What do you do if you’re the CFO of a company whose potential customers fundamentally don’t understand your product? You make like a salesperson and explain it to them.

Q2 Holdings, which provides an integrated platform of financial services for regional and community banks and credit unions, went public in 2014. Part of the reason was that the company wanted to pitch to larger customers than it had been serving.

Jennifer Harris, CFO, Q2 Holdings

Jennifer Harris, CFO, Q2 Holdings

As a small private company that isn’t yet earning a profit because it’s investing for growth, and also because of its software-as-a-service (SaaS) revenue model, Q2 has to fight hard to win over the larger regional financial institutions, notes CFO Jennifer Harris. They’re highly regulated, including being obliged to do extensive vendor due diligence. To do business with Q2 they have to prove to regulators and their boards that the company, which interacts with their financial systems, is viable and able to be an ongoing partner.

“Banks and credit unions are very risk-averse,” Harris says. “They’re cash-flow lenders — they understand Joe Plumber who’s bringing in more than he’s taking out, so they’ll give him a loan. They don’t understand the SaaS model, where we incur a bunch of costs to get customers live on the product and then we have a very long-term revenue stream over the future. Having to explain that to the CFOs and risk analysts at the banks and credit institutions is very time consuming. I spend a lot of my time educating them on how the accounting for a SaaS business works.”

Harris joined Q2 in March 2013, exactly a year before its initial public offering. She hadn’t been a CFO, but she had all the experiential components necessary for taking a company public, having worked on four IPOs in varying capacities. “I’ve drafted the documents for ongoing reporting and filing with the SEC,” she says. “At one company I was director of financial planning and focused on modeling the finances going forward and how we were going to guide Wall Street. And I’ve also been a corporate controller, in charge of making sure that all the actuals got input and analyzed and that we were reporting the financials in a fair and accurate manner.”

Give and Take

One of her first initiatives at Q2, along with doing an IPO readiness assessment, was to instill a more collaborative approach to business planning. It’s not uncommon at smaller entrepreneurial companies, she notes, for all the planning to be done within the finance department, or at least on a function-by-function basis. “The finance person says, ‘I’ll work on the sales budget,’ or ‘I’ll work on the R&D budget,’ kind of in a vacuum. I don’t know how other people do it, but I find it hard to know what to budget for with one department if I don’t know what other departments are planning to do.”

So Harris put together cross-functional leadership groups, which start the planning process with a discussion of the company’s overall goals for the upcoming year and the next three years before working out what each function needs to do. The discussion is then taken down to the next-lower management level, where objectives for that level are set, before returning to the higher-level cross-functional team to determine how to support those objectives.

A key goal of the process is to avoid this kind of scenario: The sales team says it plans to sign 50 new deals in the next year. When the implementations team hears about that, they say “no way” — they have enough head count to deliver only 40 implementations. “It does me no good to have a really good sales plan for 50 new deals if we can’t deliver those 50,” Harris says. “So we find the disconnects between departments, talk through them, and prioritize them. We might say, ‘It’s very important that we deliver to all 50 customers,’ and ask the sales, marketing, and development teams what they can do to help fund the implementations team so it has enough capacity.”

For example, she explains, the sales team might be able to decrease one head count that wouldn’t cost any of the 50 deals, allowing implementations to add one. Or perhaps the development team has dollars for a code review that’s not considered a priority, or the marketing group has a budget for two trade shows that haven’t yet been identified.

All Together Now

Connecting disparate functions is also, interestingly enough, what Q2’s product aims to do. The company’s value proposition is that it provides a complete range of digital financial services for its customers on a single platform. Historically, regional and community banks’ digital banking products have been point solutions developed or acquired over time, according to Harris.

“Currently a bank likely has a voice banking system it put up in the early 1990s, an online retail system implemented in the late 1990s, and a small-business solution launched in the early 2000s,” she says. “They are all distinct, separate systems that are not fully integrated. So if, for example, a customer who manages his own account, and his wife’s, and his kids’, and his small-business account forgets his password, the bank has to go into several different systems to make the change.”

The problem has worsened in recent years as banks have acquired still more systems to make digital services available to users of various mobile devices, she adds.

Q2’s platform is an underlying infrastructure on which all functionality is built, making for a “unified end-user experience,” says Harris. For example, “a transfer is a transfer,” whether it’s done on a desktop system at work, a tablet, a phone, or a laptop. Users have the same experience on all devices.

Another advantage of the platform approach is that it eases banks’ regulatory due diligence on vendors. “With voice, retail, and commercial banking, as well as [support for] the devices and a risk and fraud analytics program, all built onto the platform, we can replace up to six or seven vendors,” Harris says. IT audits are simplified as well, as there’s just one interface into a bank’s back-office system.

So far, few regional and community banks have transferred their multifarious operations to a single platform. Q2 currently has about 360 customers, out of about 13,000 such banks in the country, according to Harris. So the company’s challenge is also its opportunity.

Mission: Possible

Looked at one way, Q2’s mission is to strengthen communities by strengthening the financial institutions that serve them, says Harris. That’s also a goal she pursues away from the office, where she does volunteer work for local organizations in need of financial acumen. She’s been a treasurer for Central Texas Special Olympics and for her church, and she helped run a pledge campaign to raise funds for a new playground.

Harris, her husband, and some friends started a barbecue cooking team, Boot Scootin’ BBQ, and incorporated it as a 501(c)(3) organization with the sole purpose of competing in the Star of Texas Fair and Rodeo BBQ Cook-off to raise funds for youth scholarships. She and her husband also recently bought a ranch to serve as a host for Operation Orphans, a nonprofit that arranges hunting and fishing trips for children in the Texas Hill Country.

“I’ve learned over years of youth volunteering that teaching is a big part of whatever you do, and I try to apply that to my work experiences as well,” Harris says. “When people understand what they’re doing and why, they have a greater sense of pride and ownership in their part of the process, and they become more productive. That’s a big part of what drives [Q2’s] collaborative budgeting and forecasting process. It’s easier to see the bigger picture and understand why you may have to adjust something you’re doing in order to help the overall team achieve its objectives.”

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