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Is it time to outsource your startup’s accounting, bookkeeping and CFO services?

Posted by Shivali Anand

September 22, 2021    |     7-minute read (1403 words)

Up-to-date financial documents are essential to a company's performance. However, as a startup owner, your time is critical and should be spent building your business and focusing on other vital responsibilities, not entering data into a spreadsheet. Furthermore, most young businesses do not have sufficient financial services staff to implement the growth tactics needed to expand.

Outsourcing accounting, bookkeeping and chief financial officer services is becoming a popular alternative among businesses. By outsourcing, they trim costs while improving productivity.

What is outsourcing?

Outsourcing, in basic terms, is the practice of having some job activities performed outside of a company. When a firm decides to outsource, it effectively delegates a portion of its labor to a third-party contractor or agency. Businesses commonly use outsourcing as a cost-cutting strategy.

Let's look at six of the most compelling reasons why essential outsourcing activities like accounting, bookkeeping and CFO services might be a smart move for your business:

  1. You'll save money in the following ways: 

    The desire to keep your firm solvent by cutting expenses is one of the driving reasons behind outsourcing. Outsourcing helps you save money on overhead costs by eliminating the need to pay for salaries and perks such as retirement, vacation time, and health insurance – outsourced workers are often less expensive than full-time employees. Furthermore, you will not be required to invest money in software or equipment to manage accounting and financial operations.

  2. Experts are available to you: 

    Accounting errors may have devastating consequences for a business, including penalties, cash flow difficulties and even an IRS inquiry. Accounting, bookkeeping and CFO services may all be outsourced, giving you access to a team of highly trained and certified experts that employ cutting-edge technology and processes to guarantee that your data is correct and safe.

  3. You'll have more time to grow your company:

    You could probably occupy an entire day simply dealing with the details of your job, from employee onboarding and payroll tax computations to handling your accounts receivables and paying bills. As a business owner, your most essential duty is to expand your company, and your primary responsibilities are to manage the revenue-generating activities. Outsourcing key activities free up time for you to concentrate on the most critical aspects of your organization. With outsourcing, you can focus on what you're excellent at while leaving support duties to skilled third-party contractors.

  4. Outsourcing is flexible by nature:

    By choosing an outsourcing firm specializing in finance and accounting, you may get a solution tailored to your company's needs. Depending on your requirements, you can easily add or delete financial and accounting procedures. If you simply require seasonal support, for example, you can outsource for a few months. You may scale back as demand drops and ramp up again when you need it.

  5. You've enhanced internal controls:

    According to a 2012 survey by the Association of Certified Fraud Examiners, small firms with less than 100 workers are the most prevalent victims of a scam, with the typical fraud costing $147,000. This is because most small firms lack access to an accountant or CFO who can identify unusual transactional and billing data activity. Because you'll have a specialized staff of accounting specialists checking your books and transaction reports, outsourcing accounting helps you decrease the potential of fraud. It also reduces the possibility of your records being tampered with.

  6. You gain better data security: 

    If your firm is like others, you have access to many personal data on your computers, everything from employee Social Security numbers and wages to tax information. Several firms also have access to their client's data, which ranges from credit card information to invoicing information and beyond. Startups frequently labor hard to implement high-level security systems to keep this information safe. Even then, they may overlook a vulnerability update that exposes this information to the public.

If you contract with an outsourcing firm, you won't have to worry about this since the firm will implement cybersecurity measures to guarantee that your data is encrypted and safe. You'll be able to discover your papers on shared servers or in the cloud if you ever need them, but only via a secure connection that can't be hacked.

The advantages of hiring a CFO on the side

An outsourced CFO has a lot more responsibilities than an outsourced accountant or bookkeeper. An outsourced CFO is a finance specialist who, on a project or part-time basis, provides high-level, strategic services, such as working on systems design and analysis and operational optimization. Here are eight more advantages of outsourcing CFO services that may help you improve your company's financial health.

  1. Cash flow management:

    A CFO will examine the cost and profit accounts and devise methods to address any financial issues. They may also discover and implement strategies to free up cash and enhance the overall profitability of your organization.

  2. Strategy and planning:

    A good CFO can assist your firm in developing a strategy as well as business forecasts and plans. They concentrate on current performance requirements, long-term strategic planning and counseling and give tailored solutions to assist you in taking your company to the next level.

  3. Exit and growth strategies:

    An outsourced CFO can assist with preparing the necessary papers, such as business plans and projections, with acquiring funds for expansion or prepare your company for sale. This knowledge can help your company obtain a significant premium on a sale or better investment/lending conditions.

  4. Financial planning:

    If you decide to go public or combine with another company, the outsourced CFO can help you design and implement strategies to deal with difficult financial times and/or rapid growth to guarantee a seamless transition. Putting firm goals, performing market research and analysis, creating a sales and marketing plan, setting up an accounting and financial management system, identifying ways to get startup capital, and so on are all economic planning activities that an outsourced CFO may assist with.

  5. Accurate and timely financial data

    : The outsourced CFO guarantees that the company they oversee receives accurate and timely financial data. An expert reviews the financial statements and other essential financial papers, ensuring that the information is correct.

  6. Examine customer contracts:

    An outsourced CFO may assist business owners in negotiating lucrative contracts. They may also analyze if the contract conditions are in their best interests and identify any hazards that could cost them money.

  7. Process improvement:

    CFOs may enhance month-end reporting deadlines, credit and collections procedures, client onboarding, lowering lead time to revenue, and improving lead creation, among other things. Outsourcing CFO services can assist you in analyzing and updating your marketing strategy to optimize the return on your marketing investments. With an outsourced CFO, you'll have more time on your hands to focus on innovation and product development while leaving financial issues to the pros.

  8. Expert restructuring advice:

    If your company is through a substantial transformation, such as reorienting its course or reorganizing for growth, the needed CFO duties may need to be highly specialized rather than general. In such cases, bringing in an outsourced CFO who can focus on the specific responsibilities might be beneficial.

Outsourcing is the way of the future

Many business owners have reviewed their basic operational procedures, from spending to remote working arrangements due to COVID-19. Entrepreneurs have learned that they must keep a laser-like focus on lean operations, which implies that now is the best moment to outsource for many of them. Companies strive to reduce their full-time workforces and find methods to save money while still boosting growth; the pandemic has made outsourcing various activities more vital than ever. It might be challenging to imagine a future without COVID-19, but the fact is that the pandemic will ultimately pass, and your firm will resume its normal operations. Your accounting, tax compliance, accounts payable, and financial demands will almost certainly increase as a result. 

With no lag time, the outsourcing company will be able to supply more hours or even more personnel to suit your expanding business's demands. If you need four hours of accounting support on Monday but discover you'll need nine hours by Wednesday, you can get it in one phone call instead of bargaining with employees and placing advertisements in the paper.

This also means you won't have to waste time employing accounting and financial personnel as your company grows. Instead, you'll just inform the outsourcing business that your demands have changed, and they'll scale up your operations to meet all of your needs.

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