Outsourcing accounting processes is not a new concept in the business landscape. In fact, accounting is among the top five business functions 55.6% of businesses outsource, based on a recent survey by GoodFirms. While outsourcing accounting tasks sounds like something only large businesses do, many startups and small businesses are joining the wagon. Entrepreneurs are realizing that working with outsourced accountants is an excellent way to pursue growth while optimizing costs and efficiencies.
Not sure outsourcing your accounting processes is right for your startup? In this post, we’ll dive into how outsourced accounting can help startups and entrepreneurs grow.
Create More Time to Innovate
You’ve heard or even read about how outsourcing reinforces a business’s strengths to set it up for success. Perhaps you wonder how outsourced services, especially accounting, come into play. Well, the primary goal of a startup is to thrive, improve current products and services, and enhance the customer experience. It’s nearly impossible to juggle all these and handle accounting tasks at the same time.
When you outsource accounting, you take off the repetitive tasks of bookkeeping, processing invoices, reviewing payroll, and updating accounts from your to-do list. As a result, you have more time to be innovative. When you don’t have to worry about balancing accounts, following up on debtors, or paying bills, you can concentrate on designing growth strategies.
For instance, with more free time, you can research and develop new ways to:
- Improve customer relations
- Promote operational efficiencies
- Build a productive team that ensures your business runs appropriately
Besides, outsourced accountants invest in the latest technologies and software that support accounting automation. How does this benefit small businesses like yours? With advanced tools in hand, accounting processes like invoicing and tax filing become more efficient and accurate, saving you a considerable amount of time.
Cost-Effective Financial Management Solutions
When starting a business, it’s crucial that you optimize your cash flow. This allows you to invest in areas that contribute to your organization’s growth and profitability. Outsourcing accounting services is one way to maximize your cash flow, as it helps reduce labor costs. According to global outsourcing statistics, cost reduction is one of the top reasons 59% of global companies outsource. When you outsource an accountant, you receive expert financial management services at a lower cost compared to hiring an in-house accountant.
Think of it this way: Outsourced accountants work remotely, meaning you don’t need to rent extra office space or pay workers’ insurance. Plus, you don’t need to invest in the equipment to complete financial tasks for your organization because they already have them.
Another way outsourced financial experts save startups money is through flexible payment options. For example, you can agree on hourly, bi-weekly, or monthly payments. Since you’re paying only for services offered, you can budget and manage your finances effectively.
Expert Insights on Financial Planning
You have just established your business and want to scale upwards successfully. What should you do? Plan your finances carefully. That way, your team can maximize existing resources to reach your goals.
You can also improve your business decision-making processes because you have detailed information regarding your finances. An outsourced accountant can help with financial planning or budgeting by providing fresh insights into your finances. Ideally, having someone from outside your business evaluate your finances helps detect problems you and your in-house staff may not see.
Your outsourced accounting experts can help you plan your business finances in several ways, including:
- Analyzing financial data
This process entails collecting the company’s financial records to evaluate profits and losses. Outsourced accounting teams can then offer insights into an organization’s financial performance.
Entrepreneurs can use these insights to determine areas that need improvement. For example, a business may need to cut costs in one department or revamp its sales strategy to increase revenue.
- Create financial forecasts
An outsourced accountant examines historical data like cash flow, revenue, sales, and expenses to provide financial forecasting. Financial forecasts are valuable as they predict a company’s financial future. They also help business owners get a clear picture of their financial position so they can make informed decisions about budgeting, growth, and investments.
- Develop financial strategies
Once they have performed financial data analysis and created a forecast, outsourced finance experts can help build financial strategies. With expert-guided strategies in hand, entrepreneurs can effectively reduce costs, enhance cash flow, and boost sales revenue to support business growth.
Enhance Cash Flow Management
Knowing how to manage cash flow is the way to accelerate startup growth. But as an entrepreneur, you may know little or nothing about reviewing accounting systems and getting insights from all the data in there. You also have limited time to handle a complicated task, like fund management.
Now, that’s where outsourced or virtual accountants come in. They assess your accounts payable and accounts receivable to see your cash flow performance.
The information they retrieve also helps them determine how a start-up can keep growing while also saving money. With that in mind, it’s typically important to give outsourced accountants access to accounting systems.
Here are a few ways a virtual accountant can streamline cash flow management:
- Identify cash flow problems
To improve cash management, outsourced accounting experts identify issues linked to a company’s cash flow. This could be late payments by customers, failure to budget, and insufficient cash reserves. Next, an accountant could develop a plan to address these problems before they become bigger.
- Manage accounts receivable and payable
This step entails tracking and securing payments from customers. An outsourced finance expert might also perform credit analysis and ensure all business debts are paid. The purpose of doing this is so that entrepreneurs have sufficient funds to meet business obligations while conserving some money for growth.
- Create cash flow projections
Another role outsourced accountants take on in financial management is designing cash flow projections. With cash flow projections, an entrepreneur can determine the business’s financial needs and make wise decisions on how to reduce expenses. Or increase profits to sustain business growth without sacrificing quality and the customer experience.
- Note: While in-house accountants can help with cash management, they add to your expenses with high labor costs. Plus, they may be busy with other business functions, meaning they won’t manage your cash flow as efficiently as outsourced accountants.
Professional Financial Reporting
Along with cash flow management, outsourced accounting professionals excel in financial reporting. For a startup to succeed, it needs insightful financial reporting in a timely manner. That’s what entrepreneurs get when they delegate accounting tasks to an outsourcing accounting firm.
Outsourced accountants review financial records and can create:
- Balance sheet statements
- Income reports
- Cash flow statements
- Sales and revenue statement
They can even customize your financial reports into graphs or charts for better visibility of your business’s finances.
Insightful financial reports set up startups for growth in several ways:
- Transparency
Reports about your business finances bring clarity to your financial performance. For example, a sales and revenue statement can help determine which product or service generates more profits.
That way, you and your team can focus your efforts on those specific products. Financial reports also give stakeholders and potential investors insights about the company’s financial health. The outcome of accurate and insightful reports is access to financing startup entrepreneurs needs to boost growth.
- Compliance
Outsourced accountants have worked with different startups and understand the importance of financial reporting compliance. So, they’ll evaluate your business and industry regulations. Then create reports that comply with set standards to avoid penalties.
Provide Scalable Solutions
Hiring an in-house accounting team sounds ideal until you’re faced with the need to scale upwards. Too often, permanent accounting staff cannot meet the growing demands of a startup when accounting workloads increase significantly. You’ll likely need to hire extra staff, which translates to additional expenses. Outsourcing your accounting needs guarantees flexibility when scaling your business.
As reported by STAFFVIRTUAL, outsourcing accounting firms can tailor their services to match your business’s unique accounting requirements. For instance, you can choose an accountant to manage all your finances or manage invoicing only.
Since you have the freedom to choose the accounting services that best suit your current business needs, you can scale up and down with ease. You don’t have to worry about committing to a long-term contract when you can’t afford it.
Improve Data Security and Legal Compliance
Outsourcing accounting to a reputable business process outsourcing (BPO) firm gives you access to a high level of expertise. All at a lower cost than you would if you were to hire an in-house team. Apart from saving costs, an experienced outsourced accountant understands the nuances of maintaining confidentiality, especially online.
For startups, the risk of cyber attacks is high, as they lack dedicated cyber security solutions or enterprise-grade data protection software. Note that a data breach doesn’t result in loss of data only, but financial losses and reduced customer trust.
Since most of your accounting details might be shared online or through cloud-computing software, having advanced data security is essential. Your outsourced accountant could use multi-factor authentication, encryption, and firewalls to prevent unauthorized access to your company’s financial data.
Another thing about outsourced accounting experts is they know laws governing financial matters. So, they strive to keep your accounting processes compliant.
Conclusion
With outsourced accounting on your side, growing your startup becomes less hectic. An outsourced accountant may handle everything from invoicing to accounts management, tax accounting, and financial forecasting to free your time. They could also provide insightful financial reporting, cash flow management, and financial planning to help create cost-reduction strategies while focusing on growth.
Something else you get to enjoy when working with outsourced financial experts is enhanced data security. You don’t have to worry about your accounting systems or information being compromised.
With the right team, it’s easier than ever to build your credibility and business growth.
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