E03: Kevin Neary, Controller @ Wistia
Kevin Neary is the Controller at Wistia.
Kevin is a long-time accountant. After kicking off his career in Audit at KPMG, Kevin jumped into the tech sector, with over 12 years of experience at Akamai, HubSpot, edX, and Wistia.
- How to explain accrual-based accounting to dummies (budget owners)
- Prioritization with a small team during the financial close
- Software development disciplines can improve your financial close process
- The ins and outs of budgeting at Wistia
Sagar: Nice to meet you Kevin, appreciate you coming on.
Kevin: My pleasure.
Sagar: Lets just talk through basic stuff about your background and career then jump into details about what's going on at Wistia. One thing I noticed is that a lot of my accounting friends, and yourself, start off in public accounting, hold off a few years, then make the jump. I’m guessing it's like consulting where you can only do it for so long. What’s the rationale there?
Kevin: I think that's a pretty good analogy. A lot of people go into public accounting because everyone wants their CPA, atleast back 100 years ago when I went over to KPMG. I said I was going to get my CPA, spend a couple of years there and get really good experience, then make the jump to the private sector. I was with KPMG for three years. It was just a hockey stick of a learning curve kind of thing. It was so much work but so beneficial to your career especially early on when you’re still inexperienced and immature
Sagar: I remember those days, totally mature, totally different now.
Kevin: Same here.
Sagar: So now that you're on the audit side what were some of the big learnings you had there?
Kevin: Oh gosh that was so long ago. I think it's about working hard, communication, and accountability. Obviously there’s the technical side like technical accounting pronouncements or SEC disclosure checklists. I’m probably going to give a lot of listeners flashbacks, pretty bad memories. A good mix of how to work on a team is how to communicate effectively and efficiently on the more technical skill side.
Sagar: Do you find the technology skills have changed much since you were in public accounting to now or is the audit process the same?
Kevin: It’s so funny because since I left KPMG I’ve been audited at least once a year since then. It’d say especially recently since being at Wistia, I’ll have conversations with auditors and be like “wait a minute that’s not a thing” and they're like “yeah this new blah thing” and i’m like “ok fine”. You just kind of give in. they could probably ask for anything within reason and I’d say yes. At the end of the day it’s pretty similar
Sagar: Gotcha. It’s kind of crazy. Are public accounts the only ones that can keep up with the changes and regulatory needs? Or do you know anyone in house so on top of the game they don’t need an outside consultant?
Kevin: It’s us, the former public accountants like myself, the controllers, the technical accounting managers that are keeping up on the SEC pronouncements and the FASB announcements because we have to do a couple of different things. I’ve read through announcements and see how it’s different than our accounting for something now, for disclosing something now, then relay that up the chain to management and possibly to the executive level to say this is going to change the way we’re accounting. 606 is a great example of this. This is going to change the way we recognize revenue, commissions expense over time, these are the disclosures that will go into our financial statements. A lot of the work around 606 and even 842, which was the leasing standard, we did all that in house then ran it by our auditors to make sure it passed the sniff test so to speak.
Sagar: Where do you go to figure this stuff out? Is there a government website that gives you a run down then you have to interpret it?
Kevin: It’s pretty funny, I feel like I tried to get the 300 page FASB thing and they wanted me to pay for it and I said no. Every big accounting firm whether its PWC, KPMG E&Y, BDO, and Grant Thornton all have white papers on this. There’s also a pay law so to speak but you pay with your email address then they send you the PDF, I got a lot of it through there. I went to the auditors first and they sent internal documentation around it. The information’s out there, it’s really just getting all the information and taking the time to read through it and then applying it to your unique business situation.
Sagar: The reason I asked is because I noticed the recent payroll holiday issue, no one seemed to know what to do and I'm guessing with all these filters of consultants and white papers it took a while to get the information. What’s your take on that? What’s happening right now with that?
Kevin: It’s really funny, I think it’s an election right. You can either do it or not do it.
Sagar: That’s the last thing I read about it.
Kevin: I think we decided not to do it because it's not a holiday the way I think about a holiday. I didn’t work on labor day, I didn’t have to go and work on a Saturday and Sunday to make up for that but if you take a holiday from this payroll tax you’re going to pay it back. Holiday was, I think, not the most accurate word for it. When we realized we were going to have to pay it back and that the employees would have to pay it back we did some talking at the leadership level and thought it would be better to skip it.
Sagar: That’s actually a really interesting thing to poke at. I never really imagined accountants had to be good translators for the business but it sounds like that’s a pretty big part of the job especially when you get to the controller level. Can you talk about how you develop that skill? When did you realize and how big of a part is that of your day to day?
Kevin: I think it’s pretty big. I probably picked that up maybe a few years ago. I was an accounting manager at another local technology company and it’s learning from that controller. “Hey, there are changes in accounting pronouncements or if you see a big charge come through”. A lot of times the business might say ok i’m going to spend $100k on this consultant or software and that's it's all going to hit my budget right now in November when I spend the money. And we’re like wait a minute this is a six or 12 month thing. This is not just hitting you this year, this is bleeding into next year. From a cash perspective, yes from an opex and a p&l perspective no, this is going to affect you next year as well. I think in that previous role that controller showed me big ticket items need to get escalated through the food chain so that the business really understands the way these transactions affect their budgets and financial statements. I think big ticket items like that are one where it’s important to escalate. Accounting pronouncement changes obviously and on the SEC it’s just disclosures so that’s more at the executive level too the CFO, GC, and the CEO.
Sagar: The big ticket thing is interesting. We’ve been doing research and talking about. For me specifically I just moved from an operations role to marketing one and I started looking at our old marketing budget. There are a bunch of line items where I’m looking at Rebecca and saying “I’m not paying for these, we cancelled them, why are they on my budget” and she explains that if you paid for it annually you have to spread it out. I don’t know why that’s so hard for me to understand sometimes. I feel like a lot of budget owners have that problem. How do you explain that concept?
Kevin: That’s a good question and I’ve definitely had to do that a few times. You basically have to explain the accrual basis of accounting to someone. It’s funny because for an accountant that’s accounting 101. You have a cash basis and an accrual basis but for someone in marketing or an engineer they are like “wait, what?”. We’re just like “hey, you paid for this, you paid $120k for subscription in November but it’s for a year so really you used $10k every month and that’s why $10k a month is going to hit your budget throughout the entire term of the subscription.
Sagar: I was talking to Rebecca and she mentioned something about a prepaid schedule also influencing how you spread things out. You mind adding some color to that?
Kevin: That’s exactly it. This $120k software were talking about would go on the prepaid schedule in November when I paid for it, then every month for the entire 12 months we’ll chip $10k off of that and it will flow off of the prepaid schedule which is on the balance sheet and roll to the P&L’s in the expense.
Sagar: It doesn’t have to be a standardization company to company on how they handle their prepaid schedule. One company could do a 12 month schedule and another could do it differently.
Kevin: It depends on the term of the agreement and the invoice you’re looking at. I used a year for this software but I could’ve easily said $3k a quarter, or $30k a quarter, and gotten to a similar answer. You’re still going to do $1k or $10k a month and then 3 months from now you get another invoice unless you cancel.
Sagar: Ok you can do that based on the contract if you want to.
Kevin: It’s funny you brought up about not using these folks anymore and why is this on my budget. Throughout my career I’m not going to say a company specifically, we’ve been caught a few times, you pay for these annual or quarterly subscriptions and the business is like we’re not going to use this anyone but then we miss the termination window and then are stuck for another quarter or year. I tried to do this bigger ticket stuff, or stuff that the business is wishy washy about, the best thing is be proactive and reach to the business and say “hey, I looked through this agreement because it’s $10k a month and we need to give 60-90 day term notices” And we'll be out of luck, so we’ve saved a little bit of money doing that and we’ve lost a little money doing that. be that and we’ve lost by not doing that.
Sagar: I don’t know how you keep up with all those contracts. Not just one team's contracts and schedules, you have the entire company. How do you keep on top of it and stay proactive?
Kevin: You know the prepaid schedule we use is a good starting place for that. Just going through the amortization of each line item and saying when it ends and looking at that vendor and saying that vendor does a b testing, or this is our hosting so who cares if it's to host our product. Then there’s a lot of consultants who auto review like board advisors. I’ve had experience at other companies where board advisors auto renew or don’t and you never want to get an email from a cofounder like why didn’t a board advisor get paid this month and have to respond that the agreement didn’t auto renew. You should be reaching out to the executive and saying this agreement runs out, are we going to renew? It’s a lot to keep track of and for the prepaid side of it I think it's a really good starting point, the prepaid schedule. Seeing when expenses fall off and back track two months from that and go out to the business to ask if they’re going to renew or not. We don’t do it for everything, there are things we know we’ll never get rid of. A lot of times if it’s the first year of a product we’ll pay special attention to that like “hey how did your experience with this product happen in the first year, do you think you’ll review, are you eval a replacement” keeping the lines of communication open.
Sagar: Is there any way for your budget owners to do that or is it just you? Bc you’re the only one with the ___.
Kevin: It's funny and a really good question. There’s no specific CRI directly responsible individual for this. They are busy running the business, doing the marketing, and building the product. This is the last thing they have to worry about so I kind of put the pressure on myself and my team to help them out where we can and that’s where we add value to the business. Let me be the watchdog of this stuff and the safeguard of the money and make sure we’re not flushing money down the toilet. It gives the business and business leaders one less thing to worry about by tracking this for them.
Sagar: So your viewpoint is that the accounting function is responsible for overseeing budgets and recurring invoices and making sure all that’s ok.
Kevin: Every business is different at Wisita we have 120 people, we have four people in all of finance. There is a thin line, or a board line, or a grey line. There’s no line between accounting and finance at Wisita. We all kind of do what we can on both sides of those responsibilities but at previous companies there was a huge FP&A team and a huge accounting team. You had one person and they were the finance manager for R&D, and one for sales and marketing, and one for G&A, and you could go to that person and say is this going to renew. Or you could have them come to you and say “hey, I noticed this expense fell off this month” we’d respond and say “we didn’t get an invoice must’ve ran off on the prepaid schedule” and they’ll say “we’re going to renew, we talked to VP please accrue the expense”. Then we’ll get the invoice and all that stuff squared away the next month. That’s really cool when you have that separation of duties, those organizations are much bigger than Wistia and they need that kind of thing in order to survive and accurately predict their financial performance. At Wistia it’s fun and exciting to wear both hats throughout the course of a month.
Sagar: Yeah I imagine what you’re talking, I think it’s the predicament in a lot of small businesses where there's no clear delineation of you do this and I do that. I remember at Lola even when we had close to 200 people there were two and a half people in finance to cover the whole thing.
Kevin: You have to love that half person in finance.
Sagar: How do you balance it all out? I guess a common thing that I hear about is the financial close process. I guess there's a couple of perspectives on it. One thing I hear is that the financial close process can be a mess and it's super manual and you just don’t know how long it will take. On the other side I hear that they have that under control but the problem is prioritization, there’s always another fire to put out. Sounds like you got a bunch of responsibilities that have to happen at the same time. How do you balance it all out?
Kevin: Exactly with what you alluded to, prioritization. Right now at Wistia we operate on a seven to eight business day close cycle so we’ll have financials out to the board and other stakeholders that require reporting by business day seven or eight. There are other things that happen during that time. We have to file sales tax at the beginning of every month, payroll doesn’t wait for anyone, and no one cares that you’re trying to close the books. Your payroll provider doesn’t care if you're trying to close books and need more time to get the information. You have to get the information in or they won't make the payments for you. About prioritization and long term planning, it's not long term like months out, but at Wistia we have a minimum of two finance meetings every month. A pre close and in that pre close we say “hey, these are how the business days fall this month this is the first day of the close, this is what we’re going to do, this is high level what we are going to close out everyday. This is the day we will shut down GL, this is the day we are going to deliver the financials” done. The other thing we do during that meeting is discuss the prior two to three weeks of products. Did you work, hit any speed bumps or roadblocks, what can we do to erase or get around those? The next meeting comes a couple days after the close cycle is over and that meeting is a retro on how we think the close went (good,bad, or ugly). Also what are you going to work on for the next two to three weeks until the next close cycle. What are your priorities, what are the things that the business needs. A lot of times the VP of Finance will help direct because she's in all the senior management meetings and knows what product, marketing, and sales is thinking about . A lot of that is directed from the business obviously. Yeah rinse and repeat.
Sagar: That’s awesome that you have a retro process, I keep thinking in the analytics profession software best practices trying to come over there and you can see how those can be applied to any repetitive tasks. We have to go through the same cycle month in and month out. I guess when you get into the details of close there are certain things you have to do the same way every single time. How do you make sure it’s done the same way? Do you have a checklist you distribute, is it built into the software?
Kevin: We have a close management software we use, we use Flowcast as our close management software. There’s a checklist that has a responsible individual to reconcile cash, it’s pretty granular the checklist but then the other thing we have is the reconciliation checklist. Whose responsible for performing and who's responsible for reviewing it. That’s our source of truth to how close to down we are and how complete we are and it helps us know that everything’s been reviewed. Id’ say thats our biggest tool in close management is Flowcast. It makes everything so much easier to have. I have had jobs where we've worked off a shared Excel or Google Sheet and there's editing and changing. In Flowcast it’s pretty locked down. The nice thing about it is you can edit it, and you know everything is so fluid in finance and accounting that we are constantly iterating on the checklist as we add accounts. Updating that with this new person responsible for these requisitions or if people go on vacation or paternal leave it’s very easy to go in and change the responsible person and push along.
Sagar: You mentioned a close process is seven to eight business days. What do you do if someone tells you you have to make that go faster. How do you start up [inaudible] your close process.
Kevin: That's a good question. We've made big improvements already. It used to be, well I’ve been at Wisita over 2.5 years, when I joined it was at the 15+ level of days and I think we’ve solved a lot through automation. There aren’t too many manual processes within the close process and we’re making more updates in Q4 and have projects that will go live in Q1 2021 to automate a little more. No one ever told us we had to make it fast because we’re constantly improving. We’ve shaved it from 15+ days down to 12 then to 10 . Now we're at the seven to eight range and can probably do it in six by march of 2021. But if they did I'd probably set expectations with them and the team. If we were really working nights and weekends on this stuff, which we’re really not, I might from a review perspective because there are so many meetings during the day that you have to make it happen somehow. If the whole team is stretched that thin I'd probably have to make a case for another resource if they really wanted to speed up the close process that much and then that's a cost benefit on their part.
Sagar: You kind of view it as a continuous improvement system. You have those meetings that happen, the retro meeting, and a checklist to make sure you’re always iterating. Then it’s just resource management if they want to faster you need more help.
Kevin: Exactly and that’s either through a tool which will cost money or a person which would also cost money.
Sagar: For my own education how would you explain the different elements of the financial close process at whatever level you think makes sense.
Kevin: That’s a good question. The first element or phase I think of in the close process is the pre-close process. When I think about the pre-close process I get all my payroll entries in pre- close. We have a direct sync between our accounting ERP and payroll provider so if payroll is on the 15th and I approve it on the 13th I can run the GL interface with my accounting ERP and have payroll booked before it's even paid out. Ii could do the same for the end of the month payroll. Right there I've got one of my biggest line items in the books and ready to go. The other thing we try to do as a team is book all of our pre paids in advance like “hey, let's amortize all these pre paids, let's book depreciation”. Yes we’re going to get stuff that comes in after the month that needs to go into the schedule but it won't be big. Let's book it now and that way once revenue and bigger invoices get in we have at least an idea where [inaudible] is going to land. I can give leadership specifically to the VP of Finance a snapshot of [inaudible] on day four like “hey, this is where we are at right now. I see we are missing this and this, a little bit of this, maybe this is where we land on [inaudible]”. I can at least give her an idea of how we did. A lot of that is dependent on where revenue landed on that month, which everyone pays very close attention to, as well and we try to book revenue on day two or day three.
Sagar: So you can cover 90% of your outflows based on prepaid and payroll is there [inaudible]you’re waiting on.
Kevin: Probably, I’d say we have a corporate care program and I’d say we get those and they flow throughout the expense management system and once approved they zip over to the accounting ERP. Getting the humans to do that work is something that we are constantly putting pressure on people to do. If we had one bottleneck maybe it's that.
Sagar: Gotcha. I guess that must get in the way of strategic decision making if someone needs financial reporting on day four and they are good with 90% of the information. The last then is probably [inaudible].
Sagar: I guess the corporate card stuff and expenses
Kevin: We can always just accrue all that. We could also just go into the expense management system if we needed to go faster on the third or fourth day of the month. Anything that’s not there I could just export it. I have a template that mirrors my journal entry import template in my accounting ERP. I just download it, then upload it, and I'm kind of done. The teams kind of done there
Sagar: You have a shortcut [inaudible]. If there's a big decision that needs to be made you can get close enough
Kevin: Absolutely. We do a pretty good job giving [inaudible] a bit of a snapshot and that will get especially important in Q4 as we start to look at where we are landing in that year. Where did marketing spend for the year, where are we at now, what’s [inaudible] now then we’ll decide in Q4 if it makes sense to hit the gas so to speak on some marketing stuff. That's where that process and how we have it set up really pays [inaudible].
Sagar: Where in that process do you provide budget to actuals to all your stakeholders. Do you do a preliminary then a final version or do you just do financials?
Kevin: No, we do it at the point of financials.
Sagar: So when the close is officially done that’s when you put out your budget?
Kevin: Yeah our budget versus actual comes with the financial statements.
Sagar: So technically if I were in marketingI wouldn’t know what my budget to actual was from last month until the eighth business day of this month and that could impact my budget this month after I started spending.
Kevin: That’s true but in our situation we have our biggest spend in marketing. I think a lot of people these days are all over social and you can see Wistia on LInkedin. I know I do. We know when that money is going to be spent, we have a certain number of consultants, and ad budget. Within all those tools, I mean I've only been in the facebook business thing, but within all those tools they have what your monthly spend has been so far. We have a marketing operations manager who manages all this stuff and he can go in and see where they landed for the month on day one.
Sagar: Ok, so it's on the marketing team to keep track of their budget to actual for that window of time where there might be some…
Kevin: Yeah and then we’ll send the marketing actual to budget on day seven or eight and then me and the marketing operations manager sit down and talk about the numbers he had versus the numbers i had. Are there any big differences and very seldom are there. We talk about the future “hey, based on this you came in under or over. For the year you’re either over or under what do you guys think you’re going to do going forward”. This is what’s in the budget but that budget could be stale based on prior months results.
Sagar: Have you ever run into big discrepancies?
Kevin: It’s usually pretty close, yeah there's nothing.
Sagar: Good to know
Kevin: Knock on wood
Sagar: Awesome it sounds like Wisitia is a little different than bigger companies where there is a more distinct handoff between FP&A and accounting in terms of the role you play in the budget process and reconciliation. What’s your role at Wisita right now in the budget process, are you directly interacting with business stakeholders and advising them on these things?
Kevin: On a couple of line items, yeah not the whole thing. Heather the VP of Finance runs the whole budgeting process for the business and I have a small carve out of that stuff that I'm responsible for working directly from the business to get numbers on. Whether for 2021 or cogs, our hosting costs, we try to do that every quarter. I see where we are going to land for the rest of the year and reforcast for the rest of the year.
Sagar: Gotcha, cool. What’s on your mind right now at Wisita when you look forward to the next 3 months? What are you getting ready for?
Kevin: The interim audit in the first week of December, just had that scheduled so that's exciting. We’re going through some technology implementations in QQ4 that will help us have less people hours and manual work which I'm really excited about. Some stuff that is duplication of effort for one part of the business to do and accounting to update in our systems. We’re building APIs between those, we’re paying someone to build APIs between some systems. Stuff that’s been a long time coming that we finally pulled the trigger on and I think those will save the team a lot of time and build some efficiencies within the process. I really like the technology stuff and implementations and integrations. That’s how I want to spend my fall.
Sagar: So it’s more operational efficiency to I guess help to avoid adding more overhead is that the goal?
Kevin: Yeah absolutely. If I could spend a couple thousand to link two systems together or two systems here, and two systems here, I could go and not have to spend three or four times to hire another staff person.
Sagar: Gotcha. It’s always interesting how different companies handle what I’m used to calling annual planning. If you’re an FP&A right now is when you think you’re ahead of the game for planning out next year and then two weeks from now your entire plan hits the fan and you’re in panic mode for about three months. A couple accountants that I talked to said this is the efficiency time, this is the time to do this stuff, to fix things that have been broken all year. Is it as stressful as the FP&A side or is it you know kind of easy right now?
Kevin: Good question, I don’t have a ton of FP&A experience with a few exceptions to the stuff I handle at Wisita. I would say because of the way my brain works I enjoy the process stuff and the implementations. I enjoy looking at a flow chart of how information goes and try to pick apart how I could or the team could make it better. I would say the budgeting stuff is more stressful for me because I’m not as seasoned in that. Whereas on the finance technology stuff, that I will work on voluntarily
Sagar: When is the worst time to talk to you to try to get your time?
Kevin: Probably in the middle of the financial statement audit which usually happens in the spring. We’re not public so we don’t have the SEC audit filing deadlines. We usually start our audit probably mid to end of April then our financials are due to stakeholders at the end of June. I would say the middle of May to the end of June, that six week period leading up to the audit committee meeting and presentation can be kind of nerve racking. After that I jump to finalizing our tax provisions and our tax returns which we file extensions for then file later on in the year. I would say that period would probably be the most stressful for me.
Sagar: What makes that stressful is the quantity of work or the difficulty of work, surprises, meetings?
Kevin: I think the thing that makes it the most difficult is the fact that there is so much riding on it. You have this deadline of 6:30 for having this done and filed and then taxes is cash out the door, if you’re in that position from a tax perspective. You really want to make sure that you, and if you’re using a firm, have those numbers right because it will cost a lot of money in tax consultant feeds and to try to get any of it back if you ever had to amend something. Just dotting your eyes and crossing your tees, it really does have to be perfect and I think that’s what makes it the most stressful.
Sagar: I could imagine. I love working with FP&A stuff, it's always funny when I talk to someone for FPA and they are surprisingly ok with things being 90% right and having a fuzzy number. Is that the way it really is over there? Then you talk to accountants and they say it has to be perfect otherwise we’re going to lose all this money and never get it back.
Kevin: Yeah that’s kind of how Ii feel, I’m kind of a doomsday prepper.
Sagar: I think it’s kind of interesting how CFO’s come from two different backgrounds and I wonder how that impacts the rest of the organization. You have CFO’s who were CPA’s and then you have your lifetime FP&A professionals. Have you worked with both different types of CFOs?
Kevin: I have but the CPA that came from that had a public accounting background. I think he moved over to FP&A very quickly after leaving the CPA firm so maybe I haven't. A lot of the CFO’s I worked for they were VP of Finance, Director of Finance, stuff like that. I don’t Linkedin stalk these people and read their bios so I don't know if any have been a controller to be honest with you. You can tell in talking to someone what side of the fence they’re on.
Sagar: What are the giveaways?
Kevin: I feel like the accountant side might be more interested in the specifics and the finance folks are more high level. You know when you try and get into specifics with someone and they’re like “oh, yeah that's fine”. Whereas if they’re an accountant, like me for example, if someone wants to explain something to me, if you want to talk about debits and credits I'll talk about debits and credits. Wistia is a small team and I’ve been here for three years so I haven’t talked to a truly finance person in a really long time especially with Covid.
Sagar: Yeah, just conversation with the kids. So where do you go to learn more about your trade? Who do you learn from or are there helpfulful websites or slack groups?
Kevin: A lot of it is keeping up on my CPEs. A lot of times if there’s a big accounting pronouncement there will be a class for it and you jump on that class. Another thing is there’s so many of these companies out here, a good example who I mentioned before like Flowcast. They do a lot of one hour webinars and they offer credit for some of them. I try to go to a conference on financial reporting every year, usually like a two day thing, it gives you the big updates you need. Another funny thing is that I don’t know if I'm subscribed to stuff or part of a group but this stuff just ends up in my LinkedIn feed. I’ve been hearing about 606 for the last three years. It’s there and then if you put CPA in your title, or controller, and all of a sudden its download this whitepaper. You don’t really have to go looking because they find you.
Sagar: The power of marketing, somehow marketing is helping accounting.
Kevin: I’m just happy people are marketing accounting pronouncements to me, I’m appreciative of that.
Sagar: That’s funny. Thank you for your time. I appreciate it. This is great deep dive into the world of accounting
Kevin: My pleasure thanks for having me.