When I talk with business owners, a frequent complaint is lack of time to focus on the things they love to do to help their customers. Since that passion is what drives entrepreneurs, I often suggest they look to outsource non-core activities so they can focus on their passion. Accounting is one of those non-core activities that can be easily outsourced. Here’s why:
Accounting Service Providers
The availability of accounting service providers in the US economy is extensive. Given the ready availability of such services, outsourcing accounting is an easy move toward reclaiming the time spent on it by business owners. Inexpensive accounting software like QuickBooks and Xero have been both a blessing and a challenge for business owners. While it made accounting software readily available at low cost, it is also true that some knowledge of accounting is helpful in the set-up process to avoid frequent mistakes in the chart of accounts and to ensure that the roll up to the proper line items (called mapping) in your reports is accurate. Otherwise, your reports won’t have credibility. We have one partner in our practice who is called on frequently to correct set up mistakes in self installed accounting software.
All businesses should have accounting processes that include internal controls to prevent fraud and to reduce errors in the recording of transactions. Don’t underestimate the value of internal controls in protecting your business. We receive a number of calls each year from business owners who have either discovered accounting fraud or suspect that they are victims of it.
Outsourcing can provide cost predictability for accounting. When you outsource, especially if you’ve been doing accounting internally for a time, your service provider may suggest a couple of months of doing your accounting on a “time and materials” or hourly basis to properly size the time and cost of posting transactions and producing monthly reports. This can then be translated into a fixed monthly fee for accounting services once the work is sized and time to complete it is determined. That fee can then be reviewed periodically to determine appropriateness. In effect, you’ve transferred the responsibility for cost containment and process improvements, such as software upgrades and changes in accounting pronouncements, to your service provider.
Outsourcing allows your business to grow without adding resources. As Nancy Mehlberg of SVA Accounting said in her BizTimes article of May 26, 2021 “As your business grows, your outsource team will continue to provide the back-office support you need without requiring you to invest in additional office staff to manage the financial side of the business.” Because your accounting service understands the financial profile of your business, they can also provide useful insight into ideas that can help your business grow cost effectively.
Exiting a Business
Most business owners rarely think about exiting their business. We think that is a mistake. We recommend that business owners have an idea of how they would exit their business should unexpected circumstances require them to do so. A good set of books is critical when dealing with a potential buyer. If a buyer concludes that your financial reports are accurate, that can contribute to an efficient process in negotiating a potential sale. Buyers often walk away from acquisition targets whose books are in disarray. Sale of a business can be occasioned by a variety of circumstances from owner disability to death to business model obsolescence. Think of an exit plan as business survival contingency planning.
At CFOs2GO, we have a robust service offering of outsourced accounting solutions. Please reach out if a conversation with our team could help you reclaim valuable time that will help you run your business more effectively and – ultimately — benefit your customers!
Doug Kennedy has extensive knowledge and hands-on experience in building robust foundations for family offices and serving the role of a trusted advisor. He performs business advisory services and financial consulting work for a variety of family-owned businesses from start-ups to mature successful enterprises. His experience has been spent in family-dominated publicly owned companies, high net worth individuals, estate planning, wealth management, succession planning, leadership transition, and risk management.