1. You need expertise
Having dedicated professionals that can provide you with accurate and on-time financials that they can explain to you is crucial.
How often do you waste time trying to understand your financials? Outsourcing your accounting gives you access to executive level financial knowledge on your team without having to pay full-time executive level wages. Putting your accounting into the hands of highly skilled and experienced consultants who understand how to apply the best practices to your business, makes your job easier. Stop wasting time with trying to figure out your financials and engage someone that can explain them to you quickly. Getting a high level review of your financials is imperative. The more transparency into your numbers, the better. Not knowing your burn rate, your employee utilization, your exact margins on every job/client or not knowing your debt to equity ratio can kill your profits. The more insight you have into what is driving your bottom line results, the more effective your decisions will be.
2. You need segregation of duties
When you have one person managing your books, you open yourself up to errors and fraud. Maybe you think you have to because the business is typically a start-up or small. This is not efficient or effective long term. There are many advantages of having a team of accounting professionals vs. an individual. The goal is always to create checks and balances of your financial information. Even the best bookkeeper can’t catch every subtle nuance that can benefit your company. You don’t want the same person doing payroll and A/P, and also reconciling your bank and credit card statements. With an outsourced solution, you have a team of specialists including a Controller and/or CFO who checks the work to ensure that you are getting accurate information and are receiving the appropriate recommendations.
3. You don’t have the time to manage a bookkeeper or do it yourself
Outsourcing your accounting is not only cost effective, but it also saves you time. Time is the most valuable resource you have. Putting your accounting in the hand of professionals you can trust, means you can focus on what you do best, running your business. Outsourcing your business’s accounting department frees up valuable time that can be put into bettering the company or doing more business development. One goal of a CEO is to generate more top line revenue. You cannot do that if you are managing accounting. Backend office functions can be a big distraction from the day to day operational tasks that are on your plate. It’s b best to spend your time working on the business, rather than in the business. Find ways to delegate wherever possible. Work smarter, not harder.
4. You want flexibility and scalability
When the economy is strong and business is good, you may have the funds to afford a full-time team, but what happens when you lose a big customer, the leads stop coming in, or the economy takes a dive? Are you then stuck laying off your team? Are each of those people even needed full-time? While these are common reasons to outsource, the main reason is having the ability to scale up or scale down based on your needs. Smart executives are using outsourcing to build flexibility and scalability into their businesses and to gain access to the top talent in the market. They may want the CPA/MBA Controller from Harvard, but will have to pay them $150k plus. That Controller may also not want to work full-time for any one company. Hiring a top notch team through an outsourced firm will allow you access to the best of the best, without having to take on a massive salary. Again, it’s unlikely a business under $20 million needs the CPA/MBA Controller full-time, but have the ability to worth with that individual 12-20 hours a week based on the current needs on the business.
The flexibility to bring on needed help and expertise in times of growth, without committing to a project or adding people to payroll, has been an invaluable solution to the small business owner. In addition to scalability, outsourcing allows the owner to focus on the core competencies of their company. One major advantage of outsourcing is that a company can get the newest developments and up to date technology without the expense.
Lastly, a successfully executed outsourcing partnership could make the difference in a company’s ability to ride out challenging times.
5. You want to be cost effective
Until your business hits a certain level of activity and size, it’s highly unlikely you need an accounting professional 40 hours a week and at only one level. Having a mix of skill sets is important. You don’t want your CFO, Controller or Accounting Manager doing data entry and you certainly don’t want your bookkeeper managing your cash flow and providing analytics. The team could work 30-40 hours a week, but it’s preferable to have the right level resource doing exactly what they are good at.
Hitting the right level of capacity to constitute having a full-time person at only one level is different for every business. With the right planning and forethought, you can avoid wasting time and resources on full-time staff that you may never fully utilize. Done right, outsourcing is a long term strategy that can fill the gaps before you ever need to employ full-time accounting staff.
Once your business hits a certain point, you will start hiring from the bottom up. For example, if you hit $5 million in revenue and you start needing someone at a data entry level onsite at least 32 hours a week, it’s the right time to hire a F/T Staff Accountant. Once the business hits $10 million, you may need 2-3 F/T in house people. This could mean an AR specialist, a Staff Accountant and an Accounting Manager. Many businesses don’t need a F/T Controller until they hit over $20 million in revenue. Once a client generates over $40 million in revenue, they likely need a F/T Controller and/or CFO. This doesn’t necessarily mean that every business over $40 million needs a F/T CFO. It often depends on your unique business and what needs to be done at every level.
The bottom line is that outsourcing your accounting can save you money by cutting costs of wages and direct overhead for full-time or part-time employees. You also save on lost productivity costs that come along with hiring employees onto your payroll. Through an outsourced solution you only pay for what you need but retain the level of professional resources required for your business.