When you first start a business, you feel invincible and almost superhuman. The energy is high, and if you’re like most new business owners, you start out completely confident that you can do everything in-house. From advertising and accounting to copywriting and SEO, if you can’t do it yourself, you can find competent employees who are eager to be part of a startup. While you may be able to get away with keeping your ads in for a long period of time, this is not the case with accounting. There’s a lot at stake.
If you are trying save money handling your accounting and financial reporting internally, here’s why it’s holding you back.
Financial management only becomes more complex over time
What starts as a small task involving a handful of invoices and a few invoices will expand into inventory, payroll responsibilities, regulatory compliance requirements and complex tax obligations that require professional expertise to handle. Remember, your financial records must be pristine and accurate at all times. As you grow, you risk falling out of compliance in ways that can put your business at risk. Eventually, there comes a point when business owners have to ask themselves if it makes sense to continue handling bookkeeping in-house, or if it’s time to bring in the professionals.
Seeking outside help does not mean you are failing. Transfer of accounting functions has been the norm for over a decade and continues to provide benefits that exceed what in-house teams can provide. Although it may not be right for every business, outsourcing accounting can make you more efficient, reduce your costs, and provide specialized expertise on demand without having to hire someone full-time.
Do you spend a lot of time on accounting processes?
If different employees manage the company’s finances in their spare time, it will become unsustainable very quickly. What starts as a simple task will become a burden that prevents your staff from performing their primary roles. As your company grows, the demand for attention to finances will become more demanding. If you have noticed that you or your team spend a significant amount of time dealing with the accounting process, this is a clear sign that you will benefit from outsourcing the work. Once you outsource your financial tasks to professionals, your team can focus on higher-value activities.
Are your financial needs becoming complex?
An increase in complexity is a sure sign that outsourced accounting is a smart move. For example, if you have multiple revenue streams, inventory, in-house employees with payroll obligations, or complex tax requirements, this is difficult to handle in-house. Every aspect of your finances will become more demanding as you get older. This includes things like budgeting, meeting state and federal sales tax obligations, forecasting, complying with payroll and financial reporting regulations, and managing cash flow.
If any of these elements feel overwhelming or too demanding, outsourcing can put your finances in the hands of reputable professionals.
Hiring full-time staff is not always a smart financial move
If you understand the need for more support but want to keep everything in-house by hiring a full-time team, you may be surprised to learn how much more this will cost compared to outsourcing. You will need to cover each person’s salary, benefits, training costs, office space, payroll taxes and any other expenses that come with employees. External accounting makes more financial sense.
With an external accounting team, you’ll have access to professionals without having to pay all the extra costs required to maintain an in-house team. In the future, as you grow, you may decide you want your own dedicated accounting department. However, if you’re not there yet, outsourcing can provide you with everything you need.
Does your financial reporting need improvement?
As a business owner, you can’t make effective decisions when the data you have is inaccurate. If you do not have reliable and complete financial information, you will find it difficult to assess your profitability, managing your cash flowand problem identification. This problem will only get worse as your company grows.
Outsourced accounting teams use established systems and procedures that improve financial visibility. When your financial reports are accurate, you’ll have a better understanding of where your company stands so you can make more informed decisions. This is especially useful when it comes to taxes.
Tax obligations become exponentially more complex over time, and these challenges are difficult, if not impossible, to meet without financial expertise. Even unintentional mistakes can be expensive. Outsourced accounting functions can help reduce tax errors that can accrue penalties and interest and trigger audits.
It’s time to prioritize expertise
Your long-term success depends on organized and accurate finances that can be retrieved and reviewed without warning. Often, this requires bringing in outside experts. For many companies, outsourcing bookkeeping and accounting is the most practical way forward.
Photo by Scott Graham: Unsplash
