Essential Financial Management Practices of Biotech Companies – A 5-Part Series
Article 3: Collaborative Systems to Support Flexible Reporting, Forecasts, and Budgeting
For Biotechnology companies, forecasts and budgeting is a high stakes balancing act. It’s necessary to find the right spending cadence and application of funding.
Collaborative forecasting and budgeting are essential to keep projects moving according to plan – maintaining an optimal pace while closely monitoring cash flow. Not spending enough could delay projects while spending too much could prematurely deplete cash before additional funding becomes available.
Biotech companies dependent on disparate systems spend hours – even days – combining spreadsheets to deliver comprehensive information managers need to make informed forecasts. When decisions need to be made quickly, those manual processes are a liability to the company.
What is your cash balance and how long is it going to last?
The big question for pre-revenue companies is, “What is your cash balance and how long is it going to last?”
“The forecast is crucial,” explains Andrew Graham, CFO at AgBiome, a biotechnology company located in Durham, North Carolina. “It’s not something that’s done in a vacuum with just the Controller and CFO putting it together – you have to get everybody in the company involved to get reasonable assumptions about funding and revenues, headcount and hiring. Because the majority of the expense in small biotech companies are headcount and expenses related to headcount.”
From cradle to market: collaboration not just limited to forecasting
“Successful teams are collaborating constantly and want technology tools to facilitate that communication,” observes Philip Massey, CPA and founder of Massey Consulting. “Certainly within budgeting and forecasting, but also within financial accounting.”
Perhaps there is a $2,500 expense related to general supplies that should be split between Project A and Project B. However, the entire amount gets assigned to Project C.
“Nobody wants to have another meeting or sift through email threads to get the issue resolved,” says Massey. “Within Sage Intacct, there is a secure social layer embedded in the financial management called Collaborate that lets the Project C manager to drill into the transaction and alert the accounts payable staff that the expense was assigned to the wrong account. ”
Sage Intacct Collaborate allows team members to deal with non-routine transactions such as clarifying policies, gathering missing information, resolving exceptions. And, it keeps track of the conversation: with a single click, team members can see all messages related to a particular issue, putting the matter in context and on its way to resolution. A faster path to resolution keeps expenses associated with various projects accurate. Project Managers can move forward with complete confidence in their budget to actual reporting.
“It’s all made possible by the flexibility of cloud technology and the strength of modern financial accounting software features – capabilities that simply aren’t available in old, legacy software,” explains Massey.
Throughout this series we have stressed the three important benefits of cloud technology:
- A single source of information
- The ability to respond quickly to change
- Reducing risk aided by data visibility
All businesses benefit from this trio of capabilities, but the importance is more acute within biotech companies that are moving towards new rounds of funding, public offering or merger and acquisition.
This concludes ‘Collaborative Systems to Support Flexible Reporting, Forecasts, and Budgeting,’ part 3 of the Essential Financial Management Practices of Biotech Companies series.
Click on the links below to read other parts of the Essential Financial Management Practices of Biotech Companies series:
Read Part 1: Accurately Track Costs with Project Accounting
Read Part 2: Automation Batch/Lot Tracking to Ensure Traceability
Read Part 4: Streamline Business Processes for Biotech Companies