Meet Scott Wenhold, CFO of Synergis Education, a $75 million company whose entire on-payroll finance team consists of himself and three financial analysts.
GAAP reporting, general-ledger accounting, accounts payable (AP), accounts receivable (AR), internal audit and other core finance functions are handled by a controller at headquarters in Mesa, Ariz., and a seven-person group of accountants and auditors in India. They all work for Consero Global, a finance-services outsourcing company based in Austin, Texas.
If you think there’s something unusual about this arrangement, you’re right. “It’s not common at all for a company of Synergis’ size to outsource finance and accounting,” acknowledges Consero’s finance chief, Kiran Janannath. “It’s relatively common for companies smaller than $5 million to outsource a full suite of functions, and for those larger than $1 billion to outsource some transactional work, but companies in between very rarely do it.”
At the time Synergis started working with Consero, it was in that smaller size group. In fact, the partnership began a month before the company — itself an outsourcing firm that markets to potential students on behalf of its client colleges and universities — began generating revenue in September 2012.
“We’re a venture capital-backed startup, so capital was very tight,” says Wenhold. “When you’re a brand-new company, you may need a general-ledger accountant and AR and AP expertise, but you may not need them full time. And when cash is dear, and you’ve got a full-time head doing a 50% job, it’s painful. Consero can put in a 50% person until you grow into [the need for a full-timer].”
For the same reason, Wenhold wanted to avoid the expense of an ERP system and other technology that would be needed to support an internal staff. Consero uses cloud-based financial-management and accounting software provided by Intacct.
Now, a short two years and $75 million in annual revenue later, all eight Consero employees that work on the Synergis account are dedicated to it full time. But Wenhold has no intention of ending the outsourcing arrangement, even though some of the company’s client contracts are fairly complex and the recognition of revenue for its services tends to be “extremely” complex. He says he gets timely reports, has complete visibility into the numbers down to the transaction level, and has no concern about the integrity or accuracy of the information, “to whatever level of certainty any CFO can ever have.”
Maybe, he allows, if he’d come up through the controllership path, he’d be more sensitive to those kinds of issues. “I came up on the strategic side of finance: treasury, corporate development, capital markets, planning,” he says. “But that also perhaps allows me to think more open-mindedly. I want the heads we add to our staff to be geared to revenue generation as opposed to underlying support.”
According to Wenhold, the only standard finance function Synergis lacks is costing. But he doesn’t miss it much. “You’re not going to find a bunch of cost accountants walking around Synergis, calculating everything to the ninth decimal point,” he says.
Meanwhile, the company has an interesting business model. Its outsource services comprise a four-legged stool. One leg is the marketing service. Synergis works with school leaders to design multimedia campaigns aimed at potential students. Second, the company will fund the campaign, if the school wishes. It recoups that outlay by getting a percentage of tuition revenue generated by students the school picked up from leads provided through the outsourced marketing.
Third, Synergis will keep and run the books related to student marketing and enrollment. At the end of each month the company delivers an accounting upload to the client school for whatever general-ledger system it uses. Finally, the company provides curriculum-development services, for either new or existing degree programs, by a team of academics. The service includes technology for offering online courses and training on that system for professors.
The fact that Synergis is an outsourcing company may make it more inclined to use outsource services itself. “It would probably be a little hypocritical if we didn’t,” Wenhold says. “Our cultural foundation has a natural bent toward outsourcing. I’ve never sat in a meeting where we discussed it like that, but it’s there, even if on a subconscious level.”