3 Tips to Help You Decide
Outsourcing your company’s accounting functions can be a great way to free up your key employees to focus on core business tasks. It can also lead to cost savings, scalability and more flexibility for you to focus on strategic initiatives to drive your business’s success.
However, different businesses require different levels of accounting support. How can you determine what level of support your company needs? The following tips can help you decide.
#1 – Understand your options.
Most outsourced accounting firms offer several levels of service to meet each client’s specific needs, including the following:
- Bookkeeping – If your company simply needs a partner to help enter debits and credits, then straightforward bookkeeping services may suffice. These services typically include recording, organizing and classifying all financial transactions. Such accounting also includes accounts payable and receivable. If you find yourself bogged down by the responsibility of tracking incoming and outgoing payments, you may want to consider hiring an accounting firm to help with these accounting functions. Doing so is one of the first steps in a healthy business.
- Month-end reconciliation or “close” – As your business grows and your accounting becomes more involved, you’ll need more than just bookkeeping. The month-end close closes out all financial activity for a business for the preceding month. This timeframe represents a well-defined period for accounting purposes. The process involves reviewing, documenting and reconciling all financial transactions for that period. A proper month-end reconciliation is completed in the following month, allowing the business owner to understand how the business performed in the prior month. With this, you should have a trial balance and a profit and loss statement you can depend on.
- Business intelligence and analytics – Moving into more sophisticated accounting continues with intelligence and analytics, which provides the business owner with the knowledge and insight to predict what their business is going to do instead of merely recording what the business did in the past. After the bookkeeping is done, the monthly financial transactions have been reconciled and the month has been closed, business intelligence and analytics are the reports generated that tell you how your business is going to do based on the prior month’s activities. Examples of this include:
- Cash flow reporting – How much money your business should have in the future based on the activity it’s generating now (this can often be predicted months or years into the future).
- Scenario planning – What if your business does 10% more sales next month?Workforce planning – What if your business continues to grow? When do you need to hire more people, and in what area of your business do you need to hire them?Benchmarking – How does your business compare to other businesses like it?Cash burn rate – What’s the rate at which your company is spending its supply of cash over time (i.e., the rate of negative cash flow)?
- Financial reporting– Accurate and up-to-date financial reporting is key to properly growing and investing in your business. An external accounting firm can support your company with balance sheets, cash flow reports, profit and loss statements, income statements and other financial reporting needs.
- Virtual Chief Financial Officer (vCFO) services – Making sense of monthly accounting and analytics isn’t easy, so enlisting the services of a vCFO is the next step in outsourced accounting services. A professional advisor that specializes in your business and has been in the business world for at least 15 years may be a good choice to engage to assist you in interpreting how your business is doing (and advise you on strategy for how to grow your business).
- Tax accounting – Perhaps your business needs assistance with tax preparation and planning. Tax accounting services generally include providing income tracking and reporting, identifying possible tax deductions and monitoring gains and losses. Tax accounting services also help ensure your business remains in compliance with all tax regulations while avoiding costly tax penalties.
- Payroll accounting – One of the most time-consuming tasks for many business owners is making sure all employees are paid promptly and correctly. Hiring a third-party to manage your payroll can help save you significant time each month.
#2 – Consider the stage of your business.
If you’re a small business owner just getting started, you may not need as much accounting support as a larger business. For example, you may be able to work with an external bookkeeper on a monthly basis to keep up on simple accounting tasks you don’t have time for, while a larger business owner may require daily bookkeeping support.
As your business grows and you diversify your lines of service, hire multiple employees, work with additional vendors and suppliers, etc., your financial needs will likely become more complex. This is when it may make sense to outsource more of your accounting functions.
#3 – Consider your strategic goals.
Do you have plans to grow your business over the next five to 10 years? Are you going to hire new employees? Introduce new products/services? Purchase real estate? Expand your locations?
If you answered yes to these questions, it may make sense to gradually start outsourcing your accounting functions.
As your business grows, you’ll likely need to focus more of your time and energy on core business functions. Working with an external accountant allows you to offload some of the more tedious financial functions so that you’re free to drive success in your initiatives — all while knowing your company’s financials are well managed and in compliance with ever-changing regulations.
The bottom line? Leveraging the expertise and resources of an outsourced accounting provider can allow you to do what you do best: run your business. If you could use some additional accounting support, Creative Planning Business Services is here for you. Whether you’re looking for cash flow analysis, accounts payable/receivable, monthly financial statements, CFO functions or other accounting services, our experienced advisors, accountants and CPAs will crunch numbers and strategize to help you crush your goals. Schedule a meeting with us to learn more about our services.
