By Raffi Yousefian | Published 12/16/2020 04:04:52 PM

When you think about accounting, what type of operation comes to mind? For many businesses, the traditional model of accounting is still in use. It probably looks like this:

  • A bookkeeper is hired to input receipts, record bank transactions, create invoices, and the like on a daily, weekly, or monthly basis.
  • A Certified Public Accountant (CPA) is engaged annually to prepare tax filings and/or audit financials.

What happens in between these activities in terms of accounting is, well, not much. In this model, the CPA is engaged when organizational leaders think they need them – typically for filing tax returns, getting audited financial statements, or when a problem occurs. 

This method may have worked for various organizations for many years. And the old saying goes: “If it ain’t broke, don’t fix it,” – right? But this highly reactive approach leaves a big question unanswered: 

What about all those missed opportunities?

Those records your bookkeeper is entering provide your accountant or CPA with an extremely rich dataset – to be used to your advantage. Yes, the data can be used for standard work like tax returns, but it can also be leveraged for strategic activities like financial modeling, statement analysis, and growth & future planning. Answering questions like “Should I scrap this product line?” or “What do I need to do to increase my gross profit margin?” are now within reach.

Let’s face it: organizations today should receive much more value from their accountants than just tax returns and financial statements. And business owners already expect this value: 86% view accountants as trusted advisors, but only 61% are satisfied with the variety of services performed by their accountant. There’s a clear gap between customer expectations and reality. 

Outsourced accounting and advisory services provided by qualified CPA firms exist to fill this gap and provide small organizations with the tools they need to thrive in our modern marketplace. Here are our top reasons to consider outsourcing your accounting.

Gain Accounting Expertise

By plugging into an outsourced accounting firm, you’ll gain access to a group of qualified experts with a deep pool of resources. You’re not just getting an accountant – you’re acquiring expertise at every level. For example, RY CPAs has entry-level accountants who are highly skilled in organizing documentation and recording transactions very quickly and efficiently. Our senior accountants do the accounting work while our advisors focus on review and analysis.

Business owners should look for an outsourced accounting team that has expertise in GAAP (Generally Accepted Accounting Principles) accounting- a requirement for companies that get audited – and deep knowledge of state, local, and federal taxes, payroll, and bookkeeping. This team will work together to help you deal with complex accounting issues, provide industry best practices, stay up-to-date on licensure and regulatory requirements, and study trends in your organization to look for opportunities.

You could hire a single bookkeeper that has a limited set of knowledge and skills. Or, you could connect your business to an outsourced team that includes an AP clerk, a GAAP expert, and an accountant that focuses on international taxes. You’d be hard-pressed to find one person to hire in-house with all of these strengths.

This team of outsourced accounting experts will perform timely and accurate reporting to collect ongoing information about your business’s operations.  They’ll proactively look at your books throughout the year – not just when you think you need them. They’ll share things like red flags, the profitability of product vs. product B, and when it’s best to seek investment opportunities. And given their experience with multiple clients, they’ve likely dealt with any situation your organization might encounter.

Pro Tip: When looking for an outsourced accounting provider, find a firm that has subject matter expertise in your industry. A qualified CPA firm that mainly works with restaurants may not provide the same level of value to a Software-as-as-Service (SaaS) company. However, some industries require more specific subject matter expertise than others. Nonprofits need an accounting firm that knows their industry, while a ride-sharing startup just needs a firm that specializes in fast-growth companies.

Decrease Costs

Consider what it would cost to hire full-time employees that meet all your accounting needs. The list will likely include a bookkeeper, an accountant, an AP clerk, and a CFO or controller. And you might need even more – an accountant that specializes in GAAP accounting and one that knows international taxes, for example. There’s not a lot of crossover in the workloads of these employees. A bookkeeper can’t do high-level analysis or tax planning; a CFO or controller won’t likely do bookkeeping, administration, or general ledger accounting.

When you consider salaries, taxes, insurance, benefits, and the overhead of additional staff, hiring full-time employees dedicated to accounting adds up to a significant investment. Engaging an outsourced accounting firm allows you to leverage experts efficiently and cost-effectively. 

The firm will design engagements to assign easy tasks to low-cost resources while looping in high-cost resources at the end of a review cycle. There’s always a high-level advisor reviewing your financials, but you only bear the cost of a small portion of their time. You can get all of this for around the same price of the traditional bookkeeper + end-of-year CPA model.

The outsourced accounting model also reduces costs in several key areas: preparing end-of-year returns and financial statement audits, and identifying opportunities for cost savings. Because your financials are reviewed and prepared on a monthly basis, there’s no need to spend extra time (and money) doing it at the end of the year. Your financials are GAAP-audit and tax return ready at any time. 

Opportunities for cost savings are found just by proactively managing your financials. For example, by focusing on each restaurant customer’s AP cycle, RY CPAs has identified hundreds of dollars worth of weekly overcharges from vendors of our restaurant clients. High-volume operations like restaurants may bring in hundreds of invoices each month, making it incredibly difficult for a single bookkeeper to manage the books and identify these errors.

Pro tip: Make sure any outsourced accounting arrangement you enter into has a clear scope and fixed pricing agreement. That way you’ll know exactly you’re getting for your investment. When assessing the cost, take into account the additional value you’ll receive. Though the fixed price agreement might exceed your current bookkeeper + CPA arrangement, the extra value will far outweigh the lower cost and the lack of sophisticated, proactive work.

Reduce Risk

Managing an organization comes with significant risks, especially when it comes to accounting. Consider these scenarios:

  • If your entire accounting function is reliant on a single bookkeeper, what happens when that person calls out sick or leaves the company?
  • What accounting controls do you have in place to segregate duties and control for errors?
  • How will you know if employee theft or fraud occurs?
  • Are your accounting records completely secure?

An outsourced accounting provider can manage all of these concerns – instead of you having to worry about them.  If the bookkeeper working on your accounts is unavailable, outsourced CPAs have others to pull from to ensure your books stay up-to-date. They’ll also build workflows, review and approval processes, and segregate duties appropriately so you don’t have to. For example, the person receiving inventory should be different from the person paying invoices. 

Companies with less than 100 employees lose almost twice as much per fraud scheme than those with greater than 100 employees. Just by the nature of the relationship, an outsourced accounting firm is a third-party that can monitor and manage your books with an impartial set of checks and balances. In addition, the outsourced accounting provider maintains security standards to ensure confidential records, controls access, and backs up your financial data. 

Pro tip: Ask potential outsourced CPA firms how they allocate resources, segregate duties, identify fraud, and keep your records safe. Compare that to what you are able to do internally to get a better picture of value.

Get Back to What You Do Best

You started your organization for a reason that has nothing to do with accounting. Your expertise lies elsewhere, and spending too much time on activities like accounting work can drain both your time and energy. An outsourced CPA firm can take the weight of accounting off your shoulders so you can focus on what you do best. Now you can take that free’d up time and space to resume the growth and management of your business. 

Speaking of growth, anyone who has worked at a fast-growing company knows that scaling while you grow is a tough nut to crack. Adding new employees and increasing customer volume quickly can be taxing to all parts of the company, including accounting. Alternatively, if a pandemic hits and demand for your products and services plummets, or that next funding round is less than expected, then you might have the opposite problem – scaling down quickly – which can be equally taxing.

In either case, an outsourced accounting provider can flex their resources up or down to meet your needs. Instead of hiring new accounting staff to meet demand and then possibly having to let them go later, an outsourced accounting team can increase or decrease resources dependent on the state of the business. Seasonal increases in activity are handled with more efficiency. Slower periods mean your accounting firm takes their foot off the gas.

And one last thing that will help you get back to day-to-day operations? Not having to worry about what’s happening with your financial data. If you’ve got limited accounting staff in-house or are managing it all yourself, you’re probably preoccupied. Is my data accurate? Are we in compliance? Will we get audited? How will I handle end-of-year duties?

Outsourcing to a qualified CPA firm gives business owners and organizational leaders confidence and peace of mind. You know you have trusted experts who are managing your books and fully compliant with regulations. When you present your financials to investors (or any other party), they’re accurate. There are controls in place to catch fraud. End-of-year is a breeze. And bonus: your accounting firm is bringing you proactive recommendations that will help you make informed decisions about your business.

Accounting is a critical function of your organization.

Whether you decide to fully outsource accounting, keep it in-house, or use a combination of the two, it’s not enough to stick to traditional, reactive accounting. Informed, proactive accounting is imperative to the management and growth of your business. If you find yourself strapped for time and/or resources and are falling behind, it’s time to consider outsourcing to a qualified CPA firm. 

Do you need to talk through your organization’s current setup and what the best option is for accounting? Contact Aldridge Borden OneSource for a discovery call – we’ll help you navigate your way to the right solution.