In an exclusive roundtable hosted by Juniper Square, a group of CFOs from private equity (PE) firms gathered to describe the challenges they face in ensuring accurate, timely, and efficient data systems. Many CFOs have long struggled to balance speed and accuracy, especially as portfolios and processes have become more complex. According to attendees, the major challenge is consolidating data from multiple sources—whether from different departments (accounting, investor relations, treasury) that may need different investor information—or from legacy systems.
They are looking for technology solutions that provide a single source of truth, robust insights into portfolio performance, and APIs that seamlessly connect to their existing enterprise resource planning (ERP) systems. The group shared the performance of the solutions they’ve adopted thus far and their ongoing challenges.
Challenges in PE data flows
Reliance on spreadsheets. Excel has been the fundamental source of information for most PE firms. One participant observed, "For much of my life, all our information has lived in Excel and requires extensive manual manipulation.” For some, though, Excel was identified as the “least-bad” solution due to the time, uncertainty, and cost of implementing a more comprehensive alternative.
Fragmented systems. All too often, data is trapped in disparate systems. Sometimes, those systems were designed without thinking of possible broader applications. One participant noted, “We’re not using our deal cloud for investor relations or to track our portfolio investments and pipeline, even though we use it for business development.” Other systems may be so dialed in for one use that the data cannot be easily fed to another tool.
Lack of standardization across portfolio companies. As LPs have become more keenly interested in portfolio company performance, accessing, analyzing, and reporting on this data has become increasingly important. However, each company often has its own specific systems and little incentive to invest time and money to make reporting easier for their investors. As a result, said one CFO, “Our internal team has to manually type in information from different sources.”
Integration issues. Moving data seamlessly between investors, funds, and portfolio companies is a long-held goal. For many firms, true integration seems as far off as when desktop computers were first introduced, and many are still managing the work manually across the entire ecosystem. “We have one list of names and addresses of our investors, another with wiring instructions, and a third with contacts,” remarked one CFO. “We are forever copying and pasting and combining data.” Changes to contact information require people on both the LP and GP sides to update files manually, while portfolio companies manually prepare weekly or monthly progress reports that the GPs’ associates key in.
In short, the very PE firms that invest in technology or recommend that their portfolio companies do the same are wrestling with finding the right technology to solve their own data problems.
The answers: Purpose-built technology, realistic expectations, and workarounds
By and large, the CFOs all wanted a system that aggregated data from a host of sources and allowed users to produce reports and, where warranted, dig into the backing information to find its source. One participant imagined an “AI solution that links to a platform where everything feeds in automatically, allowing individuals to calculate the desired metrics and to dig deeper into the data itself.”
The major elements of such a system would include:
A unified platform with integrated fund accounting, portfolio company metrics, and investor relations in a single source of truth.
Tools that automate repetitive tasks. Despite the high-tech elements of the PE industry, much of the infrastructure requires close attention to detail, including keeping information around LP information and instructions current and accessible. Repetitive, manual work naturally introduces errors and is rarely the optimal use of a CFO’s time. One attendee noted, “I’d love to see tools where people could self-manage rather than sending an email to me. The amount of time I spend forwarding email messages ranging from contact name changes to tax and audit issues to the next person or filing it away—clearly there must be a better way for me to spend my time.”
Systems that proactively identified inconsistencies and facilitated answers. The group mentioned how flagging exceptions for review and analysis would simplify and speed up many processes. In addition, simply being able to determine the source of a data point would make the reporting review process much more manageable.
The group acknowledged that all the solutions they had tried to date were flawed and that integration is inevitably painful. At the same time, they emphasized the importance of adjusting their historical processes to leverage the vendor/system’s strengths. They noted that the success of adopting any new system depends on the implementation strategy, internal team buy-in, and realistic expectations. Several CFOs pointed out that they underestimated the amount of Excel usage that would continue even after implementing a new system. Even so, the spreadsheets allowed quick queries against a reliable, shared, and centrally accessible database rather than being the single source of truth itself.
Any movement toward a consistent source of data was viewed as a win. One CFO noted, “Moving to a fund administrator has been very, very helpful.” Another commented that “the amount of value my team gets out of the [portfolio management system] on a daily basis is greater than I could have imagined.” Another participant described their new system as “invaluable. When I’m reviewing reports on portfolio companies that we send to our investors, I can actually trace a data point in question back to where it came from.”
What about AI?
Invariably, when mentioning process improvement, AI comes up. According to one CFO, AI is “doing the things that no human would've thought to do because it can look at a wider scope of data…if AI tools can free up time so that I or other humans can do higher level thinking, that's the real silver bullet.”
The group identified AI’s potential to improve operational efficiency—automating invoice processing, generating elements of investor reports, and performing natural language processing to extract insights from portfolio data—but many had concerns about data governance and compliance. Several worried about the possibility of SEC regulation and retrospective fines for the use of data that might be later prohibited. To address this, some CFOs currently only use AI tools on internal data and keep the results of this analysis internal as well. Both diligence and fundraising seemed to be end-uses that internally-targeted AI could readily address.
Cost and flexibility remained another top concern. One CFO commented: “Pulling data on a real-time basis will get really expensive, extremely fast.”
Future technology applications
Integrating data across platforms and systems remains the Holy Grail. One CFO envisioned a single solution that integrated reporting on portfolio company KPIs with investor reporting and the Customer Relationship Management (CRM) system so that the team could analyze the information at will. Another looked for a solution that simplified invoice approval and payment processing by flagging exceptions.
Removing manual data entry will make everyone’s lives better
None of the systems these individuals had adopted was perfect, but they acknowledged that the system is only part of the solution. By deeply committing to its adoption and integration, participants identified useful functionality that had not been part of their initial vision and made up for limitations. “The system itself is not going to be why you're successful,” observed one CFO. “You’re successful due to the [effort and time] you're willing to put into it.”
Participants observed that another element of successfully adopting technology was allowing time to learn its intricacies. “It’s time-consuming,” admitted one CFO. “But long-term, it makes a huge difference. Just this past quarter, reports were produced much more quickly, and it was easier to review the information.” One participant summed up the entire fast-moving conversation with the comment that “taking manual data entry out of my team’s jobs will make everyone’s lives better.”