THE FINANCE DEPARTMENT

1. THE FINANCE DEPARTMENT Organizing your Finances Presented to: Artemis Ventures Portfolio Group By: Bud Austin and Charlie Rodondi Kranz & Associates, LLC 650-854-4550 Baustin@kranzassoc.com Crodondi@kranzassoc.com www.kranzassoc.com

2. Key Issues for a Start-up • Hire Your Interim CFO • Determine Department Structure • Set up a Chart of Accounts • Purchase General Ledger Software • Quick Books • Peachtree • Develop a Cash Management Program • Establish Key Vendor Relationships • Develop a Financial Plan • Planning and Budgeting

3. Key Issues for a Start-up • Establish Consistent Reporting Formats • Establish Filing System • Establish Policies and Procedures • Establish Employee Benefits Program • Establish Stock Management Program • Establish Contract Management Program • Establish Revenue Recognition Plan

4. Hire Your Interim CFO • Why Hire a CFO • Experience • Contacts • Obtain a Known Quantity • Team Player • Strategic Contributor • Interview Several Options • Individual Referrals • Organizations • Kranz & Associates • The Brenner Group • David Powell Group

5. Hire Your Interim CFO • Check References • Prior CEO’s • Venture Partners • Industry Experts

6. Determine Department Structure • Development • Marketing • Business Development • Sales • G & A

7. Set-up Chart of Accounts • Establish a Numerical Chart with Department and Standard Account Structure • First Two Digits = Department Number • Last Four Digits = Account Number

8. Purchase Accounting Software • Key Features • Low Cost • Ease of Use • Requires Disciplines for Cash Management, Revenue and Expense Management • Reporting Structure • Analytical Ability • Ease of Conversion to Future Software Package

9. Cash Management System • Invest Excess Cash to Generate Income • Cash Reserves Account • Three to Six Months of Liquidity • Money Market Account • Investment Brokers • Smith Barney • Morgan Stanley Dean Witter

10. Cash Management System • Establish Authorization Matrix • Two Signatures over $10,000 • Establish Authorization Levels • Managers = $ 1,000 • Directors = $5,000 • VP’s = $10,000 • CEO = > $10,000

11. Cash Management System • Paper Documentation for All Activities • Vendor Quote Sheet • Approved Internal Purchase Request • Approved Purchase Order

12. Establish Key Vendor Relationships • Banks • Lease Lines • Insurance • Payroll Service • CPA Firm • Big Five • Other Firms • Investment Broker

13. Develop Financial Reporting • Design Reports for Various Users • Board Of Directors • Executive Staff • Department Management • Others

14. Planning and Budgeting • Define Goals and Objectives • Corporate • Department • Bottoms-up Budget • Start with Department Level Salaries and Build Up • Roll Up: • Balance Sheet • Income Statement • Cash Flow Statement • Headcount • Waterfall • Capital Expenditures • Obtain Board Approval

15. Establish Consistent Financial Reporting Package • Monthly and Quarterly Reporting • Balance Sheet • Income Statement • Cash Flow Statement • Waterfall Report • Actual vs. Budget Variance

16. Set-up Filing Requirements • Personnel Folders • Personnel Files • Corporate • Accounting

17. Establish Policies and Procedures • Disbursements • Travel & Entertainment • Capitalization • Hiring Practices • Purchasing • Option Management

18. Establish Employee Benefits Program • Salary Structure • Vacation and Sick Policy • Medical, Dental, and Vision Plans • 401K Plan • Flexible Spending - Sec.125 Cafeteria Plan

19. Establish a Stock Management Plan • Set a Budget • Set-up a Policy for Issuance, Exercise, and Repurchase • Set-up “Cap Table” and Reporting Formats • Obtain Board Approval

20. Set-up Contract Management Process • NDA’s • Development • Consulting – Draft Standard Agreement • Customer • Vendor

21. Establish a Revenue Plan • Sales Acceptance Policy • Sales Order Processing • Credit Limits • Revenue Recognition • Statement of Position 97-2 • Staff Accounting Bulletin No. 101

22. Executive Summary • Organize Early • Outsource Your Finance Department • Manage Your Cash • Be Successful