When should you outsource the accounting activities of your company?
Do you struggle to keep up with your company’s accounting records late at night and on weekends? Or, even worse, does this time conflict with the time you spend running your business?
Are you having trouble determining your company’s profitability or knowing your financial requirements for the following 60, 90, or 365 days?
Do you have a feeling your margins could be better, but you’re not sure how to assess them when reviewing your financial statements?
Would getting some help forecasting your company’s operations over the next few years help you set priorities with your employees?
If you responded yes to even one of these questions, you require external assistance.
Many business owners and executives feel the same way, and there are resources available to help you obtain the help you need to grow your company.
The first step is to recognize that, while operations are the most important component of any firm, reliable financial data is critical for making critical business decisions. You can take your firm to the next level if you have visibility into cash flow and know where your margins may be enhanced.
The next step is to determine whether hiring a full-time accounting resource to straighten out your company’s finances makes sense in terms of cost and skill.
Is there enough work for a full-time accountant?
A 40-hour-per-week accountant would be insufficient for many businesses to execute the basic accounting operations they require, such as the monthly close process, sending invoices, recording and paying bills, conducting payroll, and so on.
Is there too much work for your current full-time resource?
Are you asking them to accomplish tasks that are either above or beyond their skill level? This happens all the time in any role in a developing company. This is a lose-lose situation for all parties concerned, and it may result in employee turnover.
What level of experience will they need to have – CFO, controller, staff accountant?
Will you hire a CFO and then overpay them to handle basic staff-level accounting if you can’t afford to cover the costs of more than one accounting resource? You might also engage a staff accountant and give them CFO responsibilities; but, both of these choices will cost your firm a lot of money and will result in poor decision-making.
Will you hire a CFO and then overpay them to handle basic staff-level accounting if you can't afford to cover the costs of more than one accounting resource? You might also engage a staff accountant and give them CFO responsibilities; but, both of these choices will cost your firm a lot of money and will result in poor decision-making.
Preparing for a financial statement or audit review
Many business owners believe that a financial statement audit is a good thing for their company and that it gives their investors confidence in the financial data; however, most are unaware of the resource drain that an audit can cause due to a large number of requests for supporting documents and the technical accounting expertise that must be applied to the audit. Audit firms are unable to help with the accounting processes of the companies they audit due to independence requirements and must rely on management to identify suitable accounting procedures. Due to the inefficiencies, these difficulties frequently result in high audit firm overrun fees, which can be exceedingly costly for a company.
Using an outsourced accounting firm can give management the peace of mind that they have a team of accounting specialists – the majority of whom have past auditing expertise – who know what audit firms are looking for and how to deliver that information on time.
Investors requesting financial projections
Investors want to see what their money will produce in the future so they can help with financial and operational decisions. However, many business owners lack the expertise to prepare financial projections, so they may provide information that isn’t detailed enough for the purpose, or they may overlook significant costs that must be considered. Outsourced accounting services that assist with cash flow management and predictions have CFO-level professionals that are adept in quickly comprehending a business operation and translating that information into the organization’s future potential results.
Missing out on potential tax savings
When a tax preparer receives your financial information, it is possible that they will not explore all of your accounts for tax deductions. Tax preparers may be unaware of transactions that have been classified as improper accounts and hence fail to evaluate easy deductions. Meals and entertainment expenses, for example, are frequently deductible expenses, however, some transactions may be recorded in office expense categories, supplies, or miscellaneous. The deduction will be unreported unless the tax preparer is aware that such expenses may be wrongly classified, resulting in greater income tax. An outsourced accounting firm can organize accounting data and collaborate directly with tax experts to uncover as many tax savings as feasible.
Looking for capital investment from financial institutions
Perhaps you will need funds shortly and will approach various banking institutions. Financial information with evident errors, discrepancies, or a lack of organization may have a negative influence on your capacity to obtain financing, as lenders may find it difficult to truly grasp the performance of the firm without transparent financial data. When you use an outsourced accounting firm, you can rest assured that your financial statements will be accurate and timely. They will also give you a high-level financial resource who can aid you in creating professional assessments of financial data, making the loan proposal process less difficult. These statements can be used as a resource in interactions with individuals giving money to ensure that all aspects of the business’s operations are understood.
Thank you Aiswarya l Pramod for your highly informative article.