In the rapidly evolving and complex private funds sector, CFOs face mounting challenges in financial record-keeping and reporting obligations across funds, management companies, and portfolio companies. While it has become common practice to outsource fund middle- and back-office operations to a fund administrator, outsourcing management company and portfolio company monitoring and reporting to an outsourced provider has only recently become mainstream. With good reason—the CFO role has expanded significantly over the past two decades, leaving private equity firms with the choice of either hiring significant internal accounting staff or outsourcing to an experienced provider.
Partnering with an experienced management company accounting provider offers CFOs the support they need at both the management company and portfolio company monitoring levels to focus more of their time on higher-value front-of-house responsibilities. A provider with teams of people with in-house private equity experience, technology, and proven processes can help CFOs keep accurate books and records, prepare and send invoices, and ensure the timely collection of payments.
With growing demands and limited time, CFOs are challenged to effectively keep track of portfolio company expenses. Outsourcing these day-to-day accounting tasks takes blocking and tackling off CFOs' plates, offering them the opportunity to be the reviewer, not the facilitator.
As the role of CFOs continues to grow, having access to experienced providers becomes crucial. To generate the returns limited partners seek, many private equity firms have created a roster of operating partners they deploy to their portfolio companies for specific projects. While operating partners have proven their involvement makes companies more efficient and profitable, they introduce an added layer of record-keeping and reporting complexity for both CFOs and the portfolio companies. For example, it is imperative to ensure the allocation of expenses to specific portfolio companies is accurately recorded from a financial record-keeping perspective as well as a regulatory/SEC perspective.
An experienced provider can accurately track the time allocation of operating partners to portfolio companies and generate detailed, transparent invoices. This not only alleviates the administrative burden on CFOs but also fosters trust with portfolio companies by providing clarity around cost allocations.
As the private equity industry grows in size and complexity, the demands on CFOs will only increase. Having teams with in-house experience is going to be vital for CFOs to keep pace while maintaining focus on strategic initiatives. While there are varying resources available, the provider that has a team of professionals with in-house expertise will be able to make the greatest impact because they have played on the field before.
Petra’s Management Company Accounting Group has decades of experience handling financial record-keeping and reporting for private funds. From tracking and allocating expenses to generating accurate invoices, our team provides the support CFOs need to focus on front-office tasks. Please get in touch with Sean Menon with any questions about Petra's Management Company Accounting services for private funds.
