Biotech

Article Dean Dorton

The biotech industry is booming. Projections suggest it will reach a $2.44 trillion market valuation by 2028 after growing at a CAGR of 15.83% for the next seven years straight. Forces driving the rapid expansion of biotech include supportive government policies, excited investors, new products, and rising demand – and they show no signs of changing in the near future.

Growth looks all but assured for any biotech company with a viable product or service and a competent business plan. But growth can be positive and negative. Companies that expand quickly and easily often leave themselves unprepared for running a bigger company with broader regulatory requirements, a larger product line, additional revenue streams, and a diverse market footprint. Biotech companies are often victims of their own success – phenomenal startups that grow into unsustainable enterprises – because they don’t scale their accounting and financial capabilities along with the rest of the company.

Running a robust accounting department depends on people and processes, of course, but it ultimately comes down to technology. Relying on under-powered or outdated software (often the product in place since day one of the company) puts a hard limit on what accountants can accomplish – and how much companies can grow. For fast-growing biotech companies, upgrading accounting software should happen sooner rather than later, and cloud financial management should be the only option.

Benefits of Cloud Financial Management in Biotech
There’s a reason why 75% of the life sciences companies studied by Gartner adopted cloud-first strategies in recent years: They see clear and compelling benefits to the cloud. Those include:

  • IT maintenance and security handled by cloud providers
  • Remote access to data and tools from anywhere.
  • Endless data storage and computing power available on demand
  • Redundancy and backups in the event of disaster

That list goes on. However, it’s more important to understand the overarching benefit of cloud financial management for biotech: stabilizing growth. Companies on an upward trajectory often encounter unexpected obstacles, especially in a heavily-regulated industry like biotech. As such, they don’t need accounting software to meet their needs; they need software that exceeds their needs and rises to occasions they don’t anticipate. To put it differently, they need software for today as well as tomorrow. Cloud financial management uniquely fits the bill.

The right product can handle the most complicated and consequential accounting challenges facing promising biotech companies. Everything from complying with revenue recognition standards to evaluating M&A opportunities becomes more streamlined. Likewise, critical processes involved in research and development or budgeting and planning run more efficiently and cost effectively thanks to the right cloud-based product.

Sage Intacct is a cloud-native financial management platform that offers the extensive accounting capabilities required of mature (or maturing) biotech companies. Beyond that, Sage Intacct delivers a superior cloud experience designed to enhance speed, accessibility, resilience, communication, collaboration, and so much more. Calling Sage Intacct accounting software doesn’t do it justice because it functions more like a complete business tool for biotech companies, facilitating growth at any speed or scale.

To demo Sage Intacct, contact a team at the intersection of accounting, technology, and biotech industry growth, contact us.

Article Dean Dorton

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:

  1. A single source of information
  2. The ability to respond quickly to change
  3. 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