School of Rock hits the right note with NetSuite ERP

Madeline Bennett Profile picture for user Madeline Bennett October 27, 2022 Audio mode
Summary:
Music tuition firm reduced financial close from 20 to nine days with NetSuite ERP

And image of give different fender guitars set against coloured backgrounds
(Image by Rahul Yadav from Pixabay )

To some, School of Rock may conjure up another manic Jack Black performance as a pretend substitute teacher, who introduces his prep school students to the wonders of rock music in the hit 2003 movie. However, School of Rock also exists in the real world, and has been teaching musicians since 2002 with the aim of preparing them for live performances. 

The organization now operates at over 300 school locations worldwide, training 55,000-plus kids in guitar, drums, singing and other instruments. 

When John Cappadona took the role of CFO at the company in 2018, he quickly identified various areas of the business that had room for improvement. 

Although School of Rock has been a NetSuite OneWorld customer since 2011, it had not been maximizing its investments. Cappadona estimates that when he joined, the firm was only using about 20-25 percent of the system’s capability. Part of this was down to a discrepancy between School of Rock’s ambitions and the technology’s capabilities. 

The original plan was to roll out NetSuite to everybody at School of Rock, which is primarily a franchise music education business, including all the franchisees. Cappadona says:

If you think about our model, it's subscription based. People come in, they have lessons, they have rehearsals, you have to have a scheduling component with it and NetSuite just couldn't really do that. They did all the other parts of it. So we moved away from that plan and when that happened, it became just our accounting system.

Cappadona set about changing this when he arrived. School of Rock expanded its use of Fixed Asset Management (FAM) and has more recently deployed Advanced Revenue Management (ARM). The company is also currently implementing an add-on from a NetSuite partner to manage its ASC 842 lease accounting requirements. He says:

I want everything financial, all of that, housed in NetSuite.

One of the most glaring issues Cappadona identified was the fact that the month-end close was taking 20 days, meaning the finance team was effectively in a perpetual state of closing the books. The firm has now made use of NetSuite automation to shorten the close to nine days, giving the team more time to ensure data is recorded correctly before producing monthly reports. He says:

When I first came in, we were 20 days and we were a brand new team, we were learning the system. Since then, we've cycled through our team twice and we've been able to keep the close at the same amount of time. Because we were able to automate things, because we were able to get our processes down, we didn't go off the rails and go back to the 20-day close.

Cappadona is hopeful that by next autumn, NetSuite Advanced Customer Support (ACS) will have identified further efficiencies in School of Rock’s processes to make the close even quicker. He adds: 

We're not going to go from nine days to two, but will we go from nine to seven? Absolutely.

School of Rock expects to see a reduction in audit fees, thanks to more accurate reporting data. Previously, the firm’s fixed asset or accounts payable subledger didn’t necessarily match what was at the general ledger level. Cappadona explains: 

There's a lot of machinations that we have to go through, count this, don't count that. When you're with an auditor, that should just be a report that you print out of NetSuite. The fact that you have to manipulate things doesn't make me feel good and takes more time. This year we're investing in getting that connected.

The company also expects more efficiencies leading to lower audit fees around revenue recognition standard ASC 606. Cappadona says: 

With 606, we had this spreadsheet that went out to column H and down 400 or 500 lines. Getting the auditors through that was just unbearable. Now we will run the report, it will all tie out, I'll be happy.

Hitting the right notes

The company is already benefiting from various other improved processes. With the firm’s third-party payroll system, it previously took a full day to download files and upload them into NetSuite. A new workflow lets NetSuite automatically import payroll data in a couple of hours. School of Rock’s accounting team has also created journal entry templates in NetSuite to save time on inter-company transactions. 

 Cappadona now runs a report twice a month showing the amount paid to it's music instructors by location, by year and compared with budget. This makes it easier to identify and address abnormally high or low costs.

The NetSuite technology really proved its worth during the COVID-19 pandemic. Pre-COVID, School of Rock looked at sales once a week and student count just once a month. Cappadona says: 

Our model is quite simple. Number of students is what drives our revenue. Once you're leveraging renting a facility, we get the variable cost so we had to switch and start monitoring student count daily. 

In COVID, we had to do scenario planning. Everything we did from a forecasting perspective all started with what was in NetSuite. We'd grab the data out, we had a specific report built for what we needed, put it into our Excel model, and then played with the variables.

This allowed the finance team to show its thinking in terms of revenue and profitability to the board so they could make decisions. He adds:

We're so fortunate. When we got out by the end of the summer, we knew that we were going to be okay and were able to start hitting the gas on some investments. All of this came with the financial planning we did. If we didn't have it, we wouldn't have known.

The forecasting model gets updated every month now, and Cappadona is constantly reviewing it to understand where the business should be going. He explains:

We made a pretty big acquisition of one of our largest franchisees over the course of the summer. We couldn’t have done without the forecasting, without us being able to tell how much cash am I going to have, how much cash do I need.

Since 2018 when Cappadona joined, the organization has grown from 23,000 to 56,000 students and from 200 to 300-plus music schools worldwide. Cappadona’s initial impression of NetSuite was that for a business the size of School of Rock, it didn’t need such an expansive product. This was because he had not used NetSuite before, but the more he understood its capabilities, he realized the correct route was to stick with the existing tech rather than go through another system implementation. Cappadona says: 

I went from that initial view to this is pretty powerful. I've been there almost five years, none of us have really had any training on it. It's actually a tribute to the system because we haven't had any training yet, it's intuitive enough that we were able to use it and go through our close. 

 

“That's why we're doubling down now with the investments.”

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