FinancialForce president and CEO Tod Nielsen is looking back on a year of revenue growth and leveraging his company’s relationship with Salesforce to add more features to its accounting software and attract customers.
The company just finished its fiscal year with strong growth of about 25 percent to $140 million in annual revenue. “We see strong business both in our financials play, our ERP play, as well as our professional services automation, and business is going well,” Nielsen told Accounting Today. “It’s keeping us all busy.”
Last October marked the San Francisco-based company’s 10-year anniversary, and it has been growing along with its partner, which is also headquartered in the city. “We started building an offering in 2009,” said Nielsen (pictured). “We were one of the very first Salesforce ISVs [independent software vendors], so we’ve been on this journey. Fortunately for us, Salesforce continues to expand their footprint. Its success creates a great opportunity for us, as customers want to get the full front office and back office connected on the platform.”
FinancialForce used to leverage Salesforce’s Chatter function for employees to message each other, but that function is gone now in favor of Salesforce’s artificial intelligence technology, Einstein. “We focus on the core productivity that we leverage off of the Salesforce technologies,” said Nielsen. “There have been some significant enhancements in the reporting functionality, taking advantage of Salesforce Einstein, giving great classic accounting reports with dashboards and things like forecasting. There’s a lot of really interesting things we can do with the data we have in the system.”
The main use for customers with the AI technology is for revenue forecasting. “In the professional services automation tool, you’ve got a bunch of services like what’s my revenue going to be next quarter, or two quarters out,” said Nielsen. “How can I forecast that, based on my resources and backlog? We see a lot of interest in those capabilities.”
The AI technology in Einstein enables FinancialForce to do more analytics and predictive forecasting based on machine learning. “They can look at a set of data and, based on that data and historical trends, say revenue is going to be like this, or expenses are going to be like that," said Nielsen. "It can give you a ratio, or guardrails, as far as worst case it can be this, or best case it can be this, but somewhere in between to allow people to do their budgeting and planning. The people who really like that are folks who are trying to estimate their services business. The services business is a little tricky in how you take the revenue as far as what projects have been completed and where they are.”
FinancialForce mainly focuses on services-oriented businesses. “What we’re finding is a lot of companies that would classically be product companies are doing service-based functions,” said Nielsen. “Quench is a great example. They offer what they call 'water as a service,' the modern version of the old water cooler. They can detect when you need new water, and they can plan out their delivery. They use it to direct their inventory and get it delivered to their customers. They use our system to manage their business. We see it a lot in high tech and media. In New York, the Muscular Dystrophy Association and MOMA [Museum of Modern Art] are two nonprofits that use us. From their perspective, they really want the full 360-degree of their business from donors all the way through to vendors, and how are they tracking and managing things.”
FinancialForce was a relatively early entrant in the cloud accounting area, but more accounting software vendors have also been moving to the cloud.
“Clearly there’s a huge market,” said Nielsen. “Back in the early days, people were concerned about going to the cloud. Why would I put my financial information there? I think they’ve realized that the bad actors have become so sophisticated that unless they’re going to spend millions of dollars to protect their own data center, that to not put their stuff in the cloud is kind of like the equivalent of putting their money under the mattress. We differentiate by being native on the platform. When the customers standardize on Salesforce, we become a logical extension. But we even have some customers that don’t use Salesforce. They start with us, and they bring in Salesforce. We have a symbiotic relationship between the two companies.”
Both companies help sell each other’s systems to customers. “They’ll run into a new customer that will be evaluating Dynamics by Microsoft,” said Nielsen. “Salesforce brings us in to be the financial package because Microsoft is saying, ‘Why would you want Salesforce? They don’t have accounting.’ So they bring us in to compete there. Frequently what happens is they’ll introduce us to an account where they’ve sold into it, and they’ll say, ‘Hey, you should talk to FinancialForce, and they can talk to you about back office or professional services automation.’ At all levels, from myself all the way down to our AEs [account executives], we talk regularly to our counterparts at Salesforce.”
FinancialForce generally does two major updates a year, in the fall and spring, and the company is readying the spring release.
“One of the exciting things we’ve got in the offering now is what we call ‘push upgrades,’ so we can actually push the updates to the customer’s sandbox and they can deploy it, instead of having to require manual intervention,” said Nielsen. “It’s been a big benefit for our customers to make sure they’re staying current on the most recent releases of our innovation.”
FinancialForce has needed to update its software for the new accounting standards that have been rolling out in recent years, with the revenue recognition standard — also known as Topic 606 or ASC 606 for its number in FASB’s Accounting Standards Codification — being probably the most consequential for its customers. “We saw that as almost our what I refer to as our Y2K event,” said Nielsen. “Getting to 606 was forcing a lot of customers to say, ‘Oh, I’ve got to get to the new standard.’ The fact that we had it out early helped many of them comply with the 606 standard. The move from 605 to 606 caused a big issue, particularly in software companies that struggled in how they were going to handle it. If they were pure SaaS companies, it was one thing, but some of the folks that were also selling on-premise products had a whole bunch of accounting challenges there.”
