The complete guide to outsourcing finance and accounting

The complete guide to outsourcing finance and accounting

Because an organization’s financial operations are a core function and crucial to sustaining its long-term success, it’s easy to assume that its finance and accounting structure should remain in-house where the business owners can maintain control. However, it’s because finance and accounting are so vital to an organization’s financial stability and health that decision makers should be compelled to turn to outsourcing finance and accounting.

In this comprehensive guide, we will discuss how finance and accounting affect the valuation of your company, why you should consider outsourcing your finance and accounting, areas of finance and accounting to outsource, and how to find an outsourced accounting service provider.

How Finance and Accounting Affect the Valuation of Your Company

If at some point, you need to seek funding or intend to sell your business, you need accounting valuation to value your company’s assets and liabilities. From cash flow to future performance and financial leverage, many factors determine the value of a company.

Factors like growth prospects and earnings history play crucial roles in the valuation of your business. The person appraising the value of your business will want to take a historical look at your income trends that may or may not devalue your business. They will want to examine your financial records to identify potential for future growth, which will increase valuation. Therefore, outdated and inefficient transactional processing and a lack of formal documentation policies or financial controls can hurt your business and impact the valuation of your company.

Consistent maintenance of accurate financial records is crucial to a company. It tells your financial story, showcasing your success while exposing your weaknesses. However, this transparency is crucial in making informed decisions. With accurate finance and accounting records, you can decide how to reinvest in your company, evaluating cash on hand and anticipated costs that may impact cash flow.

Because the structure of your finance and accounting function is vital to the success and growth of your company, you need accurate documentation and records, processing, proper support, formal policies, and financial controls. Unfortunately, not all companies, particularly fast growing  businesses, have the time, expertise, or leadership to ensure their finance and accounting department keeps them competitive.

Turnover, outdated systems, lack of talented in-house finance staff and inadequate budget to hire a strategic CFO can put the companies valuation at risk. For these reasons, companies outsource their finance and accounting. Outsourced accounting service providers can customize their services, providing companies with only the financial services they need to fill their gaps.

Businesses without an in-house CFO can benefit from C-level expertise and experience through fractional CFO leadership. Alternatively, a company that has an in-house CFO can become empowered when outsourcing to a Finance as a Service provider that provides reliable back-office services and customizable best-practice based processes.

Reasons Why Organizations Decide to Outsource Finance and Accounting

The finance department encompasses bookkeeping, controller services, financial planning, and analysis. It involves a myriad of tasks to ensure the upkeep and maintenance of the books and compliance with regulations and policies.

If an organization wants to scale, it will need to ensure its current employees can keep up with the demands of expansion. However, if they are bogged down with tedious, manual tasks, there is little time and energy to train and develop their skills for growth. Beyond ensuring their staff is equipped for expansion, management also must explore cost-effective strategies that minimize their overhead while remaining competitive.

Outsourcing has become a solution that offers many benefits, helping many companies maintain financial stability and scalability to achieve success. Here are the top reasons why companies decide to outsource their finance and accounting operations.

Salaried Staff vs. Fractional Professionals – Outsourcing your finance and accounting means reduced costs for your company. You would only need to pay the outsourced provider for the work they provide. The fractional use of finance and accounting professionals allows organizations to scale their operations without the high costs of maintaining a salaried accounting staff. When you don’t have to maintain full-time employees, you don’t have to factor in the additional costs of workers’ benefits like payroll taxes, medical insurance, vacation and sick days, and retirement plans.

Outsourcing also alleviates your human resource and hiring department of the burden of recruitment. Hiring new talent can be a long process. It involves placing job ads to attract talent, reviewing applications, screening, and shortlisting potential candidates. And once the right person has been hired, more resources will be needed to onboard and train them. It costs time and money to train new employees effectively. There’s also the cost of productivity loss if training means getting your workforce involved.

Help the CFO Focus on Core Business Growth Activities – Progressive CFOs know that they are of little value when they spend the majority of their days performing in-house transactional work instead of leading their finance team and focusing on high-value work. As modern leaders, they know that their competitive differentiator relies on their proactive decision-making, creativity, and analytical insight. 

By outsourcing redundant and repetitive tasks, CFOs can use their valuable time and energy to lead the organization towards growth. With outsourced services, the CFO is supported by a team that manages all the daily financial needs. This team will also establish the financial controls that safeguard and monitor revenue and expenditures and implement enterprise accounting software.

Efficient Distribution of Tasks – Outsourcing frees your staff from the mundane and repetitive finance and accounting tasks so that they can focus on high-value work. An outsourced accounting service provider is ideal for companies that need to focus on their flexibility and scalability. Instead of leaving your staff to handle time-consuming and cumbersome tasks, they can add more value to your organization by getting further training to take on supervisory and other decision-making roles.

Access to Global Talent – Hiring an in-house finance and accounting team can limit your talent choices. You can only hire those who are either local or willing to relocate to work at your office. When you outsource, you gain access to a vast talent pool that may exist anywhere in the world. Advanced tools and technology allow top accounting talent to work remotely and efficiently from virtually anywhere and give you real-time visibility into your business finances.

Advanced Technologies and Systems – Small-to-medium enterprises may not always be updated on the latest finance and accounting applications. They may not have the expertise and knowledge on how to leverage them. And for many smaller organizations, these tools may be too expensive. External finance and accounting service providers invest in these technologies.

Therefore, when you outsource your accounting to experienced accounting service providers, you benefit from the advanced tools, technologies, and applications they use, transforming your outdated operations into modernized systems that are agile and strategic. This allows you to upgrade your operations without the high costs of buying and maintaining expensive accounting software and tools.

Better Processes and Accuracy – Finance and accounting service providers can support your daily financial operations thanks to their team of highly experienced professionals whose only focus is to deliver streamlined systems and processes that will help you scale. Armed with the right skill set and technology, they ensure that your finance and accounting operations run efficiently and effectively.

When you outsource, you can eliminate old-school manual accounting methods and replace them with automated and more streamlined workflows. Automating tasks like expense claim audits, analytics calculations, risk assessment, bank reconciliations, and analyzing and matching payments to invoices not only relieves your staff of the drudgery of time-consuming tasks, but it also significantly reduces the risk of errors. 

Areas of Finance and Accounting to Outsource

Outsourcing finance and accounting to an accounting service provider doesn’t mean giving up your entire in-house team. The beauty of outsourcing is that you can choose the areas to be outsourced. For some companies, this means keeping their entry-level bookkeepers and outsourcing a fractional CFO. For others, outsourcing finance and accounting means maintaining an in-house CFO but outsourcing all the transactional financial processes. Here are the logical places to begin when it comes to outsourcing financing and accounting.

Bookkeeping and Back-Office Support – Outsourcing your bookkeeping can help your company address common issues most bookkeeping and accounting departments face without increasing staff costs. With outsourced bookkeeping, your in-house team is freed of burdensome back-end office tasks that can result in high employee turnover rates. With the right outsourced services provider, you can expect expert advice. You will also receive comprehensive reports that increase financial data visibility, which will lead to improved and informed decision-making. These include:

  • Account Reconciliations
  • Customer Billing and Payments
  • Deferred Revenue
  • Employee Expense Processing
  • General Ledger
  • Financial Reporting, Tax Reporting, and Reporting Automation
  • Foreign Currency
  • Month Close
  • Multi-Entity & Multi-Currency Consolidation
  • Order to Cash
  • Payroll Administration/Services
  • Procure to Pay / E-Payments
  • Subscription/Maintenance Renewals Management
  • Time and Expense Management / Expense Services
  • Vendor Invoice Processing and Payments

Controller Services – Outsourcing your controller services can help grow your business to the next level with controllers that provide accurate and timely reporting, financial analysis, and strategic guidance and management. Controller services typically involve:

  • Audit Report
  • Compliance Management
  • Employee and Vendor Communication
  • Management Reporting
  • Policy Adherence
  • Policy & Procedures Guidance and Adherence
  • Transactional Processing Oversight

Financial Planning and Analysis (FP&A) – Outsourcing your financial planning and analysis can help your business if your in-house finance and accounting team lack the expertise, time, and resources to drive financial performance and put you on the right track for growth. By outsourcing FP&A services, financial experts can give you an in-depth evaluation of your organization’s financial position, supporting you in the following ways:

  • Acquisition Integration Support
  • Audit Support
  • Board & Bank Reporting
  • Business Decision Making
  • Company Financial Data Analysis
  • Financial Leadership
  • Investor Communication and Reporting
  • Management Reporting and Narrative
  • Planning, Budgeting, and Forecasting

How to Find a Great Finance as a Service Provider

Not all Finance as a Service or outsourced finance and accounting  providers are created equal. So when it comes to hiring an outsourced partner, you need to find a third-party solution that has the industry experience, certified staff, and service architecture that can elevate your business operations and performance. The following are conditions you should look for when deciding on the right accounting service provider:

High-Quality AI-Powered Technology – The whole purpose of finance and accounting outsourcing is to have a third-party service provider that will relieve your staff of mundane, manual tasks that cost you time and money. Therefore, the accounting service provider you outsource should be equipped with advanced tools and software that automate these tasks.

Cloud-Based Software Solutions – To benefit the most from artificial intelligence, you need a solution provider that can help you centralize your system, standardize it, and automate it. With all your financial data stored in the same place, you increase efficiency, share data effectively, and lower the risk of accounting errors significantly. When you outsource a team that leverages cloud solutions, you not only benefit from streamlined accounting processes but lower IT costs as it relieves you of the high costs of infrastructure and maintenance. Working from the cloud also results in the flexibility to scale your services to fit your unique needs because it is highly customizable. 

Proven, Streamlined Processes and Controls – Great providers create value and give you a competitive advantage through business process excellence. The right outsourced service provider has a proven track record in designing and managing finance and accounting processes that save time and automate manual tasks that would otherwise waste employee talent and reduce morale and productivity.

The implementation of best-in-class systems and processes fast-tracks your organization towards growth and innovation. Only the best systems, processes, and controls can gain insight into your financial performance and health to eliminate silos, fill gaps, and improve productivity. They should also be able to guarantee internal controls for risk mitigation and data security. 

Experienced Team – From entry-level bookkeepers to interim CFOs, the best outsourced finance providers can meet a variety of finance and accounting staffing needs, which include consulting services, finance services, and bookkeeping services. Because centralizing and automating your systems is a huge undertaking, you need to rely on an outsourced provider composed of experienced finance professionals who have fully developed and tested the technology. 

However, the gauge for experience shouldn’t only be based on years of experience. Also, look into quality and industry knowledge, business intelligence, and their ability to leverage and manage technology-based solutions effectively.

Methods and Metrics for Measuring Success – As previously mentioned, accurate and proper transactional processing and reporting are crucial to your company’s valuation. The accounting solution provider you hire should make it a priority to not only implement the software but also provide the service of improving financial reporting. Therefore, the ideal finance and accounting provider should have developed methods and established metrics and KPIs that measure success and identify errors.

Ability to Provide Detailed Financial Reports – Investors and stakeholders will need to see performance reports to assess the financial health of the company. A great Finance as a Service provider is ready to provide detailed cash flow statements, income statements, balance sheets, financial statements of shareholders’ equity, and other relevant financial reports. The Finance as a Service provider must be able to achieve all this while maintaining compliance, particularly when it comes to taxes, audits, SEC reporting, and so on.

Collaborative and a Good Culture Fit – Cloud-based accounting software allows you the ability to view real-time data and access your financial data from virtually anywhere. This makes working with the service provider easier and more efficient. The right finance and accounting service provider should be keen on providing financial visibility through comprehensive financial reporting. You will work best with a Finance as a Service provider that has a service culture and value proposition that is willing to align with your company’s vision and mission for growth.

Conclusion

The right outsourced accounting firm and Finance as a Service provider should not only understand the financial side of your business but also have the knowledge and insight into your industry. They should be able to fill your finance and accounting gaps with modern software solutions and best practices. They should also be prepared to learn the complexities and uniqueness of your business, along with its specific financial goals.

Consero is a fully managed solution that implements the software and provides the service. Our cloud-based, AI-powered software is unique. It incorporates Simon, a voice-activated AI technology that functions similarly to SIRI and Alexa, but for accounting and finance.

With Consero, we customize your solution based on your in-house team structure and company goals. All of our teams are led by a high-level VP of Finance that manages a dedicated team experienced in handling transactional accounting. Depending on what model you choose, you may be more actively involved in managing the team, or you may be purchasing our growth model where we would play more of a management role. To discuss outsourcing your finance and accounting outsourcing and our customizable solutions, request a demo today.


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