A Two Part Series: Why Outsourcing Accounting Makes Sense
“While we need accounting, do we really need accountants?”
This is an important question business owners should ask themselves. Last time, I talked about some of the reasons business owners use to justify keeping an in house accounting department. However, in today’s reality of cutting costs as a means for survival, does the price of keeping accounting in house add up to long-term financial success? Is it time to shift your accounting needs to an outsource firm?
How do you decide which is the right decision for your business?
There are five basic functions that your accounting department should fulfill whether in house or outsourced.
Simplicity. No matter how great your accounting function may be, if you as an intelligent professional and the business owner cannot understand what they are saying, it will not be a productive relationship.
Timeliness. Information after the fact is only so useful. The more time that passes, the less useful that information becomes. You should be receiving information quickly enough from your accountant that it is not already obsolete by the time you receive it. Reliability. This includes accuracy, consistency and relevance. The numbers should be correct and be thoroughly reviewed. They should not be constantly changing. They should give relevant consistent information from period to period so that you can manage your business.
Control. Internal control is not very exciting to many business owners but it is critical to a company’s survival. Too many business owners become the victim of embezzlement because they did not put in place sound internal controls to protect their assets. This is not a matter of “trust.” Internal controls protect all parties to a transaction so that there is no misunderstanding or, worse, opportunity for embezzlement.
Cash management. Your accounting function should play a part in the healthy cash management of your organization. This comes in many forms. It includes ensuring adequate cash flow to cover normal expenses included in payroll and accounts payable. It also includes analysis such as controlling costs, monitoring purchasing decisions and projecting for future savings or debt reduction. Outsourcing your accounting can help you as a business owner attain an accounting function that meets all of these needs of the organization. Here are some tips for finding the right firm to work with.
Find a firm that’s more than a “sole proprietor.” One of the most important goals of the finance function is to have multiple levels of expertise and internal control. This is not possible with a single person firm. Additionally, they can often serve as a bottleneck if you need something quickly since they do not have the bandwidth to work on multiple client projects at one time.
Do your homework and check references. I can name two examples of bookkeeping services started by individuals with criminal records for embezzlement- one that is out on parole and one that is currently serving time in prison.
Look for the expertise of a CPA and/or an experienced CFO in the firm you choose. These individuals will have experience in internal control and the higher level financial expertise that small companies are often lacking.
By demanding better information and a stronger finance function, you can more effectively manage your business because you as the business owner will receive more accurate and timely information. By working to outsource your accounting, you can gain all of this while reducing costs. The right outsourced accounting firm can be a strong part of your company’s team.