustive. The process followed by each investor group differs. The sequence shown here is to draw a logical conclusion that the process can be taken from a start to finish stage online. But as we know, many of these activities are inter-related and happen in conjunction with the other. For eg – an NDA will get signed before information is shared under normal circumstances. In the case of known parties and existing documents, this may not even happen. Similarly, communication is active through-out a fund-raising process.

3. To maintain simplicity, we have only mentioned a few pieces of tech. With the type of industry a company belongs to and the processes they follow, there could be more software tools involved. Eg – inventory add-ons or custom reporting / consolidation software etc.

The Bottom-line

We live in a time where getting information is easy, the internet is full of it. But yet, information that has the power to influence a decision is still elusive. With small-business numbers, the data that is crucial for decision-making can be easily "only a click away". No fuss and minimum hassle, it’s never too late to start this conversation with a portfolio company. As investors, you need to have first have knowledge of a company’s financial performance and not just what is sent over in an excel sheet. With the pressure to perform, installing stable processes often goes on the back burner with a portfolio company - and herein an investor can play a crucial role. It’s never too late to capture the cloud.



2. The pictogram for the virtual due diligence room is proprietary to Evalua8 Corp. Usage for the same is licensed under Creative Commons - CC BY-NC-ND license type. Read the license legal code / deed here -

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