Do you Outsource Accounting for a Startup?

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Do you Outsource Accounting for a Startup?

You’re a startup owner. Did you start your business to perform tedious bookkeeping tasks and constantly worry about training your new hires? No. You started your company because you care about your products and services and how they help your customers. Maybe you want a yacht along the way. Whatever your reasoning, you didn’t sign up to be a CPA. 

However, if you’re in growth mode, you might notice your accounting tasks take more time than they should. If this sounds like you, it’s time to consider an outsourced accounting firm. 

The full-service accounting team at Fully Accountable is here for all of your accounting needs. We can deliver whether you need controller services to ensure everything runs smoothly or a more comprehensive solution such as fractionalized CFO services to provide real-time reports and financial analysis. Continue reading to learn why it makes sense to outsource your accounting as a startup.  

What Are the Benefits of Outsourcing for Startups?

Some roles within startup organizations don’t require full-time hires. That doesn’t mean these roles aren’t integral to the organization’s success. In fact, it’s the opposite. Some of the most important roles for startups are the ones that they should outsource. 

Outsourcing roles (such as accounting) gives you distinct advantages compared to keeping these roles in-house. That’s why 80% of small businesses plan to outsource at least one role in 2021 compared to only 37% in 2018

The biggest advantage of outsourcing is the flexibility it provides while saving money. Handing these responsibilities to an outside resource gives you the time and freedom to identify and remedy problems within your core business principles. 

Running a startup is challenging enough. Without the resources of a larger company, it can feel like you’re running around like a chicken with its head cut off. Outsourcing business procedures keeps you grounded, with your head attached, ready to overcome the obstacles you encounter. 

Why Do Startups Outsource Accounting?

As the startup grows, so too do the responsibilities involved in sustaining growth. Included in these responsibilities are bookkeeping, tax complexities, and more comprehensive financial planning. 

The following factors influence startups to outsource their accounting: 

  • Reaching a million in revenue (how do you manage your revenue stream more effectively?) 
  • Accepting capital from outside investors (do you have an established network of investors to trust?)
  • Employing ten or more people (Are you comfortable handling payroll, benefits, and  tax regulations as you grow?)
  • Scaling (Do you have the right resources in place for sustainable growth?)
  • Data-driven financial decisions (do you have the technological and analytical capabilities to issue financial forecasting and advisory?)

These questions signal that it’s time to unload some of your responsibilities and enlist the help of outside resources.

Outsourced Accounting for Startups Statistics

These are just a few of the stats that reveal the benefits of outsourcing your accounting department. 

The Advantages of Outsourced Accounting 

Outgrowing Bookkeeping 

In the initial stages, business owners might be able to fulfill the responsibilities of a bookkeeper. They might even be able to get away with hiring an in-house bookkeeper to do so. However, as the business grows, accounting processes extend beyond the purview of bookkeepers and require more abstract, expert knowledge, such as that held by a CFO

Additionally, the startup owner will have more essential business procedures to focus on as the business continues to grow, preventing them from completing bookkeeping tasks. When startup owners can’t devote themselves to every business area, they need more comprehensive accounting solutions beyond bookkeeping. 

The increased responsibilities include data and analytics, financial forecasting, capital budgeting, and management accounting- responsibilities an in-house bookkeeper can’t fulfill. Management accounting also includes real-time reports for their companies that ensure compliance and identify evolving KPIs. 

Outgrowing your bookkeeping might seem like a daunting task, but you should look at it with optimism. You’re growing, and outsourcing your accounting keeps it that way. 

Removing the In-House Burden 

Without outsourcing, you have to pay for the latest technology and accounting resources out of pocket without knowing your ROI. How will you know whether you’re using the software that fits your company best? Outsourced accounting services give you access to the industry’s best software and tailor its usage to your business’s needs. 

Additionally, hiring an in-house accounting team requires extensive deliberation in recruiting, training, and managing additional employees. Your company will likely need other hires in different departments during growth, increasing your human resources issues. As the CEO, you need to focus on hiring positions that generate income, not financial advisement. 

Outsourced Accounting Provides the Scalability You Need

When you use outsourced accounting, you have 24/7 access to an accounting team. The team scales according to your growth- when you grow, your team automatically grows with you. 

Compliance Vs. Financial Intelligence

The main difference between a traditional CPA firm and an outsourced accounting firm is that CPAs typically focus on tax and audit compliance while outsourced accounting services provide financial intelligence. Financial intelligence goes beyond compliance and ensures you make data-driven financial decisions. 

Instead of simply complying with tax regulations, you maximize your services with data analytics that provide insight into things such as market spending profitability, client profitability, and sales directives. 

Data-Based Decisions 

Your gut instincts have taken you far in the startup world. However, as you grow, you need to recruit more resources to make sure you can see all angles of your decisions. 

Outsourced accounting firms have access to software and Business Intelligence systems. These systems provide critical growth resources- real-time analytics and KPIs that help you improve your business performance while focusing on other core areas. 

The Disadvantages of Outsourcing Accounting 

Communication Barriers

Business owners might be concerned about the degree of communication they can keep with their outsourced accounting services. Because of this, owners should present their communication needs to the prospective outsourced accounting firm upon their first meeting. They should set clear expectations at the start to avoid any confusion. 

Security Risks

Some startup owners might be concerned about the security risks of handing over their financial information. Before handing over the data to an outsourced accounting partner, discuss the various processes that protect your privacy and ask probing questions to determine what they can do to mitigate data loss and security risks. 

Loss of Control 

One of the hardest aspects of outsourcing as a startup is the reluctance to let go. You raised the business since the beginning and losing control over every aspect can be frightening.  However, there comes a time when you simply can’t afford to turn every cog, and you need to focus on growth instead. 

Outsourced accountants can help guide you through this tough transition. You can also still control all of the major insights that influence your business growth. When you use outsourced accounting, you’re not handing the keys to your business over. You’re recruiting the right resources to help you achieve success. 

Conclusion- Does It Make Sense to Outsource Accounting for a Startup 

Running a startup is an incredibly demanding position. It requires ingenuity, fearlessness, and grit. However, one of the traits many startup owners often overlook is adaptability. Things change quickly in a startup environment and startup owners need to think on their feet.

As your business grows, so too do your financial requirements. When you feel like your business is suffering because you’re stretched too thin, it’s time to consider outsourcing. You didn’t start your business to become a bookkeeper and tax expert. You started it to let your entrepreneurial spirit thrive and achieve success. 

Let the full-service team of outsourced accounting experts at Fully Accountable help you achieve your vision. Whether you need controller services or something more extensive like fractional CFO services, we’re here to help your business grow. Contact us today to find out what Fully Accountable can do for you. 

Vinnie Fisher

Author at Fully Accountable | 1-877-330-9401 | www.fullyaccountable.com

Vinnie fisher is an entrepreneur, author, husband, and father of 4. A lawyer by trade, for almost ten years, Vinnie focused on tax planning, corporate formation and operation of closely held businesses. Vinnie was a principal partner in his law firm that he wound down to pursue a career as an entrepreneur. After the creation of a series of successful internet and e-commerce companies, he discovered a much needed service for business owners. In 2014, Vinnie opened Fully Accountable, an outsourced accounting and finance firm for e-commerce and digital businesses. Today he serves as the CEO of the company. Fully Accountable a cutting edge firm that offers done for you services that includes everything from master bookkeeping to fractional CFO services. We are digital experts specializing in high transaction businesses. Our clients are all over North America. We offer a complete accounting back office for your business costing less than the price of an entry level person in your company. Our data analysts and accountants do the work and provide the proactive, forward thinking feedback you need to make the right decisions to increase your growth and double your profit margin.