Business is all about money. Simply put, if more money is coming in than going out, you’re headed in the right direction. But even the most profitable businesses can fail if their finance and accounting teams aren’t finely tuned and reporting the numbers correctly.
So how do you know when to outsource or keep your accounting team in house?
In today’s blog, we’re telling the story of finance, and helping you determine whether to keep your accounting teams in house or export the responsibilities to a team of professionals.
WHAT GOOD ACCOUNTING CAN DO FOR YOUR BUSINESS
In the early stages, running your own books was simple enough. Accounting systems like Xero, QuickBooks and MYOB made organizing small to medium size business finance easy. As your business grows, starts generating an income, and you begin bringing on employees, the complexity of your accounting can often grow exponentially.
What began as a 10-minute-a-day task quickly balloons into a part-time-job, especially if you’re not an accountant yourself.
So, what are the benefits of getting either a finance team, full-time accountant or outsourced service provider?
A good accountant knows how to claim tax deductions and reduce your overall tax liability. They can assist with understanding the ins-and-outs of staffing, operating expenses, and can therefore spot opportunities that will help to boost profits. An experienced accountant can also advise you on any government grants or private funding that can help your bottom line.
Hiring a professional to help manage your accounts will ensure nothing is missed, reducing the risk of errors that can be costly to your business.
You’ve probably heard the phrase “time is money”, and this makes so much more sense when you watch an experienced accountant do in five minutes what you just spent two hours trying to work out. Accountants can save you valuable time allowing you to focus on what you do best. Hiring a good accountant may be an expensive investment, however the time and money they will save you will outweigh the fees and the stress of not having one.
A good accountant will make sure your business meets any laws, regulations, standards, or codes with which all businesses must comply. Corporate compliance can include meeting tax deadlines amongst other requirements.
Finance teams or accountants can also give advice when it comes to structuring your business and even changing the structure as you grow. From sole traders and partnerships to corporations and companies, having the right structure is important to ensure you’re not paying too much tax, protecting yourself and your assets, and managing risks. Having professional and sound advice is a must for finding the business structure fit for your business.
Your Next Move
During a business’ lifetime, the majority of owners experience a crossroads moment. Whether its to embark on a growth phase and acquire other businesses or whether its time to shut up shop and liquidate all your assets, the consultancy received from a good accountant can be invaluable.
So, these pros are fairly well understood, but what are some of the hidden benefits of good accounting?
THE HIDDEN BENEFITS OF GOOD ACCOUNTING
A good accountant or finance team isn’t just installed to save time and money, there’s arguably something much more vital that this role can provide for your business.
A good finance team can provide fast access to operational metrics, cash flow, revenue and upcoming expenses. When this data is reported correctly and timely, businesses can react and respond to changing market conditions.
We’ve seen countless examples of businesses that have wasted tens of thousands of dollars paying for ongoing subscriptions and services they no longer need. Their regular monthly billing went unnoticed. But this is just the tip of the iceberg. Vendors, partners and suppliers routinely overcharge or incorrectly invoice, and without the watchful eye of an experienced accountant, they get away with it. Now, I’m not saying people are inherently honest, nine times out of ten its an honest mistake, but anecdotally, I think we’re all overcharged more than undercharged in our day to day lives.
On the other hand, when your finance team is slow to react or even non-existent, you can quite easily put yourself through unnecessary anxiety every time a big bill comes in. Your cash flow might be cyclic and the books can look a little unhealthy on a specific time of the month and without insight or context as to why this is so, panic can easily set in. A good accountant can alleviate any transient fears and provide context and reassurance if needed.
At the end of the day, good accounting tells the whole story of a business. It’s the complete picture from customer to product to employees.
So how do you know if you should build an in-house finance team as opposed to outsourcing your accounting?
IN-HOUSE vs OUTSOURCE
While businesses have traditionally relied on an in-house accountant to fulfill their bookkeeping and accounting needs, with the advances in technology and a growing economy, businesses now have many cost-effective options to outsource their accounting and bookkeeping.
Here are a few of the pros and cons of each option.
Interviewing, hiring and onboarding an in-house accountant is an expensive affair. Especially if you don’t choose right the first time. One of the biggest challenges for business owners is properly evaluating someone’s accounting skills without having a deep knowledge of accounting themselves.
On the other side of the fence, accounting firms and outsourcing partners specialize in finding and vetting their staff prior to making them available to your business. Expert outsourced accounting companies also ensure their accountants are highly-qualified individuals who undergo continual training to stay up-to-date on their knowledge in order to provide the best level of service. This is not usually the case with internal accounting employees/teams.
Unfortunately, financial fraud is common with in-house accountants, in fact, 80% of embezzlement cases occur at small businesses. The reason is simple: when one person controls your entire financial flow of information, they are in direct control of your banking and reporting. When more people are involved, the risk is significantly reduced as multiple layers of checks and division of labor makes everyone more accountable.
With outsourced accounting and bookkeeping, the accountability lies entirely with the agency you have hired. Their only job is to ensure your books are accounted for and that the math adds up.
It can be argued that an in-house accountant has a better view of the company’s operations. This isn’t a remote vs on-site argument; studies have shown that staff in the office network and communicate both faster and more efficiently. Having said that, they can often be pulled away to perform other finance-related tasks when financial reporting is due.
Outsourced agencies allow you to retain your in-house bookkeeping staff but also provide them with more support. While your internal team members help out with important responsibilities that fall outside of financial reporting, the outsourced firm’s agents can collate relevant information about financial statements and status.
While a good accountant can effectively pay for himself, a bad accountant can double your liabilities. We’ve discussed the cost of a bad hire at length, but the cost of repeatedly hiring the wrong accountant can, over time, be devastating.
Conversely, an outsourced or accounting partner has a fixed and predictable cost with staff able to be remotely onboarded almost immediately.
If you’re looking for a professional accounting partner or consultancy to determine your next move, the right advice is priceless. As business consultants and COOs, we work with entrepreneurs every day to set them up for success by identifying where their business is suffering. We help them pinpoint which processes to re-evaluate and adjust to grow their business. And best yet… We offer hassle-free, no obligation 30-minute discovery calls with our founder to see how we could help you. Just email us today.
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