How NetSuite Can Be Used For Private Equity Firms

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Private Equity (“PE”) firms raise funds to invest in privately held companies to transform businesses to enhance profitability, and in return, generate value for shareholders. These transformations almost always include an upgrade in IT infrastructure, and NetSuite has become a leading ERP system of choice as it supports rapid implementation, scalability, and streamlined configuration.

As a NetSuite Alliance Partner, Bridgepoint Consulting has worked closely with PE firms to execute numerous implementations for private equity firm’s portfolio companies. Recently, we have observed a growing interest in PE firms seeking to deploy NetSuite to support their own operational ERP needs. While the accounting requirements of PE firms are unique, through the use of the NetSuite PE Management (“PEM”) module and additional configurable solutions, Bridgepoint has found success in automating these functions and producing efficiencies for PE firms.

Private Equity Operations

The rights and obligations of PE firms and the General/Limited partners (i.e., investors) are governed by legal agreements that establish fund(s) and define terms for the formation, operation, and termination of the fund(s).

On behalf of fund(s), PE firms perform research and analyze companies as potential investments. A company will be referred to as a live or active deal as the process begins. If the firm decides to discontinue analysis and pass on the deal, the deal becomes a dead deal. If the firm chooses to consummate the deal, one or many funds will invest/close the deal, and the company will become a portfolio company. PE firms are responsible for the ongoing management of portfolio companies and invoices for expenses and fees as defined in agreements laid out at the time of investment. When a firm decides to sell or divest from a portfolio company, an exit strategy is executed, and the deal becomes an exited deal.

The essential functions in executing deal transactions and managing portfolio companies drive the accounting requirements of PE firms. The complex relationship between deals, portfolio companies, and funds further complicates the end-to-end operations and require creative solutions to automate processes.

NetSuite Solutions

There are three crucial operational needs specific to a Private Equity firm that can be supported by NetSuite:

1. Pass-Through Costs

PE firms tediously track direct and indirect expenses against deals and portfolio companies to eventually bill back costs. Expenses may be billed back to one or many funds, portfolio companies and/or deals depending on deal status and deal type. In many cases, it’s unknown who will be billed for the expenses as it will differ depending on whether or not the deal is consummated, the type of deal, and legal terms surrounding the fund(s) and deal.

NetSuite’s PEM module allows PE firms to track expenses by deal throughout the deal lifecycle. Deals are set up as a segment, which creates a bridge between the Accounts Payable and Accounts Receivable transactions. Funds and portfolio companies are made as “customers,” and the module allows firms to bill back deal expenses to these different “customers” as needed. The module also provides shared deal functionality and the ability to distribute expenses to multiple funds for invoicing efficiently. Lastly, NetSuite seamlessly integrates with employee expense systems, such as Concur or Expensify, to easily bill back employee expenses related to deals.

2. Allocations

As legal agreements typically require PE firms to maintain expense tracking at a precise level of detail, firms often have processes to allocate expenses such as overhead, employee payroll, and vendor bills (e.g., legal, consulting services) using dynamic metrics. This can be a burdensome, error-prone, and time-intensive activity.

By leveraging NetSuite’s platform capabilities, automation of these allocations can be achieved, eliminating or significantly reducing manual intervention. These processes allow for firms to use data such as employee time entry to allocate actual monthly employee payroll to deals/portfolio companies, as well as to consolidate overhead expenses and allocate to portfolio companies using dynamically calculated percentages. Leveraging an automated allocation process significantly reduces risks related to human error and increases efficiency in month-end close activities.

3. Fees

In addition to expense bill back, PE firms also charge portfolio companies management and/or performance fees. NetSuite’s configurable invoice templates allow firms to easily categorize these expense types and present them in the desired format. The PEM module also provides the ability to attach supporting schedules detailing the rolled-up charges on the face of invoices.


NetSuite’s thoughtfully designed PEM module addresses the key challenges that PE firms encounter due to the unique nature of the business model. Other configurable or custom solutions supported by the platform can eliminate manual processes and reduce pain points in end-to-end transactions. As more PE firms look to take a page from their portfolio playbook and engage in digital transformation, NetSuite has shown the ability to satisfy PE-specific business needs successfully.

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