Gregory GjiniWith two thousand customers and a large number of deliveries to three offices, House of Control has many contracts to manage – and a significant risk of making mistakes. Fortunately, the finance department has a black belt in using the company's own contract management software.
Every month there are over 50,000 monthly logins from House of Control's customers to the contract management platform, Complete Control. Among the customers is House of Control's own finance department.
Recently, our webinar host Karoline Rønsdal spoke with Chief Financial Officer Fabian Flaaten and Head of Finance and Controlling Pål Havneraas about how their own solutions are used to strengthen contract management and financial management in House of Control.
Financial Crisis: From asset management to contract management
Fabian takes us back to the financial crisis of 2008, when founder Lasse Sten had already established a company that used security tags and a database to give customers full control over physical equipment in the company.
"In a customer meeting, the customer leaned over the table and looked Lasse in the eye: We like your asset management solution. But, what we really need now is to get an overview of all the commitments we have, so we can see how quickly we can terminate contracts and cut costs," - Fabian
As a resourceful entrepreneur, Lasse quickly pivoted. The equipment database was adapted for contract management – and customers flocked to it. The rest is the history of the further development of the solution, about strong growth and increased importance for customers, about going public and – in 2022 – the company's acquisition by Europe's leading business software actor, Visma.
"The fact that Visma bought us is a strong testament to what we deliver and to our employees. We are not an annoying competitor to any of Visma's products, and they really got to know us as customers in advance of the acquisition. Now we are about to embark on a really big journey and expansion in current markets and further into Europe," says Fabian.
The CFO who professionalized financial management with own tools
It's been a long time since Fabian gained insight into how House of Control's solutions for contract management and IFRS 16 reporting can improve the performance of the finance department. He was tasked with professionalizing the company's financial management shortly after the investors in Viking Venture bought the majority of the shares in 2015.
"As a finance manager, you naturally know the company's biggest contracts with the most important suppliers and biggest customers. Let's say this is about 30 to 60 contracts. Then there's the rest of the forest, where the unknowns get bigger the deeper the forest is. Do you even know that the contracts exist and what commitments they involve?"
He lets the question hang in the air, before he elaborates on what it means for financial management and profitability. If you don't know the contracts, don't know if they are necessary, don't know who their rightful owners are in the company, don't get alerted before renegotiation - how can the CFO then say that he or she has full control?
Centralization of processes, decentralization of responsibility
Today, Fabian is supported by Pål in the daily handling of House of Control's contracts. Pål is concerned with the overall design of the processes around contract management.
"There needs to be a centralization of process and overview, preferably originating in the finance department. Then there needs to be a decentralization of responsibility and ownership of the contracts, because the need for the actual deliveries is elsewhere in the company. In these processes, manual handling of the contracts is not optimal. They should instead be automated as much as possible," says Pål, and elaborates:
"Especially in a growth company, manual processes are not optimal. They scale very poorly. The same goes for companies with dynamic changes in the market, where deliveries and contracts change often."
What he is talking about is registering critical metadata about each individual contract. These are data that answer questions such as: What is the payment plan? What is the contract's duration, and when can it be terminated or renegotiated? Who is responsible for the contract, including confirming that it is still necessary for the company?
Good contract management provides first-class data for the finance department
"When all this is in place and registered for all the company's contracts in a smart digital solution, it has some startling positive effects on financial management. The quality of financial data is greatly improved, which makes budgeting both faster and more accurate. And with alerts before contracts expire, we become less dependent on individuals and reduce risk," Pål explains.
He says that improvements begin with raising the importance of financial management in the company. This includes making budgeting and forecasting a top priority. And it also includes significant effort. It takes time to register all contracts, but Pål is clear that the gains from doing the job are worth the effort. And the more the solution is used, the greater the value becomes. This is confirmed by Fabian:
"You get a fantastic dataset, which also gives full control over all contracts and obligations. The software is the very prerequisite for being able to answer the question of whether we really need the contract. And for the finance department, the solution helps you to map the future financial significance of the contracts. You get a living cost base, which you can constantly work on trimming."
Also used to analyze revenue from 2000 customers
Karoline, who on a daily basis helps many of House of Control's customers optimize the use of the Complete Control software, asks if the gains also involve handling unexpected events better.
"You could say that. When the entire forest of contracts is registered, fewer unexpected events will occur. You have a full overview of future cash flow, which means that you can also make assessments of capital needs now and in the years to come. This makes Complete Control an excellent tool for building different scenarios," says Fabian.
House of Control also uses Complete Control to handle all nearly two thousand customer contracts. These are sold as licenses and become annual recurring revenue in the accounts. From Complete Control, the contracts can be billed, and Fabian and Pål have a first-class dashboard to be able to report and present the revenue picture to the company's board.