How the Finance Function Creates Value for Private Equity Portfolio Companies

When we look at the typical finance and accounting function within a company, we’ll find a range of accounting activities – payroll administration, customer invoicing, financial reporting, processing of payables, and so on. According to various surveys, about 70% (or more) of all financial management functions deal with the processing of accounting transactions. That means that less than 20% of financial management is spent on strategic planning, risk management, performance measurement, competitive intelligence, investment analysis, and other aspects of real financial management.

As opposed to hedge funds, which are alternative investments that use a variety of tactics and pooled money to earn investment returns, private equity funds invest in their companies directly. They do that by buying a controlling interest in publicly traded organizations or by purchasing them. Furthermore, private equity investors provide equity capital to a company that isn’t quoted on a stock market, turning it into a platform company. That money can be used to expand working capital, develop new technologies and products, strengthen a company’s balance sheet, or make acquisitions. PE can also resolve management and ownership issues.

When private equity portfolio companies get their investment, one of the first steps to redesign their finance function to create value is to move away from traditional accounting management and kickstart the transformation into real financial management. This transformation’s overall objective is to switch to more value-adding activities or things that will help improve company performance.

Portfolio companies need to adopt a set of practices that can help transform their finance function into a significant value driver. These practices include many things, such as:

  • Reducing cycle times by processing data only once.
  • Organizing around results.
  • Leveraging technology and people to improve transaction processing (e.g., electronic data interchange, purchase credit cards for payables, electronic payroll processing, etc.).
  • Centralizing and structuring financial data, so it doesn’t just occupy storage space but provides necessary information.

Keep reading to find out more about how the finance function creates value for private equity portfolio companies.

Breaking Away from the Traditional F&A Model

Departing from the traditional finance and accounting model is essential to making the finance function a source of value for your portfolio company. That requires a different way of thinking about how you measure your company performance. The emphasis should be on increasing value. To successfully transition over to value-creation, it’s crucial to understand why the finance function runs contrary to it.

Your company’s financial function can play a role in placing focus on things that are of greater importance to true economic performance. For instance, it is critical to think outside the financial statements because value-creation never actually appears on the Balance Sheet. Things like innovative marketing, information technology (like AI, automation, and financial analytics), human resource capital, and others are paramount to creating value.

Balancing the financial and non-financial forms of measurement is another crucial step. Portfolio companies need to identify their strengths and weaknesses and measure the non-financial aspects contributing to value-creation. Solving disparate systems by moving towards a unified system can help leverage the company’s intellectual capital. Using better analytical and processing tools can improve the CFO’s and CEO’s decision-making process. This is how value gets created, and finance and accounting needs to lead the way.

Key Lessons for Finance Functions

  • Adding value. In finance, less than a quarter of the time is spent delivering relevant business insight.
  • Investing in skills. Top quartile companies pay their insight to finance professionals about 25% more.
  • Focusing effort. In top-quartile companies, analysts spend 40% of their time gathering data (not analyzing).
  • Making savings. Leading finance functions cost 35% less than the median finance functions.
  • Eliminating inefficiencies in finance as well as other functions. Across many key finance processes, automation, and process improvement can reduce costs by more than 45%.

Realign Your Operating Model to Focus on Value

Since business operating models are changing so fast, finance functions must keep track if they want to support the business and find ways to add value. But when they think about their business operating model, CFOs usually focus on the shared services and location choices for teams, as well as to what extent they can outsource them to third parties. There are many other important questions to consider. What services does finance provide the business? What technology needs to be in place? What skills are required?

One of the ways towards a lower-cost finance function is applying automation, which doesn’t have to be a time-consuming, complex, and expensive project (as many believe so). Much of the time wasted on performing finance and accounting tasks or activities like error correction and rework can be replaced by automation and robotics. Thanks to FaaS providers, web-based data analytics tools, and accessibility of RPA (robotic process automation), portfolio companies can put these solutions quickly and at low cost. That can help transform the way finance function works and the value it adds to the company.

Another way to lower the cost of the finance function is by focusing on more effective human resource management, changing the way teams work and collaborate, and eliminating “waste activities.” Finance leaders are asking themselves whether their teams can do certain tasks more efficiently and whether they need to perform some of them at all. Then, they determine what tasks don’t differentiate the business and add value and eliminate them.

As finance functions grow more efficient, they free up their most operationally savvy and experienced professionals from routine transactional tasks. It saves them from the dullness of gathering, validating, reconciling data, and compiling many financial reports that often aren’t used for bringing business decisions. What PE firms look for in their investments is, most often, a top-notch management team.

Utilizing Technology

Today, technology is vital to almost any finance function (and overall business) transformation. With the emergence of a new generation of tech platforms, resources, and tools (such as RPA, Artificial Intelligence, Big Data, cloud, etc.), transformations have a bigger potential to deliver more generous benefits than before. Robotics, AI, and the Internet of Things are technologies that global organizations see as both the most important for cutting costs and the most disruptive. Private equity portfolio companies can’t fall back on their technology gaps as an excuse to delay implementing other transformation elements. However, some companies have realized that they can’t move forward with their transformation until their tech resources have caught up.

When selected and applied correctly, tech solutions can free up significantly more time for the finance function to deliver value. For example, with effective governance and standardized data definitions, FaaS platforms can serve as a single source of information and make it possible to streamline various processes. Companies with a single enterprise-wide system have much lower accounting costs, while data visualization tools and add-ons enable self-service reporting and make it possible to frame opportunities and challenges in new, productive ways.

The best FaaS providers already have access to the latest technological solutions to help private companies achieve high growth rates. Overall, those tools help with improving and reorganizing outdated systems that are slowing down productivity and growth. They typically come with a higher price tag, which is a solid reason why a PE-backed company will benefit from reaching out to a Finance as a Service provider.

Measuring the Right Metrics and Accurate Reporting

When PE firms invest in a company, the first thing that most of them do is develop and improve the portfolio’s information systems. They do that to make sure two important things are set up to their standards:

  • Costs. What are the costs, and where are they? Nothing will change if everything is according to the PE’s standards, but if the costs can be reduced, they will do everything to achieve it.
  • What sells and what doesn’t. Whichever product or service the PE portfolio company has that’s creating income will remain as are or be improved. However, the PE firm wants to cut down on costs, and one of the ways of doing it is by eliminating offerings that aren’t producing high-enough income.

Before the private equity company invests in a company, it wants to look at these five metrics..

  1. Cash flow

No investor wants to invest in a company that is not making high-enough revenue, so they will want to see the cash flow statement. Cash flow statements show how much cash the organization is generating, while the income statements include non-cash expenses and revenues. The cash flow is a metric that matters a lot to PE firms because they know high incomes sometimes don’t mean that the money is circulating. Investors value portfolio companies based on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), which is an important indicator of an enterprise’s earnings potential and financial performance.

  1. Liquidity

Investors want to see this metric because it shows them how quickly a company can be sold or bought without affecting its price. They typically want to see it after the company is invested in or sold, and they want to see daily, weekly, monthly, or quarterly cash flow models. Since the enterprise needs to ensure that the liquidity metrics change or remain at a desirable level, it increases the need for excellent F&A solutions.

  1. Product analysis

Costs need to be controlled because it’s easy to leave out certain areas where profits are generated, which makes cost accounting tricky. When certain areas are left out, PE firms want to conduct a detailed analysis of each product to determine the actual margins that the portfolio company is making.

  1. Expense control

Private equity firms always want to have a clear view of the portfolio company’s expenses, so expense control is another important metric that they need. They need it to detect expenses the company has and find ways to reduce them (and increase profits). If the costs are higher than previously planned, they will take actions to decrease them. PE firms will ask about the company’s policies, why some of them are spiking, and how they are controlled.

The last metrics include industry-related metrics, and they are specific to each company (depending on the industry it operates within). Since each industry has its own metrics, every company needs to define them. The PE firm will definitely ask for these metrics because they provide insight into how the portfolio company performs within its industry.

How FaaS Helps PE Portfolio Companies Create Value

To help their portfolio companies thrive, PE firms understand that they must leverage the best financial services and advanced tools. The main reasons why PE firms decide to hire companies such as Consero as their partner include:

  • Accurate financial data and reporting

When a private equity firm invests in an enterprise, it sometimes happens that the enterprise doesn’t have a strategic CFO, which is why its reporting isn’t up to the level PE firms need. To drive the growth of the acquired company, PE firms use data, analytics, and metrics. FaaS providers are there to supply all the analytics and metrics the PE firms need, giving them the necessary KPIs and metrics in an understandable and easy-to-read format.

  • Scalability

FaaS providers have a business model that allows them to scale to meet any company’s needs quickly. They provide the right level of resources for the right activity. When an organization goes through an acquisition, FaaS providers can help with the process by setting up systems and getting the company streamlined. Companies don’t have such scalability and flexibility with in-house finance teams because in-house teams don’t have the time to get that acquisition integrated. 

  • Speed-to-optimization

Immediately after investing in a company, PE firms will want to grow it as quickly as possible. But it often happens that the finance and accounting department hinders that growth because:

  • The F&A team members don’t possess the right skillset.
  • It is unable to increase company revenue.
  • It doesn’t have the right processes or systems to help them achieve the desired growth.

When there is a problem in this department, many organizations try to hire a new team that researches available systems. They choose one that seems to be the best fit, configure, and implement it. After it’s all done, they train their staff to use the system. However, this optimization process requires between 18 and 24 months, and it takes a lot of energy to achieve the point of full integration. On the other hand, the FaaS model will help you optimize your finance function in as little as 30 days. FaaS providers already have the finance processes and systems fully implemented, and they can deploy them more cost-effectively and rapidly than an in-house team could.

  • Cost savings

Hiring a FaaS provider is a much more cost-effective solution than building and training an in-house team (for PE firms, time is of great essence). Also, the savings achieved with a FaaS partner can last even as portfolio companies continue to grow. These providers bring a larger pool of experienced staff to the table. They are very efficient and automate activities that an in-house team would perform manually. Besides, they already know which processes will work best for you because they work with similar organizations.

  • CFO insurance

The FaaS model is often considered as CFO insurance by many PE firms. Your FaaS partner helps reduce the time needed with financial analysis and administration and takes over the daily mundane tasks, allowing the CFO to focus on strategic leadership and business growth. PE firms don’t want their portfolio’s CFOs to spend time on tactical and routine activities but on figuring out how to turn financial information into competitive intelligence.

Benefits of Teaming Up with Consero

Consero’s services are designed to help companies assess their current financial health and determine which choices will help them thrive. We understand that businesses often need an experienced partner to help them deal with various obstacles on the road ahead of them. We offer a robust financial solution that will help your portfolio company build a strong foundation after the investment or acquisition was made. Our services include:

  • CFO consulting. If you have a private equity CFO without the right skill sets, then we provide strategic guidance to help improve their skillset. Or, wel can help to fill that gap with an expert strategic fractional CFO to help you boost profitability and productivity, provide financial data analysis, forecast performance, etc. Our Strategic CFOs will take initiatives that deliver on your portfolio company’s investment thesis, which helps to democratize the creation of value beyond the finance function. 
  • Financial planning and analysis. Our finance analysts and experts will help you bring informed decisions based on detailed insights to help you come out of cash flow problems. We use advanced software based on AI and automation to provide detailed analysis and reports that will help you create the best plan for moving forward.
  • Controller. Controllers play an integral role in interpreting financial numbers and making data-informed decisions on budgets and expenses. They work to ensure that a company utilizes the right internal controls that keep it profitable and healthy.
  • Bookkeeping. PE-backed portfolio companies with issues with their financial management, records, and strategy can benefit from Consero’s bookkeeping services. We are not just an outsourced, third-party bookkeeping provider that helps you maintain your books, but a strategic partner that enables you to save money, save time, and deliver a higher ROI.

Since the private equity industry has increased significantly during the last decade, PE firms have to do more to stay competitive. They need to understand regulations and make the right decisions, but this cannot happen if their finance staff is unskilled and unequipped with the right tools. A fund manager must have comprehensive insight into the company’s financial standing at every moment to be able to make the best decisions.

Consero provides an outsourced finance and accounting solution that will help gain more significant financial insights through advanced analytics, reduce operational risk, eliminate inefficiencies, make savings, and allow CFOs to focus their effort on things of greater importance. We are ready to help you improve your practices in value creation, firm valuation, governance, and capital structure.

 

Where to Go When You Outgrow QuickBooks

The Problem with QuickBooks

QuickBooks is entry-level accounting software for small and medium-sized businesses, meaning that it comes with various drawbacks. First of all, it is not designed for working with complex financial data with multiple variables. It lacks many sophisticated financial management functions that a growing business needs, such as resource management, comprehensive reporting, tracking, advanced cash flow analytics, etc. The primary functions of QuickBooks are centered around accounting, and their scope is quite limited (to accounting basics), which means you’ll need to integrate third-party business management software to digitize your organization.

Disadvantages of QuickBooks include:

  • Limitations on the number of users
  • Lack of crucial reports outside of accounting
  • Lack of business- and industry-specific features
  • Manual processes
  • File-size issues
  • Problems with QuickBooks data conversion
  • Issues with data import/export of Excel spreadsheets
  • Lack of direct professional support
  • System crashes and disaster recovery
  • Not scalable

Where to Go When You Outgrow QuickBooks?

Once you have noticed all the signs you’re outgrowing QuickBooks, it’s time to leave QuickBooks for a more advanced solution. There are a few options for enterprises struggling to plan their next move because they cannot get visibility into their sea of financial data.

  1. Switching to an on-premise finance and accounting platform

To minimize the growing pains, you can decide to ditch QuickBooks and move your accounting to a different, more robust, and more complete on-premise accounting platform. However, these accounting systems require more time and effort to implement. They also require a large cash investment, external consultants, and an in-house finance and accounting team. Enterprises shouldn’t expect to get far with an on-premise accounting choice for less than approximately $50,000, and the numbers may go up.

Furthermore, moving to the new on-premise accounting software will be difficult because migrating valuable and sensitive data to a new environment is quite challenging for CFOs and their teams. Also, the probability of everything going smoothly is virtually non-existent because tracking down financial data requires a lot of patience and time. Finding, hiring, and training employees on the new platform requires additional investments – the more robust the system, the more extensive training period will be before your team becomes prepared to use the system efficiently.

Of course, these systems can solve tons of transactional problems that you’d face with QuickBooks, but they won’t solve the analytics and reporting problem. You will need to buy additional software for enterprise-level analytics and advanced reporting, then bring in consultants to implement it. All in all, this is a very time-consuming and expensive solution.

  1. Switching to an ERP (Enterprise Resource Planning) system

Another potential option is upgrading to an ERP solution – a holistic business management software that integrates all back-office functions, from workflow management, sales, supply and distribution, and business analytics to resource control. Accounting is typically tied to most of these core processes, so having such an enterprise-wide software that covers financial management makes a lot of sense. Unlike QuickBooks, a small business accounting software, an ERP is a centralized solution that can link each process through a common platform.

On the other hand, it also costs a lot to implement, especially if you need to upgrade your hardware and train staff to use it. Typically, ERP systems require some level of training from the vendor before you can start using it. Data migration to a new ERP is slow because you’ll have to input all existing data the first time you use it. The more data you have, the longer it will take (and you will have to double-check it to make sure nothing is duplicated or lost during the migration. Ultimately, complexity is both the biggest advantage and disadvantage of ERP systems. Since it’s capable of so many things, it can be challenging for users to focus on singular tasks.

If you want to upgrade to an ERP system, it may take months or years of planning in advance to avoid any disruptions to your accounting work. Cloud-based ERP software is easier and faster to install, but it still takes time.

  1. Cloud-based accounting system

SaaS accounting applications are starting to find their place in the world of finance and accounting. Actually, if you’re using the QuickBooks Desktop version, there’s probably no other alternative but to switch to a SaaS platform (e.g., QuickBooks Online). Migrating to a cloud-based system offers more flexibility, and most of the cloud-based accounting vendors offer tech support and could help you resolve technical issues on short notice (but that doesn’t necessarily cover data migration issues). If appropriately set, some of the platforms provide data visualization of your financial information, allowing you to perceive your data the way you like.

Data migration is also a major issue with cloud-based applications. There hasn’t been a migration of data from one accounting environment to another that didn’t come with a few significant data issues.

Leveraging Finance as a Service

Partnering with a Finance as a Service (FaaS) to outsource your finance and accounting function has a myriad of benefits. It has pre-built systems and workflows, a skilled finance team to take on all back-office operations and easy-to-view dashboards for efficient monitoring of the business, This provides you with more transparency, clarity and time to focus on core business tasks. Your CFO can spend more time on financial management and decision-making, and reliable and precise financial reports provided by your FaaS provider will make a world of difference to your business intelligence.

Your company can reap the benefits of outsourced accounting when you start assessing your organization’s gaps and needs regarding financial operations. The FaaS providers can take over your entire F&A department with services that range from comprehensive finance services, as well as controller services and a fractional CFO. The main areas of your finance department you can outsource include:

  • Bookkeeping
  • Back-office support
  • Controller services
  • CFO services
  • Financial planning and analysis

When you subscribe to FaaS (Finance as a Service), you will get:

  • Improved accuracy of financial data and reports
  • Provision of reports that help improve your decision-making
  • Lots of saved time to spend on core business issues
  • Reduced errors
  • Mitigating the probability of fraud
  • Access to financial experts and the latest technology

Outsourcing your finance and accounting department allows you to modernize your back-office function by letting go of outdated or insufficiently robust systems (for a fraction of the cost of running an in-house F&A department). You will have a team of experts to improve your processes and controls with powerful tech systems and business solutions, proper controls, and streamlined processes. You will get to use a consolidated platform to ensure all work and processes run smoothly. At the same time, your CFO will benefit from your FaaS provider’s ability to overcome various setbacks and obstacles that prevent your organization from scaling.

Next, you won’t have to buy the accounting technology (or maintain it) because you get the advanced software your partner provides. Improved compliance, minimal errors, no duplication of jobs, and avoiding other bottlenecks come from capitalizing on your FaaS provider’s expertise. You will ensure that your company is equipped with everything that lets it meet digital transformation requirements. Paper-based and non-integrated solutions get replaced with integrated software solutions with a centralized dashboard that lets you see your company’s financial position at a glance. This kind of financial visibility leads to improved strategic decision-making and problem-solving, which leads to a higher ROI.

Conclusion

There is life after QuickBooks. Many startups and SMBs go with QuickBooks because it’s the most known and widely-used accounting software globally. On a small scale, the basic functionalities it offers are what small companies need to meet their accounting needs and get them up and running. But as a business owner with a growing company, you will run into various limitations (such as primitive reporting, data accessibility issues, and inflexible processes) that will cause you to upgrade to a better solution. Outsourcing your finance and accounting department is the most cost-effective and efficient way to go because it provides the necessary technology, people, and processes to meet your accounting needs and support executive decision-making.

Reach out to Consero and request a free demo today to find out how outsourced finance and accounting can set you on a clear path towards growth! We can help you identify the telltale signs that you’ve outgrown QuickBooks and that your business could benefit from FaaS. 

 

What Are The Limitations of QuickBooks Online?

In April 2019, Intuit Inc. (the creator of the QuickBooks accounting software) introduced new usage limits in QuickBooks Online (QBO) software, which affected the number of users, chart of accounts, and class or location items that platform users can add. Users were able to maintain their entries above the limits for the first six months. Since last October, the software no longer supports plans that exceed the revised limits. As a result, QuickBooks Online users expressed their frustrations on the QuickBooks’ community forum and social media. If you are one of the users who used the online version of QuickBooks to manage your accounting, you have been affected by this change.

The updated usage limit in QuickBooks Online includes:

  • Billable users: Simple Start (1), Essentials (3), Plus (5), Advanced (25)
  • Classes and locations: All plans (40) and Advanced (no limits)
  • Accountant: Across all plans (2)
  • Chart of accounts: All plans (250) and Advanced (no limit)
  • Time tracking-only: Simple Start (0), Plus and Advanced (unlimited time tracking)
  • Reports-only: Simple Start and Essentials (0), Plus and Advanced (no limit)

How to Find Your Usage Limits

QuickBooks Online users can find what their usage limits are from the Usage Limits Dashboard under the Usage tab in the Account and Settings section:

  1. Sign into your QuickBooks Online account
  2. Click the Gear icon
  3. Click on Account and Settings in the left-hand column
  4. Click on the Usage tab from the left-hand options

What Happens If You Exceed a Usage Limit?

If you’ve already gone over a limit before the implementation of these usage limitations, you will not be able to add new list elements to the list until you reduce it. For example, if you are on the QuickBooks Online Plus plan and have 50 classes and locations, you will not be able to add any new classes and locations until you are back down to 39. These usage limits affect only active items, so you would have to mark the unwanted classes and locations as inactive to be able to add new items up to the limit.

The software doesn’t say what specific method of list reduction is required for each list type. If you want to add more items or avoid list reduction, you can simply upgrade your plan. There is no clear instruction that says whether making an item inactive is a sufficient reduction, or if you must delete an item to reduce a list size for purposes of usage limits. When it comes to the Class and Locations list limit, you should be aware that the list limit is the combined size of these lists (not each list individually). When you take a look at the Usage Limits Dashboard, you will notice that they’ve been combined to reflect your existing number of items in relation to the overall usage limitation.

Other Options for Circumventing QBO Usage Limits

Your QuickBooks ProAdvisor may tell you that you need to go to QBO Advance if you want to add more than 4-5 users. With the exception of Billable User limits (regarding the number of people moving from Simple Start to Essentials or Essentials to Plus), the only option regarding other lists is to convert to QuickBooks Online Advance because the ability to reduce list size may not be possible in many instances. Is there anything else you can do to circumvent these usage limits (besides upgrading your plan) once QuickBooks Online tells you that you need to upgrade because you have outgrown your product?

Intuit tech support probably won’t tell you that you can just start a new Company File with only the list elements you need (only the most current ones). The ability to migrate item lists and period-specific data into new QBO may preclude your need to upgrade to a higher plan. This is possible thanks to apps that can make a copy of QBO files and preserve them as an archived backup, which you can then restore into a brand-new Company File (with all historical records preserved).

QuickBooks Online users believe that this limits-and-upgrade-game may have breathed a renewed energy into the QuickBooks data migration skill set for QuickBooks ProAdvisors. The only difference is that it is a different platform and a different set of tools that are easier to learn than the limited toolkit and old database users had for the QuickBooks desktop version. For all accountants considering enrolling into a ProAdvisor program and focusing on data specialization as a niche, you can basically play the same game, but on the cloud.

Switching to QBO Advanced – What Will It Cost You?

The current cost of QuickBooks Online Plus is $50 per month, while the QuickBooks Online Advanced will cost you $150 per month. This is a significant price jump for those who want to reap the benefits of QBO Advanced. With such a large price jump, many enterprises might be hesitant to leap to the Advanced subscription plan, mainly because the QBO platform comes with many disadvantages and limitations for high-growth companies.

Since October 2019, accounts that exceed the limit may be suspended on their next renewal date. In case your account is suspended, you can reactivate it by reaching out to Intuit. According to Intuit, this is what to expect while your account is suspended:

  • You can export data to QuickBooks Desktop or Excel.
  • You will be able to see your transactions and data for a year, but you will not be able to change anything or add new transactions.
  • You cannot reduce your usage.
  • If you signed up for QuickBooks Payroll through your QBO subscription, it would also be suspended.

For some growing organizations that need additional accounting functionalities, jumping to a more expensive QBO Advanced play may seem inevitable and justified as a cost of doing business. Such price increases may follow the so-called “Netflix effect,” bringing in changes and price increases that would make customers grumble, but not enough to make them leave the service altogether. It seems that they are bumping their prices every year but not providing more reliability to their users. Many growing companies that need a more robust solution for handling complex accounting tasks aren’t seeing the benefits.

Besides the usage limits, QuickBooks Online has its downsides and bugs that prevent users from getting the financial visibility they need to improve their decision-making.

  • Software bugs. Many users report that their bank accounts become disconnected from QBO, and the platform goes down for a few hours at a time.
  • Security issues. The number of cyber-attacks is growing, and there’s a chance of hackers hijacking your network and stealing sensitive information, such as bank and credit card details.
  • Customization. When it comes to customizing your reports, appearance, statements, and invoices as desired, QBO gives you limited options.
  • Limited internet access. QuickBooks Online requires high-speed internet access, while many users have limited internet speed. That slows users’ access to QBO.
  • Server downtime. QuickBooks Online has a large user base, and the Intuit server may experience downtime due to heavy traffic.
  • Reporting issues. Users aren’t able to create their own reports based on specific predefined variables.
  • Customer support. Intuit has limited support, and it is said that their customer services are poor.
  • Less control. With QuickBooks Desktop, users have total control of their company files. With QuickBooks Online, you need to create files and send them to your account, which relinquishes some control of your business information.

Conclusion

With all these usage limits and software downsides, QuickBooks Online cannot provide a multidimensional view of your financial data. It is a great small company accounting software that offers some basic functionalities, but once an enterprise grows beyond a single location or product, these limitations become apparent. On the other hand, the Finance as a Service (FaaS) solution is able to provide you with the accounting power, financial models, expert staff, and advanced technology that allows you to execute with confidence.

Signing up for FaaS service means your back-office finance & accounting will be offloaded to an expert finance team that leverages pre-built digital processes and workflows powered by a cloud-based software stack. All of this comes at a fraction of the cost of running an in-house department. You get a software platform that financial executives and CEOs can use to improve financial visibility, learn more about core business needs, detect gaps and needs in accounting, and get a better picture of the company’s financial health.

Contact Consero to schedule a free demo, and we will walk you through our guiding principles and processes to show you what you can expect as a Consero partner.

 

Are There Disadvantages of Using QuickBooks Online?

There are a few versions of QuickBooks, and QuickBooks Online is perhaps the most popular online accounting software for SMBs because it is easy-to-use, affordable, and well-understood by accountants and bookkeepers. Also, it is a cloud-based software, which means that you can view your financial data anytime and anywhere from any device connected to the internet.

QuickBooks Online was introduced in 2000, and since then, freelancers and business owners have struggled to determine which version is their best bet. Everything depends on your needs and what you are comfortable using, meaning that there is no straightforward solution to that dilemma.

Intuit (the company that developed QuickBooks) now promotes QuickBooks Online as their primary offering, encouraging consumers to go with the online version. They’ve also drastically reduced the number of QuickBooks Desktop versions available for sale on their official website. Naturally, the rise of cloud-based SaaS platforms has led many software development companies redirecting their resources from on-premise to cloud-based accounting solutions. On the other hand, business owners and decision-makers move to the cloud because it reduces their IT setup and maintenance costs (just by moving to a cloud infrastructure, they can reduce costs by up to 30%). That explains why QuickBooks is pushing their customers into a SaaS environment.

Disadvantages of Using QuickBooks Online

According to online feedback from customers, there are various advantages of QuickBooks (e.g., integration with third-party apps, payroll automation, expense tracking, remote access, etc.). However, the cons of QuickBooks Online are non-negligible.

  1. Maintaining and adding features is expensive

QuickBooks Online comes with a myriad of features, but they are expensive to maintain. One of the least appealing aspects of QuickBooks service is its pricing. For example, you can add a maximum of 25 users at the same price, but that feature is available only at the highest price point of the software (which is six times more expensive than the basic plan). If you want to maintain your books without breaking the bank, this creates accessibility issues.

As for platform add-ons, they come with their own price, which can only increase the costs of using this service. Unless you sign up for the most expensive subscription, customization features and functionalities (such as automated data backups, multiple users, management charts, customized reporting, and automated approvals) will not be available.

  1. No built-up restore or backup function

Without this function, businesses don’t have protection against mistakes or disasters, whether large (deleting an entire account, importing 200 transactions into the wrong account, etc.) or small (entering data into the wrong account, deleting a transaction, etc.). There is also no protection against having your data deleted by a hacker or a server problem. The only functions that resemble data backup are the ability to export one account at a time to a .xls file (but it is useless as a backup because it will omit all split detail and cannot be restored in its entirety).

  1. Not supporting the CSV file format completely

CSV (comma-separated values) format is supported by the QBO’s built-in Import function. However, the function recognizes only three fields – Date, Description, and Amount. If the transactions you want to import already include categories, memos, check numbers, and any split information, that information will be ignored. The only way to add that information is to edit each imported transaction manually after importing CSV files. If you have years of past accounting and bookkeeping data to import, it’s almost impossible to do that manually.

  1. Lack of industry-specific features

When it comes to inventory management, businesses operating in different industries have different requirements. Industry-specific features are there to help them quickly perform tasks unique to their industry. QuickBooks Desktop is more robust and supports several industries (Retail, Professional Services, Nonprofit, Manufacturing & Wholesale, and General Contractor), but QuickBooks Online doesn’t. For example, general contractors can create a Job by Vendor report to organize job costs by the vendor and see which vendors need to be paid. QuickBooks Online doesn’t offer these features, and there’s no support for inventory management. It is general accounting software, which explains the lack of such features.

  1. Inability to revert to a previous version

QuickBooks Online users are not able to restore to a previous version of their books. For example, you won’t be able to go back to a point where the last transaction data is available unless you’re on the highest pricing plan. QuickBooks’ cloud storage and management updates and saves data but doesn’t create any restoration points (which prevents users from going back to modified or deleted transactions). To recreate the data, you need to pay for the advanced plan that creates backups for you or enter data manually. Many other applications that operate in the cloud can generate restoration points within basic plans, so QBO’s lack of support for such an essential functionality can create further issues for accountants who want it without having to pay for a pricey upgrade.

  1. Payroll functionality

The QuickBooks Online basic plan doesn’t include payroll functionality. If you want to include it into your accounting system, you will have to pay an additional monthly cost (along with a surcharge per each added employee). If this doesn’t work for you, then you may want to consider a full-service accounting program.

  1. You don’t choose when upgrades occur

Since it is cloud-based software, you don’t control when feature upgrades or changes occur. And if the new software version has removed features, bugs, or other issues, you cannot roll back to the previous software version. When it comes to monthly or annual subscription cost increases, you also have no control.

  1. Bank and credit card account feed goes back 90 days

The information about your bank and credit card account transactions goes back 90 days. It may happen that it is offline for days or weeks at a time with no explanation, which will force you to either enter all transactions manually or download a CSV from your bank and upload it into QuickBooks Online. You must do that if the date of your transactions is more than 90 days in the past. And as for the CSV upload, we will mention again that you will have to fill in memos, categories, and check numbers, as well as updating any required splits every time after importing it into QBO.

  1. Giving a bit of control over your data

When users move from QuickBooks Desktop to Online, they have to give up a bit of control over their data. You cannot upload your data to the QBO servers by yourself, but you can create company files to send them to QB and then they load them for you. Since finance and accounting data is very sensitive and confidential, this can be dissatisfying. Furthermore, data is stored in the cloud, which means it is subject to all the typical risks of an online account – such as a hacker or an unreliable internet connection.

To conclude, the limitations of QuickBooks Online can be potentially more costly over time. You don’t have to pay for upgraded versions or buy multiple licenses with QBO, but it can cost more than simply buying the Desktop version (a one-time purchase, rather than a regular monthly subscription). The software is not for beginners because there’s a learning curve that requires your patience and time, and you might feel confused at the interface at first. QBO has no project management software features, so if you need one, you’ll have to find the best option out of the third-party software that can integrate with QuickBooks Online.

Questions to Ask Yourself when Considering an Accounting Solution

We recommend asking yourself the following question when considering which accounting and bookkeeping system to go with.

If you’re already using a system, ask yourself:

  • What are the associated monthly fees?
  • What do I like and don’t like about it? What features do I wish it had?
  • What features does it have, and which features am I actually using? How frequently am I using them?
  • Is it able to provide the financial information I need? Does it increase my company’s financial visibility?
  • Does the system interact with other important systems I rely on (e.g., customer billing, project management, time tracking, etc.)?
  • Does it have the ability to export all of its data or only some of it?
  • Where is my data stored? Am I able to make backups? In case of a disaster or problem, how would I restore it?

For any prospective accounting and bookkeeping system, you should ask yourself:

  • What features does it offer?
  • Will it be able to provide the detailed information I need?
  • What does it cost to get started? Are there any ongoing costs? Can I cancel, and will I get a partial refund?
  • How will I backup my data? In case of a disaster, how will I restore my data?
  • If I have existing accounting data, how will this new system import it while preserving its usefulness, completeness, and integrity?
  • When it comes to entering new transactions on an ongoing basis, will you enter them manually? Will you pull them directly by auto-linking your bank and credit cards? Will you download them from those accounts on your PC and then import them into the system?

Conclusion

If your company is set on a path for growth, you will quickly run into various obstacles resulting from using QuickBooks Online. It is the world’s most popular accounting software, but it is marketed primarily to small enterprises and non-profits. Despite the user-friendly nature of QB Online, you should analyze the pros and cons and be aware of a range of disadvantages before investing in the software.

Reach out to Consero and request a free demo today to learn more about QuickBooks Online vs outsourced finance and accounting. 

 

Why Companies Are Outgrowing QuickBooks in 2022

If you run a small, order-centric business, QuickBooks is a practical finance and accounting solution. But if your company has recurring revenue or an assortment of billing models, you will start to notice limitations and growing pains as revenue schedules and invoices become amplified. As your company scales, and you work with multiple entities, it becomes increasingly important to have improved financial visibility. Having the right information in the correct format and in real-time is required for achieving rapid growth. QuickBooks accounting was not built to manage that.

With QuickBooks, you would be missing out on various benefits that automation could bring, such as:

  • Increasing company valuation with accurate forecasting for better business intelligence, project management, partner relationship management, and so on
  • Shortening your closing time by as much as 30-75%
  • Freeing cash that can be redirected to investing in core business functionalities
  • Speeding up quote-to-cash cycles

Aside from performance and speed problems, there are other signs that your business is outgrowing QuickBooks and it’s time to upgrade. Inventory and warehouse problems, operational efficiencies, cost, and lack of third-party software integration are among the most common reasons why companies leave QuickBooks for specialized finance and accounting solutions.

Advantages and Disadvantages of Using QuickBooks Online

QuickBooks Online is an accounting solution developed by Intuit (founded in 1983) and is designed for small and growing companies. Upon its release, QuickBooks became popular with small business owners who didn’t have formal finance and accounting training. About ten years ago, QuickBooks could boast having a 94% share in the retail unit in the business accounting sector. The company then released QuickBooks Online as a cloud solution where users pay a monthly subscription fee to use it. It is a different product from the QuickBooks Desktop version and offers integration with various third-party software and other financial services.

Advantages

Startup and small business owners typically manage QuickBooks themselves. Otherwise, they have an outsourced person or dedicated in-house staff who do the company’s bookkeeping and accounting. Let’s take a look at how businesses use QuickBooks.

  1. Expense tracking and bills. QuickBooks can automatically keep track of the company’s expenses and bills. It’s done by connecting credit card and bank accounts to the software. All expenses are categorized and downloaded, while other transactions can be recorded in the software directly.
  2. Payroll. QuickBooks has a payroll feature that automatically calculates and runs payroll for the enterprise. Along with payroll tax tables, this feature offers the advantage of having an updated financial statement.
  3. Managing company income and sales. QuickBooks allows you to manage income and sales by creating invoices to track your company’s sales. You can do this individually for every customer, which helps you keep track of how much each customer owes. You can also look at your customers’ accounts receivable report to view all the details of past and current due invoices.
  4. Inventory tracking. QuickBooks can automatically track and update unit costs and amounts of inventory.
  5. Business reporting. When business owners manage and record cash inflow/outflow activities using QuickBooks, they can generate pre-built reports in a few clicks. Also, the reports are updated in real-time as they enter and save transactions.

Disadvantages

According to user feedback, the disadvantages of QuickBooks include:

  1. Difficult to learn. If you are a beginner, QuickBooks’ user interface can make you feel overwhelmed. There is a learning curve that requires patience and time. You will come across account-specific jargon that you must be familiar with to understand what to do (otherwise, you’ll feel lost). If you have enough time to spend watching video tutorials, you will get the hang of it quickly.
  2. Limited reports. Some users find that reporting is not as good in QuickBooks Online as it is in the desktop version. Cleaning up outdated QuickBooks reports is time-consuming, the report builder is limited, and charts are not customizable.
  3. Audit trail loopholes. The audit trail in QuickBooks is one of the primary concerns of this software. Business owners and accountants like having an in-depth and well-documented flow of financial information. This kind of financial visibility allows them to make data-driven, strategic decisions. QuickBooks provides an audit trail for most financial information, but there are situations where that information can be changed without leaving any documentation. In other words, the software leaves a loophole that could allow an enterprise’s financial records to be altered and exploited.
  4. Upgrade fees. To keep your software up-to-date, there are numerous upgrades that you will have to purchase, and the upgrades are pricey. The updates are typically required once a year to receive the most up-to-date features and other additional resources.

In many cases, larger enterprises will require a more customizable and adaptable platform. And as companies grow, they will demand several special attributes and additional options unique to their needs. QuickBooks is limited in that there are only a certain number of licenses available, and a growing business may demand greater scalability power in their business accounting software to be as effective as possible. The software cannot provide benefits like connected data, process and controls, and increased financial visibility that supports your strategic leader’s decisions.

But in the case of small businesses and larger companies that perform uncomplicated accounting tasks, QuickBooks can still be a cost-effective alternative to more robust finance and accounting solutions.

Signs Your Company Has Outgrown QuickBooks

Have you outgrown QuickBooks? It all depends on what industry you’re in, your company size, and how quickly your enterprise is growing. QuickBooks is a great entry-level solution, but it does come with a myriad of limitations. If you have sights on growth and expansion, it will not accommodate your company’s needs in the long-run. Let’s take a look at a few telltale signs that your company is outgrowing QuickBooks and why you should move to a more comprehensive FaaS (Finance-as-a-Service) outsourced finance and accounting management solution.

1.    Your ERP requirements extend beyond accounting

You cannot do much with QuickBooks beyond basic accounting processes. If you are using it as a check writer and reporting with Excel, the time has come to leave QuickBooks for a more robust ERP solution. Also, it’s time to ditch it if your transaction volume is increasing, and you can benefit from CRM functions that integrate your processes with those serving your customers.

2.    You are entering duplicate data into multiple systems

As an enterprise grows, there are increasing volumes of data that it needs to handle. If your staff is spending time entering data into QuickBooks and then re-entering it again into other systems, QuickBooks doesn’t contribute to your business efficiency. Some solutions update data in all systems whenever you make a change. That allows you to see the latest financial record or document version, wherever they are entered.

3.    Spending a lot of time outside QuickBooks

QuickBooks users know that their financials’ most in-depth analysis happens in some other software or a spreadsheet. This ad hoc workflow incurs switching costs, and it’s likely to create disparate sourced data that eventually becomes siloed. If you are adding on systems or drowning in spreadsheets to get the job done, you should consolidate all the processes into an all-in-one solution to tighten your processes.

4.    Your financial numbers are inaccurate

If it is difficult to determine your true cash balance, or it takes too long to bill your clients, your business has outgrown QuickBooks. If consolidating financial reports from multiple divisions or meeting the new ASC 606 requirement is a concern, you should consider switching to a new solution that supports various report formats, multiple currencies, multi-currency transactions, etc.

5.    Number of users has become a problem

QuickBooks Enterprise supports up to 40 users, while QuickBooks’ license allows up to 25 user licenses. That might suit a growing startup or small business, but you’ll probably need more people to be connected at some point. It would be best if you had a solution that can be scaled as your enterprise grows to continue to use a familiar platform without requiring a reimplementation (which can be time-consuming and costly). QuickBooks was designed to handle small volumes of data and get overwhelmed relatively easily. If the data is getting corrupted, or the software is taking 15-20 minutes to load, you have probably hit its functional limit.

6.    You need a multi-location accounting program

QuickBooks has an online version of the software, while many enterprises are still relying on the desktop version. It is a cost-effective option, but it prohibits any remote work, which is an issue if you ever need to perform daily tasks or access financial information outside the office.

7.    You need a full, relational database export

It is difficult to import data from receivables, billing, payroll, and other external systems because QuickBooks uses a proprietary database. That can slow down a business because it interferes with transactions and workflows. By switching to a FaaS solution that supports different types of databases (e.g., SAP HANA, Oracle, or Microsoft SQL Server), you can better serve your partners and customers.

8.    Lacking versatility and automation

Automation is the most surefire way to deal with accounting tasks related to payments and billing. However, QuickBooks can automate nothing more than routine transactions. The software often breaks down at scale, and errors can occur even when using the most basic automation features within it. Those errors can accumulate into countless wasted work hours and thousands of dollars in false payments.

Benefits of Switching to Finance-as-a-Service (FaaS)

Thousands of customers have outgrown QuickBooks as their entry-level accounting solution and have turned to more flexible and robust solutions to support the next phase of their business. A FaaS solution such as Consero can more than just solve worsening issues of inadequate systems – they provide services and features that catapult your processes and strategic decision-making into high gear.

Also known as strategic financial management, strategic finance provides long-term planning for ongoing development and growth. Every company’s objective is sustainable, steady, and accelerated growth. But the question is – can your back-office financial operations support business growth without adding non-scalable costs or falling apart?

Remember – every manual data entry point is a bottleneck in the workflow. It is an opportunity for errors and a source of inefficiency and staffing cost. For example, if someone mistyped your company’s name in the accounting system, there will be confusion when looking between the accounting and CRM systems to calculate commissions. Here are the top 5 benefits of switching to FaaS: 

  1. Improved financial visibility

Using non-integrated accounting systems and collecting/analyzing data in Excel spreadsheets is time-consuming and increases the chance of human error. The FaaS model provides a clear picture of your business as a whole because it allows you to get accurate financial reports in an easy-to-read and unified form. Improved financial visibility will help you:

  • Track ongoing account profitability
  • Monitor customer acquisition costs
  • Understand your current financial position
  • Improve the accuracy of business predictions, forecasts, and goals
  • Detect errors and frauds faster
  • Make strategic decisions with more confidence
  • Demonstrate performance gains to investors

QuickBooks doesn’t give you a bird’s-eye perspective of your company’s performance nor the ability to zoom in on financial details.

  1. Reduced distractions

Business leaders and financial staff shouldn’t spend time performing time-consuming accounting tasks but finding ways to differentiate their business. They need to learn continuously, improve customer experience, and distinguish the company from the competition. Trying to deal with finance and accounting tasks simultaneously will take up much of their time. The Finance-as-a-Service model helps reduce such distractions, allowing leaders to focus on core tasks.

  1. Scalability

Consero is a FaaS solution provider that’s appropriately structured and can provide the right resources for any particular task. By getting you streamlined and set up with the right systems, we can jump in and help in a short period of time, allowing your enterprise to be scalable.

  1. Saving money

Instead of building an in-house F&A department that will spend time and energy trying to keep your finances in check, you can sign up for FaaS services. These outsourced services can help bring up to 30% cost savings that can last indefinitely. Most of your manual activities will be automated, you will get more accurate financial reporting, and you will gain access to a larger pool of finance experts to tap into.

  1. CFO support

Growing companies face challenges of executing assignments requiring not just another consultant but also an expert with leadership skills who can understand their financial position and execute projects. The FaaS model provides CFO support services, which allows companies to focus on more strategic matters. A CFO undertakes a thorough review of financials, helps in designing finance reports, and provides detailed analytics. Improved data and reporting are critical for any enterprise because data, metrics, and analytics are used to drive company growth.

Suppose your finance and accounting function relies solely on the utilization of QuickBooks. In that case, you won’t fully grasp where your business stands financially. With a FaaS model, you won’t feel the lack of metrics and analytics because your FaaS provider will leverage enterprise-level accounting and finance software to provide better financial data.

FaaS vs QuickBooks: Accurate Financial Data Leads to Better Decisions

Whenever small or mid-sized businesses start pushing up against the limits of Microsoft Excel or QuickBooks, certain processes become entirely unmanageable. Then, they begin investing in a CRM system (to track clients and opportunities), specialized point solutions (to ease their bottleneck), time entry tools, or a database. All those solutions perform the job they are designed for, but they aren’t integrated, which means that data needs to be transferred manually between them.

As the enterprise grows, costs and problems grow linearly, resulting in a non-scalable growth model. Flooded with financial data from multiple sources, just compiling important reports becomes a challenging task in itself. Add real-time information on revenue churn, sales performance, and cash flow that’s obscured by poor and nonstandard processes, and it becomes virtually impossible to find the information because it’s spread across several accounting systems, which creates more headaches for finance and accounting staff and CFOs.

Leaders need clear insight into business performance, and QuickBooks cannot deliver that. To respond to rapid changes, you need forward-looking reporting, a transparent view into financial numbers, and an experienced perspective of your business KPIs. Finance as a Service (FaaS) can help offload non-core business activities like basic reporting, AR, and AP. At the same time, it delivers an integrated all-in-one platform, data analysis expertise, business process engineers, and high-level strategic CFO guidance.

Conclusion

Are there solutions for a company outgrowing QuickBooks? The answer is – yes! If you feel you are wasting time on a solution your company has outgrown, it may be time to upgrade. It’s crucial to notice the first signs that your business is outgrowing QuickBooks and make a timely change to one of the more integrated and robust accounting and business management software solutions.

QuickBooks is designed as a generic accounting and bookkeeping platform for a wide variety of businesses, and it fulfills its purpose. However, the software lacks the functionality and features that businesses need to increase their efficiency, profitability, and scalability. Business owners need a more robust finance and accounting software solution and trustworthy financial management guidance to monitor and guide their enterprise’s strategic directions. The FaaS solution provides accurate financial models and visualizations that allow them to execute with confidence. 

Consero doesn’t just provide a software platform that CEOs, CFOs, finance and accounting teams, and investors can use to improve efficiency and financial visibility; we offer a robust solution that helps your growing business get a clear financial picture of your enterprise, empowering your business intelligence. Our cloud-based financial console – SIMPL – provides real-time financial data and advanced reporting to communicate your organization’s financial health to all executives (both financial and non-financial).

 

Why Outsourced Finance and Accounting Services Are Cost-Effective Solutions

The traditional business structure incorporates various departments within an organization – production, advertising, marketing, sales, accounting, IT, HR, etc. Each department is led by the department manager who reports to the business owner, president, or CEO. Responsibilities are split up so that every individual within the company has a clear understanding of what they do. However, this structure is not designed for every type of company. Some businesses don’t have the resources and manpower to work within such constraints, so they decide to outsource certain parts of the business.

Outsourcing finance and accounting is the area that many businesses decide to outsource due to the cost of hiring and retaining an accountant and the complexity of the work. For example, a finance department needs at least 5-6 employees, each with a different role. Depending on the size of your business, you may need to employ a full in-house finance and accounting department with roles such as bookkeeper, staff accountant, accounting manager, controller, and CFO (Chief Financial Officer). Considering the cost of building an entire department – salaries, overhead, cost of benefits, IT, PTO, and overtime – it’s easy to see how these costs can easily add up.

As a business owner, it’s essential to have good financial and accounting systems in place so you can focus on achieving business growth. A major benefit of outsourcing accounting and finance functions is the reduction of business costs by offering cost-effective services.

The Real Cost of In-House Finance and Accounting

A lot of your staff’s valuable time could be going to in-house accounting, meaning that the real cost of the function kept in-house could actually be greater than you thought. The time spent on your accounting and bookkeeping is also time could be spent as billable client hours or on building customer relationships. The cost of keeping the function in-house is not always financial because it can come at a great expense to the success of your business.

Some of the biggest issues that business owners and CEOs deal with when it comes to maintaining their own books include:

  • Staying on top of paperwork and filing
  • Miscalculations and errors
  • Changing compliance and regulations issues
  • Managing payroll
  • Preparing for and submitting taxes

How Outsourced Finance and Accounting Can Save You Money

In most cases, an outsourced financial solution costs much less than what you would pay for doing the same job in-house. First of all, building and managing an in-house finance and accounting department involves the costs of finding, hiring, training, and retaining finance talent. Second, there’s the opportunity cost, which includes all the potential gains that you miss when you focus on the needs that don’t directly generate revenue or are outside your expertise. Just consider what you could accomplish in the time it takes to collect and analyze financial information, put together a financial report, or create invoices.

Outsourced financial professionals using a Finance as a Service (FaaS) approach have the expertise and are equipped with technology that allows them to do the same job faster and with fewer errors, minimizing penalties and missed deadlines, while delivering greater value to your business. Most of today’s accounting service providers are qualified in modern automation tools.

A finance and accounting outsourcing company with a Finance as a Service (FaaS) approach can help you save through:

  • Managing payroll
  • Monthly reconciling of your books with your business credit card accounts and bank statement
  • Maintaining comprehensive financial data that helps avoid various fines
  • Tracking expenses correctly to help you take advantage of tax deductions
  • Tax-ready books save time and cost for your accountant or CPA
  • Cash flow forecasting
  • Budget creation and management
  • Financial support and problem solving
  • Increasing financial visibility across all departments

Outsourcing provides you with access to the latest cloud-based technologies and tools that will help you manage payments more effectively and get paid faster. An experienced finance and accounting outsourcing company will be able to provide advanced technology for less than the cost of your company’s old technology. With a few clicks of a mouse, you can see a real-time, up-to-date accounting analysis of your cash flow.

Comparing In-House vs. Outsourced Accounting

Having an in-house finance and accounting department does come with some benefits, such as having total control of how the books are being managed. While it is important to know what’s going on in your business finances, handing the responsibilities over to an expert is one of the best things you can do. Otherwise, serious issues may arise, and some of them could be irreversible.

Most common issues that businesses with in-house finance and accounting face are:

  • The Cost Factor

Businesses usually spend 2-5% of their revenues on hiring and adequately training and staffing their internal accounting departments. If you look at the numbers, you will see that it is more expensive to bring a full-time employee onto your payroll. Besides the salary you need to pay, there are various overhead expenses that you should consider – paid time off, insurance coverage, office space and equipment, holiday pay, ongoing training, etc. When you compare the costs with the price of hiring an outsourced F&A team, you will see that it’s more affordable to go with the outsourced option. Some outsourcing companies offer a flat rate (all-in-one monthly fee structure) while others may charge for services hourly.

  • Hiring and Training

When it’s time to hire a new employee, how much time and money is spent on the recruiting process? Going through the entire process of posting the job opening, interviewing candidates, onboarding them, and training them on procedures and systems can be a burden. But when it comes to hiring an outsourced team of professionals, you are hiring a team that already has proven systems in place, so your business doesn’t have to worry about ongoing training or onboarding.

Suppose your accountant or an important member of your accounting team leaves the company without prior notice. In that case, you will have to rush to find a replacement and spend time and energy on making them familiar with your processes and accounts. With outsourcing, one employee can easily be replaced with another one from their pool of finance professionals.

  • Work Quality

Finance and accounting involve complex yet repetitive tasks, and the people responsible for them must stay fresh with industry experience, attention to detail, and mathematical skills. An outsourced accounting team comes with a vast amount of knowledge and skills (compared to having an in-house accountant). On the other hand, your in-house accountant’s mistakes might go unnoticed in the office and can be costly. 

Outsourcing companies typically have a team of supervisors that evaluate their accountant’s work, which leaves less room for errors. Also, many of them rely on technology and automation to further reduce the chance of human error and be able to deliver accurate reports consistently. Your on-hand financial experts will have up-to-date and detailed knowledge of accounting principles, transactional processes, payroll processing methods, and basically anything that could lead to inaccurate filings and reporting.

You may think that you cannot afford to outsource your accounting, but when you realize that the cost of cleaning up financial mistakes could be far more expensive, outsourcing starts making sense.

  • No Wasted Work Hours

It doesn’t always happen that in-house employees work optimally throughout the day, which means that you’re paying someone even when they are not productive.

As for Finance as a Service, you can expect to pay a variable and predictable pricing model that goes up or down as your business grows in complexity. You only pay them only for what you need. For example, you may choose a monthly plan that includes a few services (e.g., back-office transactional processing and statutory reporting), and if you need additional services, you can pay for them when needed. This way, outsourcing provides significant cost savings.

  • Minimized Risk of Theft and Fraud

If you want to minimize the risk of theft and fraud, it must be a team effort. If there are only one or two people in the company left to oversee all things financial, the risk of undetected theft is increased. One of the best ways to avoid fraud is to have a proper internal controls system to ensure that the flow of information into your business’ accounting system is timely, accurate, and correctly classified. With proactive checks and balances in place, it is easier to detect red flags and reduce the risk of theft. With an outsourced finance function, you will have an external team overseeing your company’s finances, helping you detect any anomalies in the early stages.

As you can see, all these benefits of outsourced accounting and finance functions can save your company lots of time and money. Today, many businesses are transitioning to outsourced finance and accounting services as a more viable, efficient, and cost-effective alternative to an in-house F&A department. The cost of outsourcing this function helps remove the burden of hiring, onboarding, and training staff and is easier to budget. It’s one of the primary reasons to outsource accounting services.

Consero Global can help alleviate much of the stress by relieving you of manual and tedious accounting tasks. As one of the world’s leading FaaS service providers, Consero brings extensive accounting and business advisory resources to our clients. Freeing CFOs, senior management, and other personnel from the drudgery of mundane work and letting them focus on core business tasks will save money, but it also increases productivity and morale. Outsourcing your company’s finance and accounting function to a FaaS (Finance-as-a-Service) is cost-effective, and it gives you access to advanced technology and top talent, which helps you stay compliant, competitive, and on the path towards growth.

Reach out to Consero and request a free demo today!

 

How To Outsource Finance and Accounting Services

The concept of outsourcing is relatively straightforward – it refers to contracting out a segment of the work that a company regularly performs in hours to someone outside the company (ex: a third-party CPA firm or a payroll provider). Outsourcing comes in various sizes and shapes, and regardless of their revenue share, most businesses engage in some type of outsourcing. Many of them use a third-party vendor to represent their online presence, host and manage the website, print branded assets, or warehouse their goods, for example.

When it comes to outsourcing finance and accounting service, it is categorized as business process outsourcing, and it refers to managing the processes that supplement everyday business operations. Finance and accounting operations make up a significant portion of those processes for many businesses. When deciding to outsource the F&A function, you should know that it doesn’t require an all-or-nothing approach, and many companies decide to outsource a small set of processes to “test the waters.”

Which Finance and Accounting Functions Can You Outsource?

When most businesses begin with finance and accounting outsourcing, they start with the highly repetitive, highly transactional tasks to assess the changes, challenges, and benefits of outsourcing your finance and accounting functions. For example, Accounts Payable and Accounts Receiving are two such transactional functions that are popular to outsource. These processes are manual and are typically assigned to entry-level accountants in an in-house accounting team. Because employees progress along their career paths, new talent has to be sourced to fill those roles, which means downtime, lost productivity, and additional cost in hiring and training new team members. With that in-house model, there is a lot of effort and money dedicated to a routine bookkeeping process. Using an outsourced model helps reduce the burden because the third-party vendor manages sourcing, training, and deployment of talent.

Companies can outsource finance and accounting tasks, such as:

  • Payroll
  • Tax planning, filing, and reporting
  • Expense reporting
  • Fixed asset reporting
  • Account reconciliation
  • Order to cash
  • Employee expense processing
  • Month-end close, etc.

These are all low-value tasks that business owners and executives feel most comfortable assigning to a remote team. However, these are not the only types of finance and accounting tasks that an outsourced team can handle. Some third-party vendors that specialize in high-level accountancy can handle the work that typically falls to CFOs, senior-level accountants, and controllers. This can be useful for investors, company executives, and businesses of any size or shape (especially those that do business in markets where labor is inaccessibly expensive and increasingly scarce, as well as companies that need to scale quickly).

More complex and intensive finance and accounting processes a company can outsource include:

  • Compliance
  • Financial Planning and Analysis leadership
  • Process oversight
  • Debt management
  • Financial auditing and audit reporting
  • Forecasting and budgeting
  • Data extraction and financial analysis, etc.

The individual needs and goals of a company will drive the processes they choose to outsource.

How to Choose a Finance and Accounting Partner?

Once you decide that outsourcing fits into your finance and accounting operations strategy, the next step is to look at potential service providers and choose the one that feels like the best fit for your workflow, goals, and values. A reputable finance and accounting partner will be able to provide the right knowledge, case studies, client referrals, and a test project agreement, along with a bid or quote when you put out your request for proposals. There are various considerations that a company needs to address when comparing outsourcing providers.

  • Process

Understanding how an F&A provider handles the onboarding process (from knowledge-sharing to implementation) is essential to choosing between potential vendors. Be sure to look for a provider that can provide a transparent and thorough rundown of how everything happens because you will want to know what to expect from the first day.

  • Experience

Next, you will want to outsource your accounting and finance function to a vendor with a proven track record for success. Look beyond the amount of time they’ve been in business and ask them to speak directly to the partnerships they have with other clients. If a provider can grow and maintain the service it offers to individual clients year after year, it’s a clear sign that they are successful in what they do.

  • Technology

Does a provider utilize cloud-based technology and other such software solutions? Suppose an outsourced accounting firm doesn’t offer cloud solutions to potentially siloed information and data with the option to move yours to the cloud. In that case, they are not prepared to help you scale quickly and effectively when you need to. Cloud accounting relies on the latest cloud-based accounting programs that are integrated with your bank accounts and other cloud-based accounting systems, such as human resource systems, payroll systems, bill pay solutions, etc.

Also, the purpose of F&A outsourcing is to be relieved of manual, laborious, and mundane tasks that cost you time and money. That is why your third-party vendor must be equipped with the right accounting software (preferably AI-powered) and tools to automate those tasks. A good F&A team will implement efficient software solutions that will streamline your operations as much as possible.

  • Culture

When it comes to your company culture, you should make sure that your partnership comes with certain commonalities. When deciding which vendor to go with, take note of whether a vendor listens to your concerns and shares your values. With a good culture fit, you will make the process of onboarding and continued communication seamless. Eventually, you will feel like the vendor is a part of your team, not a separate entity.

  • Metrics

How will your vendor measure and deliver financial data, performance metrics, and other vital metrics? That’s an important thing to determine when looking for a provider, and it can be helpful to discuss things with them that you would like to see improved, as well as the KPIs you want to meet. Also, your provider should be able to provide detailed financial reports (e.g., balance sheets, income statements, statements of your cash flows, and other financial statements) about the financial health for your company.

  • Security

Security is always a top priority concern when it comes to financial data. Whether a company has decided to outsource a part of their F&A operations or not, data security breaches can be catastrophic. Your provider should be able to show you that they have security protocols in place and that they’re SOC 1 certified.

More Tips for Hiring an Outsourced F&A Provider

When choosing outsourced accounting services, it’s important to be strategic. Take a look at a few more things that you should pay attention to when comparing third-party accounting service providers in the finance and accounting industry:

  • Customer-centricity. In other words, you would want to hire someone who is focused on providing the best service and customer experience. Whenever you have a question about your business finances, it’s imperative that you can get someone on the phone or online. When hiring a finance and accounting outsourcing company, ask about ongoing support throughout the year. Many businesses make the mistake of talking to their accountant once or twice a year (usually at tax time). You want to regularly examine real-time information about your business’ financial health because it improves financial visibility and influences your strategic business decisions. You’ll get the most value through working with a finance and accounting team that provides strategy implementation, support, and communication all year long.
  • Certifications and licensing. Does the F&A provider you’re hiring hold the right licenses and certifications? If they do, it means that they’re true professionals because the certifications show the years of education, training, and experience that went into their professional development.
  • Scope of services. Before you hire someone, you need to know what services your company needs. Do you need help with ongoing bookkeeping tasks, or financial leadership? Perhaps you need a full-service financial solution that includes financial strategy, account reconciliations, payroll processing, and more?

Consero delivers a flexible approach for its clients by developing unique and custom financial reports, as well as finance and accounting solutions. The scope of financial support services we offer is wide, so you can rest assured that they will meet the unique needs of your board and staff. Whether it’s a review of your books, performing financial statement audits, risk mitigation, disaster recovery, or providing CFO consulting, we are here to help you get your finance and accounting departments in order.

Reach out to Consero today if you’re ready to professionalize your finance and accounting function.

 

How Outsourced Finance and Accounting Services Increases Business Efficiency

If you want to meet regulatory requirements, increase profits, and reduce overhead costs, you should take advantage of finance and accounting outsourced services. With the help of a third-party F&A that will handle your company’s finances, you can focus on core business problems and benefit significantly from an increase in your ROI. Finance and accounting is one of the most commonly outsourced business activities for many companies, while outsourced finance and accounting is among the fastest-growing areas for CPA firms. And it is not just about helping clients keep their accounts clean but also about leveraging financial data to provide insight that allows clients to make better decisions.

In the past, CPA (Certified Public Accountant) firms have focused on accounting for transactions that their clients already completed. However, the resulting financial reporting was too slow for an accounting-focused approach to be of much use in running the business. Thanks to tech advancements, finance and accounting professionals can now be part of the transaction process, which allows them to deliver higher-value services such as:

  • Providing real-time information that helps improve financial visibility
  • Assisting clients with focusing on the business or core issues instead of accounting
  • Supplying expertise, best practices, and cost-effective access to technology

As companies look to leverage the power of their financial records, they decide to outsource to get better technology and expertise resources than they have in-house. Outsourced accounting service providers are going to have access to the latest technology, and that analytics power can help companies better understand their spending throughout the entire supply chain. That will allow them to boost business efficiency by standardizing procedures and controlling budgets company-wide.

Increasing Efficiency by Outsourcing Finance and Accounting Function

The benefits of outsourced accounting regarding business efficiency include:

  1. Focus on the business and leave accounting to the pros

What often convinces clients of the benefit of changing their business approach are the efficiencies provided by advanced technology and a skilled accounting and finance team. Helping companies efficiently run their accounting and finance departments allows them to spend more time on core competencies and less time dealing with numbers and documentation. The approach is efficient for both clients and CPA firms because modern tech solutions increase accounting accuracy, lower service costs, free up resources, and allow financial advisors to spend more time addressing their clients’ issues.

Besides collecting and processing financial information, financial advisors and CPAs can also provide value by interpreting the results and providing advice about potential pitfalls and opportunities. Instead of reacting to situations after they’ve occurred, this allows for a proactive approach to preventing issues from happening.

  1. Proactive approach

Besides the technical expertise and technology, outsourcing F&A services also allows clients to pinpoint business inefficiencies and move their account management from reactive to proactive. Unlike traditional accounting (also known as reactive accounting), proactive accounting can help you identify growth opportunities and benefit from savings, gaining market credibility, and increasing value in the long-term.

  1. Real-time financial information

Traditional financial reporting doesn’t occur in real-time, so companies don’t find it very useful in improving their business efficiency. On the other hand, having real-time information about key business drivers is extremely valuable in that context. Your F&A provider can help you identify key drivers of your company’s success and use cloud-based, real-time technology to make that information understandable and easily accessible. However, this approach cannot replace traditional financial reporting, which is still necessary for banks, investors, tax returns, and audits.

  1. High level of accuracy

Outsourced finance and accounting teams are made up of skilled staff trained for your company’s finance and accounting needs. Their work is monitored by top management to ensure the highest level of accuracy is achieved. Accounting is a complex area with many regularities and rules that business owners may not be aware of. To avoid any breaches, it’s always highly recommended that the financial function of a business is managed by a skilled accounting professional.

  1. Meeting compliance deadlines

When it comes to meeting compliance deadlines, it’s essential to have a clear history. However, deadlines are easily missed when business owners and accountants are overburdened with daily tasks and operations. Meeting compliance deadlines is crucial for any business, especially for those that plan to seek third-party funding in the future. Your outsourced professional finance team will make sure that all returns are up to date and will send timely notifications to remind you of any upcoming deadlines.

  1. Financial and managerial flexibility

Outsourcing your finance department helps you decide and go with the types of services that your company needs. You can either pay only for a specific service or hire full-time services. Fixed costs can be converted into variable costs, releasing capital for other investments. Your company’s ability to outsource can make the business more attractive to investors since the company is able to acquire more capital directly into its revenue-generating activities. Also, you get all the required financial data within the timeframe you need it, meaning you can make business decisions more efficiently and quickly.

As for managerial flexibility that comes with outsourcing, it means that a third-party will be involved in managing your finance and accounting function (including managing your bookkeepers and accountants). Saving businesses’ time and money will leave them with more time to focus on their business’s key personnel. They have the option to add and subtract staff anytime.

  1. Security and cost-savings

With the right finance and accounting outsourced partner, you can outsource any function to them without the fear of confidentiality, privacy, or security issues. They can either upload your files to a secure cloud-based server or work with your server through remote access (so your files don’t leave your office). Your outsourced partner can back up your data on multiple secure servers and have a foolproof disaster recovery system across all their premises. Your finance provider should be able to guarantee internal controls for data security and risk mitigation.

Automating your business’ back-office functions, such as finance and accounting operations, has various benefits, aside from improving cash flow:

  • Lowers the risk of human error
  • Speeds up to time to create accurate reports
  • Lowers the labor cost of accounting
  • Decreases risk of fraud
  • Supplies more data and reports than manual processes
  • Increases profitability

Increased business efficiency that comes with outsourced finance functions also involves significant cost savings. When you get access to professional accountants, you get them at a lower cost, without compromising quality. The vast pools of available accounting talent globally are there for you to tap into, and highly-competent and qualified finance professionals are not exclusive to big multinational corporations anymore. You can also save on employment taxes, infrastructure costs, and other overhead costs. Instead of spending money on finding, training, and retaining talent, you can just outsource.

Outsourced Finance and Accounting Function for Meeting All Your Needs

Finance and accounting needs vary depending on the resources, structure, and size of the business. Outsourcing brings value by providing professionals that operate as business advisors, assessing needs, engaging in personal interactions, and providing finance and accounting services tailored to your unique financial position and circumstances. Businesses across the spectrum can increase their business efficiency with outsourcing. This includes:

  • Companies that need process expertise and technology. Maybe your personnel is adequate, but they have minimum or no experience using cloud-based processes, technologies, and practices to increase the efficiency of their operations. It is possible to outsource accounting process expertise and technology without outsourcing the personnel operating them.
  • Companies that need to supplement existing resources. Some companies have some finance and accounting resources, technology, and personnel – but not everything they need. They can bridge that gap by using outsourced finance and accounting services. As the needs of the business change, these services can scale.
  • Companies that need full-scale finance and accounting support. Companies with no finance or accounting personnel and no desire to build and manage them are left with no other solution than outsourced F&A function. These companies usually outsource all of their F&A needs so they can focus on other important things.

While trying to operate their businesses economically and efficiently, business owners often encounter different challenges. Concerns about their organization’s wellbeing often lead them to oversee and take on too many tasks, which takes their attention away from critical aspects of the business. Outsourcing the CFO role provides them professional assistance and the ability to refocus on executing their company’s strategic vision. Benefits of outsourced CFO services include:

  • Improved cash management
  • Boosted time management
  • Use of cost-saving technologies
  • Receiving unbiased advice
  • Alleviated financial constraints
  • Internal growth
  • Financial expertise at a lower cost
  • Help in creating plans and implementing financial strategies
  • Increased business revenue

From small to large enterprises, businesses of all sizes and shapes can benefit from outsourcing their finance functions in various ways. An increasing number of companies contracting for better business outcomes are exploring new ideas and seeking new ways to streamline their finance and accounting processes. They’re expanding outsourcing to new areas of F&A, new industries, and new sizes of companies. For CFOs who want to outsource your accounting and finance processes, driving efficiency is a matter of high priority. Whether it is within the F&A department or across the company as a whole, the main strategic aim of F&A is delivering efficiencies.

Financing and accounting outsourcing provides increased business efficiency by removing the need to manage and monitor your in-house accounting staff. It will leave you more room and resources to focus on core business tasks. Thanks to outsourcing, the CFO can spend more time on financial management and decision-making. If you want to know how outsourced finance and accounting can set your business on a path towards growth, reach out to Consero and request a free demo today!

 

The Complete Guide to Outsourced Finance and Accounting Services 2022

Financial planning and accounting are two critical components of running a successful business. This article will guide you through the concept of outsourced finance and accounting services, discuss the latest trends, and help you understand how to outsource these services.

Over the past decade, many companies have decided to outsource these functions to professionals because they can have a tremendous long-term impact on their business. Are you looking for ways to improve your financial reporting? Is it time to invest in additional people and new software to boost your business’ efficiency? Outsourcing some or all financial processes can allow your company more time to focus on core parts of your growing business, offering better opportunities in the long run.

Now that the cost of outsourcing is less than the pay of one financial executive, many companies are beginning to outsource their finance and accounting operations more frequently. Cutting overhead and getting better financial leadership is critical to the success of all companies. By understanding where the industry is currently and where it is moving, you’ll be able to decide whether outsourcing is the right decision for your business.

Finance and Accounting Outsourcing 2022 Trends

  1. Real-time finance and accounting

The F&A industry continues to move steadily into the digital space, making it easier to keep financial reports and books entirely up to date. Thanks to the availability of full-integrated accounting platforms, accountants can help update your books every time a transaction occurs. Companies can understand their financial position and make data-driven decisions using the latest available financial information.

  1. Secure audit preparation

Monitoring audit trails will remain important. If you are using paper-based accounting information, you should switch to document management programs or accounting software that can categorize everything for you. This makes it easier to prepare financial statement audits almost instantly.

  1. Advanced financial modeling

Advanced technology has made it possible for financial and accounting experts to create better and more accurate financial models than ever before. Without a timely and accurate cash flow forecast, your company may run into future problems and surprises, which is why financial modeling is so important. By creating financial models with a wider range of inputs, you’ll be able to predict future outcomes and opportunities more accurately and plan accordingly.

  1. Highly-sophisticated automation

Companies that don’t adopt the automation trend may encounter miscommunication, disorganization, slow processes, and increased staff involvement that could lead to burnout. Ultimately, all this may veer you away from your core function and lead to increased operational costs. Machine learning and artificial intelligence are also important trends in finance and accounting. AI, for example, can help companies efficiently compile big data, identify potential market threats, and offer insights to improve their performance. Outsourcing your finance department can help you eliminate traditional accounting methods that rely on manual financial processing and replace them with automated workflows.

  1. Personalized finance and accounting service packages

Many finance and accounting firms used to offer an all-or-nothing approach to accounting, but things have changed. With increased customer-centricity in business and understanding that every business has unique needs, we have seen a major shift towards customization. The a la carte approach allows companies to choose only the services they need, thus maximizing their accounting team’s value but avoiding overpayment. Some companies may need a CPA firm to help them with their taxes, while others may need financial leadership and long-term financial forecasting.

In the past, when the outsourcing industry was getting momentum, companies would hire an accountant that would come into their office on a regular basis. But with recent technological advancements, it’s now common for the business and the accountant to never actually meet in person. Companies have a global pool of experts to tap into, and it has become easier for them to discover a finance and accounting partner that meets their needs. Recent trends have seen companies outsourcing more complex and valuable functions such as financial analysis, forecasting, and budgeting.

Major Benefits of Outsourced Finance and Accounting

Recently, an increasing number of companies has seen that outsourcing their finance and accounting function is a better, more efficient, and cost-effective financial solution that helps them boost business growth. Let’s take a look at the most significant benefits of outsourcing finance and accounting.

  • Increased in-house efficiency

By outsourcing your finance and accounting functions, you can boost the efficiency of your in-house personnel. There are a few reasons behind this:

  1. Optimizing your current expenditure. Your outsourced accounting provider will help you identify unnecessary expenses and cost-saving opportunities without compromising work quality and efficiency.
  2. Offload managerial responsibilities. By outsourcing your financial team, business owners and their financial managers will have more time and energy to focus on their business’ core aspects (because financial and accounting tasks will be taken off their plate). This is important for companies with managers inexperienced in financial management but responsible for other departments.
  3. Frees up time of your in-house staff. Besides your managers, your in-house employees will also be able to spend more time on other roles important for growing the business.
  4. Cut infrastructural and hiring costs

First of all, building and managing in-house finance and accounting departments can be costly. From the hiring, onboarding, and training costs to salary and benefits to office space and equipment, you will have to spend thousands of dollars to handle your financial and accounting needs. But if you outsource the finance department, you won’t have to cover many of these costs.

You won’t have to spend time and money finding and hiring the right employees – just hire an outsourced team and get started immediately. The team you hire is already experienced and trained, and their ongoing training is not your concern, which further reduces your expenses. The outsourced team already uses advanced software and technology, which allows you to benefit from the latest tools at a fraction of the cost you would incur if you invested in them yourself. And ultimately, you won’t need to worry about finding a place for your team to work (renting an office, buying equipment, and paying for utility) because they are not your in-house employees.

Therefore, outsourcing cuts much of the cost that comes with having an in-house team but still allows you to work with the best professionals in the F&A industry.

  • Limitless access to global talent pools

To build an in-house finance team, you will have to hire experts from your vicinity, meaning that you are limited to the local talent pools. But what if the best fit for your company is not in your city or country? This is not a problem with outsourcing because it allows you to hire the best experts in the financial services industry from across the globe. These teams are also experienced when it comes to remote work and are dedicated to providing the same (or even more) value when compared to an in-house team. And since your team may be working from a different time zone, you may be able to extend your company’s operational hours and further boost your financial activities’ efficiency.

Access to tax and wealth advisors can assist in building an efficient financial roadmap for your business. They can help you with individual tax planning, business continuity, disaster recovery and risk management, risk mitigation, and other aspects of financial planning.

Is Outsourced Finance and Accounting Right for Your Business?

If you are considering outsourcing your finance and accounting function and whether it’s the right move for your company, there are several key factors to consider.

  1. Staff

If you cannot handle a full-time, in-house staff, outsourced finance and accounting services may be the right choice for you. You will benefit from timely financial statements to improve your financial visibility and reflect your company’s activity and progress without the hassle of managing multiple people. Outsourcing this function will eliminate the need to manage sick leave, vacation time, or other workplace disruptions.

  1. Technology

Outsourced finance and accounting services will bring you a competitive advantage in the marketplace thanks to the advanced technology it brings to the table. Perhaps you cannot afford to invest such technology, but finding a cloud-based financial team that already works with the latest cloud-based accounting software will allow you to access outstanding bills, AP and AR aging, general ledger reports, and financials within a mobile app or web browser. This type of automation and mobility will allow you to have real-time, accurate financials delivered to you instantly.

  1. Work quality

Quality of work and quality of team members are both equally critical for those considering outsourcing their financial department. If you are unable to find quality workers in your area, then outsourcing might be the only option left for you. Quality is probably the most important factor that drives companies to outsource their financial department.

  1. Don’t have the numbers

The most obvious red flag telling you that it’s time to outsource is not having the critical numbers you need to make the right business decisions. It isn’t easy when your financial situation is a huge question mark, but spending the money on an outsourced team of financial professionals is the first step to getting your financial situation under control.

Even if you have the numbers, not being able to interpret and understand them also calls for an outsourced financial backup to ensure that your business is heading in the right direction.

  1. Too many errors

If errors in your books keep appearing, that means the person taking care of your books is not doing the right job. Resolving such errors can be very time-consuming and expensive. By outsourcing these services, you can take advantage of the multiple layers of review built into your provider’s processes, which allows them to detect most errors on time. And even if any error creeps up, you won’t be the one that has to deal with it.

How to Choose an Outsourcing Provider?

When you decide that outsourcing is the right choice for your company, it’s time to find the provider that meets your finance and accounting needs. How do you pick the right outsourcing company? Let’s go through the process step by step.

  1. Determining your business needs

Are you looking for complete financial service outsourcing, or do you need to outsource specific tasks? What kind of privacy or security measures does your business require (depending on the operations and data that you will share with the outsourced team)? Do you need to outsource common finance and accounting services, or do you need CFO consulting services? These are all factors that you need to consider before you even begin to look at all the financial services available. List out your business needs and always keep them in mind when looking for the perfect outsourcing service.

Also, you should know the roles you should outsource. The roles you can outsource include tax accounting, bookkeeping, management accounting, payroll processing, financial data analytics, and Chief Financial Officer (CFO) for financial leadership services.

  1. Determine your budget

You probably won’t be able to accurately calculate your outsourcing costs yet, but you can make a rough estimate to make sure you don’t risk overspending. While estimating your outsourcing budget, keep in mind things such as:

  • What your organization can afford to spend.
  • The exact type of services your organization needs.
  • The value that outsourced services will bring to your organization.
  • The cost of hiring an in-house finance and accounting team and technology to perform the same work (compared to the price of the outsourced team and technology stack).

These figures should serve as a rough guideline to estimate the range of your budget for outsourced finance services.

  1. Narrow down the list of Outsourced Finance as a Service providers

Once you determine what you can afford and what your company needs, the next step involves searching for finance and accounting service providers. Narrow down your choices by using these two main factors, but also consider all the benefits that each vendor provides, which may include:

  • Infrastructure and software used by the outsourced finance and accounting provider.
  • Internal control measures.
  • Security compliance.
  • Advanced processes and controls that increase speed to market and efficiency.
  • Advanced financial reporting that can significantly increase your company’s financial visibility.
  1. Check the providers’ reputation

Check your providers’ reputation by looking at client testimonials and reviews. Take a look at their testimonials of clients that the outsourcing service provider has worked for in the past. Also, pay attention to businesses with the same financial service needs or those in industries similar to yours. Read what their past clients have to say about the finance provider’s quality of work, performance, and employees, and use those impressions to narrow down your choices to 2-3 companies.

  1. Culture fit

Your company has its vision and mission for growth, which is why it’s best to work with a Finance as a Service (FaaS) provider that is willing to align with your vision and mission. The best financial service providers are keen on providing financial visibility through financial reporting. A company’s culture is inextricably connected with its financial success and its perceived value in the world, and your financial service provider needs to understand that.

  1. Trial project

The final step of choosing the right Finance as a Service provider includes working on a trial project (a task or short project) that will allow you to properly evaluate their performance and how well they suit your requirements. You should pay attention to factors such as:

  • Compatibility and communication. How well does the outsourced company work with your staff? Are there any gaps or barriers in communication that may negatively affect your business operations?
  • Efficiency and performance. How efficient was the outsourced team performing the work they were given?
  • Value. How well does their work meet your business needs? To determine the value an outsourced finance and accounting provider brings to your company, use an objective KPI (key performance indicator) or metric.

Once the trial project is done and analyzed, you should have a clear picture of how well an outsourcing provider fits your financial and accounting needs.

The outsourced finance and accounting industry continues to demonstrate its value to companies of all types and sizes, which is why it has begun to secure their trust. As a result, many companies are now more willing to outsource complex financial functions. Instead of just outsourcing for bookkeeping services, they are now looking for partners to help them create project valuations, IRR forecasts, cash flows models, and other complex financial functions.

The FaaS service provider and CPA firm that you decide to outsource to should understand the financial aspect of your business, while also having an in-depth understanding of the industry it operates in. By using best practices and modern software solutions, they should be able to fill all your finance and accounting gaps, as well as learn the uniqueness of your business. With Consero as your partner, we will be able to bridge the gap between your organization’s financial goals and numbers together and increase your financial visibility. Furthermore, you’ll get the opportunity to strategically outsource your accounting while maintaining a core finance team.

To discuss outsourcing your finance and accounting, as well as our customizable solutions, request a demo today.

 

Finance Organization Strategy and Structure in 2022

Growing the business, improving operational excellence and performance management, and executing business transformation are top priorities and responsibilities for most organizations in 2022. Yet, high degrees of digitalization, complex decision-making, and disruptive delivery models are changing what businesses expect from their finance departments and/or partners.

However, successful CFOs understand the best ways to employ corporate strategies capable of taking advantage of the latest technology trends and how to structure their finance in order to make the most out of their already tight budgets. When it comes to breaking down organizational structures that minimize the advantages of digital finance functions, they pay very close attention to reducing unneeded effort and duplication. They also aim to provide more coordinated support to the business. To that end, a finance function redesign is required.

The Need For Finance Function Redesign

It’s been some time now since the finance department limited itself just to reporting figures. Finance today is increasingly providing operational and enterprise decision support, alongside its other critical responsibilities in areas of governance and oversight. It’s up to the CFOs to determine the best organizational structure that will be able to fulfill both their rule-based activities and meet new demands.

One of the first steps for CFOs in this regard is to settle the matter of centralization. With the ongoing business process of standardization and automation of transactions and finance process and policies, centralization plays a key role. Yet, there is a range of options that serve different purposes. Finance leaders, on average, will place their staff at the corporate center, while anywhere from 10 to 15% are in shared locations. However, as companies grow in size and complexity, as well as their finance functional maturity, the location of corporate finance activities also expands.

Customizing Your Finance Functions

As companies continue to grow and expand, their customers and operations will also spread out geographically. They are also served by a more complex organizational structure. As such, they will tend to put a higher percentage of corporate finance staff in business units. While centralization is important, it’s not always appropriate. In these scenarios, finance leaders should consider which type of service delivery model will best support their business needs.

Some will choose to divide their responsibilities between their corporate and embedded finance teams. Others, on the other hand, may find that a center of excellence (CoE) or shared services will best suit their needs. Whatever the case, the best model for any given organization is one that’s able to perfectly balance the company’s available financial and human resources with the finance’s competing governance and guidance responsibilities.

When it comes to the corporate finance middle-office that owns most of the core accounting work, its impact and complex activity attributes are the most important in terms of identifying which locations will be best suited to balance financial risk and efficiency. Such a framework will allow CFOs to establish a base example for activity location. With some exceptions, low-complexity middle-office activities should be moved into shared locations, while high complexity activities should either be handled by the corporate center or in a joint effort by the center and BU management teams. Even though there is no one-size-fits-all approach, such a model will provide a baseline for considering where certain finance processes and activities will fit across the finance department.

After identifying their degree of centralization, CFOs should go on to redesign other critical aspects of the finance functional organization. They should start by assessing the current finance structure by understanding the company’s staffing, structure, spend, technology, performance, and productivity. These will help identify and anticipate their future business needs. The second step is to identify and select the finance activities that need to be outsourced, as well as the location for outsourcing.

They also need to make sure that the structure is based on functional priorities by clearly defining the scope of activities for each sub function. This will help avoid any unnecessary duplications. Lastly, CFOs will need to establish reporting relationships by choosing the right reporting structure for embedded finance teams and optimizing the control span. Incentives, performance measures, and role definitions will help drive the desired behavior and structural change, more so than simply redrawing reporting lines. 

Solving Operational Performance Problems

It’s important to realize that no company is immune to operational performance issues. These are those unanticipated material impacts that affect the business unit profitability and that require corrective action that’s not typically found in the annual plan. Typically, companies experience such performance issues several times a year. They can relate to revenue or costs like unexpected price pressures from new competitors or a sudden change in production costs. Each of these will require a corrective action, where speed is of the essence.

Over the past several years, CFOs have been working on improving the speed and quality of their performance information. Many have also developed good leading indications and predictive financial analytics to anticipate these issues. However, while most businesses are able to identify these problems before they affect their bottom line, only a handful can do anything about it in a timely manner.

Shortening the Remediation Process

To resolve the intra-year performance issues at a low cost and facilitate structural change, finance teams will need to compress the entire remediation process. This goes from spotting the existing issues to helping the company recognize its own materiality, as well as knowing how to respond in a timely manner. Yet, this shortening can pose some challenges, as managing directors often need to be persuaded of the performance issues’ materiality. That said, finance can help remediate the company’s performance issues in two main ways:

  • By establishing quicker buy-in around the idea that the issue needs to be remediated.
  • By removing any resource constraints that prevent the company from acting faster and more effectively.

How to Establish Quicker Buy-In

The corporate finance department will need to validate the real nature of the performance issue to the business. The majority of CFOs and CEOs will agree that there is too much back and forth between the finance department and the rest of the organization when it comes to identifying the material issue. Such a “stalemate” will tend to lead to the so-called analysis paralysis and needs to be avoided.

In general, there are three major opportunities to reduce this back-and-forth between the company and finance:

  1. Shortening the time it takes for the business to engage with finance data – While technology can help improve data quality and featured strategic insights, there is no guarantee that the rest of the company will engage with it quickly. To do that, you will need to present your financial information in such a way that it will resonate with the organization. It’s best to use business terms that make it clear about the urgency of various performance issues.
  2. Increasing your company’s confidence to make decisions with the available data – Many organizations will tend to put off important decisions, stating that they need “perfect data” before initiating a change. In this case, it’s best to use the 80-20 rule (the Pareto principle) to size the issue quickly and determine the root causes of the problem.
  3. Eliminate requests to test the root causes that appear during the late stage of the process – Effective finance teams will surface and track any latent beliefs about business drivers. By using a catalog of official and off the record drivers can help the finance department quickly draw the attention of the company and generate buy-in regarding performance issues as they emerge.

Removing Any Resource Constraints

Many business leaders feel that a lack of resources limits their ability to take action during the response phase. It’s up to the finance department to resolve these resource constraints. To do so, they need to:

  • Have a contingency plan at the start of the year – By building contingency budgets based on multiple scenarios and for different cost categories, the finance department can create funding pools and other mechanisms that will help resources flow towards the business areas that experience performance issues. By using financial risk assessments to determine where to cut spending, finance can pool those extra funds centrally and allocate them throughout the year within the business as needed.
  • Freeing up idle funds – Finance should also surface unused funds from growth projects by zero-basing them for midyear reallocation. For example, you can reevaluate and cost them from scratch, instead of based on the existing budget. You should also monitor human capital assumptions from a granular level to uncover any untapped funds.

Consero Global can help ensure that your executive team is making the right moves and implementing the best management and corporate strategies to keep your business growing. Besides our experienced finance management teams, what we bring to the table are cloud computing technologies and advanced financial management solutions that will help you achieve operational efficiency and financial clarity.