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Growing companies could gain edge by outsourcing accounting

04/26/2017  |  By: David Lewis, MBA, CPA, President, LBMC Business Process Solutions

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There comes a moment for many growing businesses when company leaders realize they’ve outgrown their back-office accounting department.

It may be time to invest in new software and additional people or to improve accounting processes to be more efficient and flexible. They may be looking for ways to improve their financial reporting or may have other unmet needs.

When company leaders reach this fork in the road, some are finding that outsourcing parts or all of their financial processes offers better opportunities in the long-run, allowing company leaders more time to focus on other parts of the growing business.

What is outsourced accounting?

Essentially it’s back-office support without the fixed costs of maintaining a full-service in-house accounting staff. It can offer a continual fresh eye on your business, larger-scale technology and access to seasoned accounting teams without incurring the expense of hiring and training.

Outsourcing can be as minimal or extensive as you need. Some companies need only the basic services: accounts payable, accounts receivable, reconciliation, payroll and cash flow management. Others need more developed services, including budgeting, custom reports, dashboards and others. A full-service outsourced arrangement might include CFO services, tax consulting, IT consulting and strategic planning.

One advantage of outsourcing is that it can be customized to your needs, and adaptable enough to grow with your business.

For example, two entrepreneurs who did not want to incur the time and stress of hiring an internal accounting person for their new company decided instead to partner with an outside firm for financial services. The results? The company got a cloud-based accounting system, along with a cloud-­based vendor payment system that integrated with the general ledger. It gave both owners the convenience of working remotely and traveling on short notice to meet with clients, while enjoying the peace of mind that an experienced team knew how to process and record accounting transactions and resolve issues as they arose.

Another organization that had enjoyed significant growth for several years found itself with separate general ledgers and different software systems for its various entities. The management reporting process was manual and required too much time each month.

The company’s decision to outsource led to a newly designed accounting infrastructure that streamlined the reporting process of various entities within one system. The cash-disbursement process was converted from a large volume of manually signed checks to an online vendor payment system, significantly reducing costs and paperwork.

This combination of changes enhanced the organization’s confidence in its financials, saved a great deal of time and allowed management to get the reports they needed sooner so that they could stay focused on the organization’s mission.

Think of it this way. Instead of immediately hiring more people and increasing your own overhead, partnering with a financial firm to provide ongoing or special project services gives you the benefit of someone else’s investment in software and skilled accountants.

A long-time leading company in the music industry, for example, found its existing staff stretched thin when it implemented a new general ledger accounting system as a result of a large acquisition. The new software and a significantly higher volume of transactions strained the company’s finance department.

Instead of hiring more people, the CFO worked with an outside partner to find ways to move things forward quickly. Their experience with the accounting system saved his team valuable time and reduced their frustrations. A new cloud-based software allows for efficient processing of accounting transactions daily without having to be on-site.

In another case, a venture-capital backed company had developed a software platform to generate revenue. This virtual company had no corporate office, and the management team was located in several cities. By using a cloud-based accounting solution for its general ledger, management reporting and vendor payment process, the company was able to eliminate geographical barriers so it could recruit the best talent for its organization regardless of location.

In another example, a private equity firm had experienced significant growth in its real estate investment trust business. They wanted to work with a team who would understand the technical nature of the service line and who had the infrastructure to scale up with the company’s growth. Their solution included a cloud-based system accessible to the company’s management team from a smartphone, tablet, laptop or desktop computer, and access to professionals who could answer questions, research transactions and add entities as needed.

No matter the size — whether it’s a small and growing entrepreneurial venture or an established business facing changes or significant growth — companies are finding they have options in developing an accounting structure that works for them.