The Challenge
As QuantumQuest experienced rapid growth and expanded its operations across more than 30 states, the company faced mounting complexities that strained its financial and operational infrastructure. From multi-state tax compliance and unresolved liabilities to weak financial reporting and high staff turnover, QuantumQuest encountered numerous challenges that hindered its ability to scale effectively. With no CFO representation at board meetings and growing investor concerns over financial accuracy, the company recognized the urgent need to strengthen its financial controls, streamline operations, and establish scalable processes to sustain its expansion.
QuantumQuest faced a host of complex, interconnected issues, including:
1. Compliance and Tax Liabilities
- Operating in over 30 states created a web of payroll tax, unemployment insurance, and business entity compliance obligations, many of which were unmet.
- Open tax liabilities were actively being pursued by certain states, adding financial and legal risk.
- The tax preparer resigned due to the complexities of multi-state taxation (e.g., corporate income and sales/use tax nexus, apportionment, allocation), leaving the company without adequate tax support.
- Local use tax obligations had been ignored for years, resulting in penalties for non-compliance.
- Stock compensation processes were not compliant with IRS regulations, including failure to conduct annual 409A valuations and file required forms (IRS Form 3921).
- Income tax provisions were not being calculated, and significant deferred tax assets (in the millions) from prior years' net operating losses were not recorded.
2. Financial Management Gaps
- Receivables collection issues led to aged receivables (90+ days) and large provisions for bad debts. Many customers required purchase orders before paying invoices, yet no formal process for managing POs existed.
- Cash forecasting was ineffective because management focused on income statement data rather than actual cash inflows and outflows, causing liquidity risks.
- Accounts payable and disbursement controls were weak, lacking dual-approval workflows, vendor setup controls, and IRS Form 1099 compliance.
- Financial reporting and internal controls were unreliable, making investors uncomfortable.
- The Series B stock purchase agreement required an annual audit, but the company lacked the infrastructure to support audit preparation, including proper schedules and workpapers.
- Revenue recognition processes were non-compliant with US GAAP, resulting in incorrect reporting of revenue and deferred revenue balances.
3. Operational Inefficiencies
- The Vice President of Finance resigned due to mounting pressures from rapid expansion and investor demands, leaving a leadership gap.
- High staff turnover resulted from a heavy reliance on freelancers and independent contractors, with no formal onboarding process or HR systems in place.
- Employee benefits management was disorganized, leading to frequent issues with health insurance, ancillary benefits, and 401(k) enrollments.
- Budgets were prepared, but no variance analysis or accountability mechanisms were in place for department heads.
- There was no formal reporting of key SaaS metrics, such as annual contract values, annual recurring revenue, and churn, making it impossible to develop retention strategies or improve customer experience.
4. Investor and Stakeholder Relations
- The company’s cap table was poorly maintained, resulting in discrepancies between recorded balances and the general ledger.
- QuantumQuest disclosed too much information to investors, without differentiating between summary-level reporting for external stakeholders and detailed internal reports for management and the Board.
- There was no CFO representation at quarterly Board meetings, increasing concerns over financial stability and compliance.
The Solution
To address QuantumQuest’s complex and multifaceted challenges, Teel+Co deployed a comprehensive, integrated approach combining Fractional CFO services and Business Management Solutions. By embedding seasoned financial leadership and operational expertise directly into QuantumQuest’s processes, Teel+Co focused on resolving immediate compliance risks, strengthening financial reporting, enhancing cash flow management, and building a scalable operational framework. Through close collaboration with QuantumQuest’s leadership team, Teel+Co established tailored solutions designed to restore investor confidence, improve internal controls, and enable sustainable long-term growth.
Teel+Co embedded a senior fractional CFO and staff accounting/HR support to lead QuantumQuest’s financial transformation:
1. Fractional CFO Services
Teel+Co embedded a senior fractional CFO to lead QuantumQuest’s financial transformation:
Compliance and Risk Management:
- Correspondent and negotiated with state and municipal tax agencies to resolve open tax liabilities and implement controls for multi-state tax compliance (payroll, use tax, unemployment insurance).
- Rebuilt the stock compensation system, ensured annual 409A valuations, and implemented proper reporting processes (IRS Form 3921, Form 3922).
- Developed policies to handle income tax provisions and recorded deferred tax assets to accurately reflect operating losses.
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Introduced dual-approval workflows for bank wires and accounts payable, strengthened disbursement controls, and deployed an accounts payable platform that enhanced transparency and facilitated approval workflows for all internal control participants.
Audit Preparation and Investor Relations:
- Led the annual financial statement audit by coordinating with external auditors and preparing all necessary schedules, work papers, walk throughs, and managed all communications.
- Created a tailored external reporting mechanism that differentiated between investor summaries and detailed management reports.
- Reconciled and maintained the cap table, ensuring consistency with the financial statements and recognition of stock compensation expense.
2. Business Management Solutions
Teel+Co implemented robust processes across operations, HR, and strategy:
HR Process Overhaul:
- Introduced a formal new hire onboarding workflow and selected a cloud-based HR solutions to streamline employee lifecycle management.
- Took over benefits administration processes to resolve benefit enrollment issues and improve employee satisfaction.
- Developed HR policies to ensure consistency across the organization.
KPI Reporting and Strategic Planning:
- Built a SaaS metrics dashboard to track key performance indicators, such as ARR, ACV, and churn, enabling management to develop retention strategies.
- Enhanced sales pipeline tracking by implementing policies that provided for realistic forecasting models and reducing overstatement of estimates.
- Integrated budget variance reviews into monthly financial reporting, holding department heads accountable for their budgets.
Receivables and Collections:
- Designed purchase order policies ("No PO-no Invoice") in the receivables process and integrated them into customer invoicing procedures to improve collections and reduce aged receivables.
- Implemented proactive collection strategies that reduced the average receivables age from over 90 days to 45 days within six months.
3. Cash and Financial Reporting Improvements
- Designed a cash forecasting model that aligned with actual inflows and outflows, significantly improving liquidity management.
- Delivered a timely month-end financial close process and developed a comprehensive monthly financial reporting package for management and the Board.
- Implemented accurate revenue recognition procedures and schedules in line with US GAAP ASC 606 and properly bifurcated software subscription elements to ensure compliance.
The Results
Teel+Co’s strategic intervention delivered transformative outcomes for QuantumQuest, addressing critical financial, operational, and compliance issues. By implementing robust processes, improving financial transparency, and enhancing operational efficiency, QuantumQuest not only stabilized its business but also positioned itself for future growth. Key results included stronger investor relations, improved cash flow, and a scalable framework to support continued expansion.
1. Compliance and Risk Mitigation:
- Resolved all outstanding tax liabilities and avoided further penalties.
- Achieved full audit readiness and passed the Series B-required financial statement audit without material weaknesses.
2. Financial and Operational Stability:
- Improved collections reduced aged receivables by 50% within six months.
- Introduced robust internal controls for disbursements and vendor management, enhancing financial oversight.
- Recorded deferred tax assets worth several million dollars, improving the balance sheet position.
3. Investor Confidence:
- Improved financial reporting and cap table accuracy strengthened investor relations.
- Instituted professional CFO representation at Board meetings, addressing stakeholder concerns and fostering trust.
4. Operational Excellence:
- Introduced formal onboarding and HR workflows, reducing staff turnover by 25%.
- Delivered a SaaS KPI dashboard, enabling data-driven decision-making and strategic improvements in customer retention.
Teel+Co’s integrated approach enabled QuantumQuest to stabilize its financial position, enhance operational efficiency, and regain investor confidence. With a scalable infrastructure now in place, QuantumQuest is well-positioned for sustained growth and future expansion.
Confidentiality Disclaimer
In presenting this case study, we are committed to upholding the confidentiality and privacy of our clients. To protect their identity and proprietary information, we have altered certain details, including names, locations, and specific financial data. These changes are solely intended to preserve anonymity and do not impact the accuracy or substance of the case study. Our modifications ensure compliance with our confidentiality agreement and safeguard our client’s business interests.
