Small and medium-sized businesses (SMBs) are often driven by a passion or cause – not spending hours on accounting and financial management.
SMBs face many financial challenges that affect cash flow including hiring new employees, increasing profits, employee healthcare, growing revenue and properly managing expenses.
Fortunately, technology has changed the game for SMBs. In the last decade, new technologies have enabled SMBs to compete with large enterprises.
Technology is only part of the equation. Accounting as a Service (AaaS) is a hybrid solution that combines services with accounting software; thus, the client can enjoy the benefits of professional expertise and leading cloud technology. This lays a great foundation, allowing companies to focus on revenue generating activities. They are able to focus on future growth instead of being stuck analyzing the past.
10 Benefits of Accounting as a Service
Real-time visibility to your business performance via dashboards
Outsourced Accounting or Accounting as a Service (AaaS) providers can be the catalyst to take your organization to the next level. For some SMBs, accounting is not looked at as a strategic function of the organization, but it should be. It also shouldn’t take focus away from growing your core business. Lots of SMBs don’t consider Outsourcing. Here are 5 main reasons why.
1) They think it is too expensive
By using Accounting as a Service, you have access to shared service center. Providers have put a lot of investment, thought, and execution into their model and have staffed accordingly. With an AaaS provider you now have access to a full accounting department that often is less expensive than one full-time FTE. This doesn’t even figure in technology costs that come with the service.
2) It is the same as bookkeeping services
Bookkeepers are responsible for recording daily financial transactions. Controllers are responsible for financial reporting, internal financial audit and internal controls. Outsourced CFOs are responsible for financial planning, financial data analysis and strategic planning. By relying only upon a bookkeeper you are stuck looking in the past and cannot see into the future to effectively make critical decisions for your business. AaaS providers ensure daily transactions are done correctly but also greatly reduce risks and provide necessary forward-thinking strategy to help growth your business.
3) We can just do the same in-house
For most SMBs it is hard to justify the expense of having a bookkeeper, controller, VP of finance and CFO. All positions have importance. You don’t want to pay a senior level person to do daily transactions and you definitely don’t want to ask an entry level person to manage financial risks.
4) We cannot have any finance staff in-house
Often AaaS providers work with internal staff to fill voids. Yes, providers can function as the entire finance department but often work with existing staff to help maximize their production.
5) We have more control and stability by utilizing in-house staff
Employees turnover and training are always on the minds of companies. If you don’t have a defined professional develop plan for each employee, you are at risk of losing your top talent to other opportunities. By using an AaaS provider you eliminate the risk of employee turnover. You also will not miss a beat when people people are out sick, on vacation, or on leave.
In order to stay competitive, businesses are forced to examine all aspects of their operations to identify cost savings and drive efficiencies. The companies that do this successfully will be rewarded with increased market share and improved profitability.
The challenge for small business owners is how to effectively conduct this analysis without the knowledgeable resources to do it. Typically, small business owners will try to handle the company’s finances on their own, even though accounting is not their core strength. Consequently, owners can end up with poor financial reporting that impacts their understanding of their business operations.
Specific results of accounting and financial reporting shortcomings affecting small businesses include:
Inability to obtain bank financing or raise equity investments
The financial complexity of the business has outgrown the capability of existing staff
A lack of financial bandwidth on a specific project such as a M&A transaction
Inability to respond to growth opportunities due to misunderstanding the relevant financial implications
Misperceptions about the origin of profitability
Most Efficient Method for Small Business Owners
For many small businesses, hiring a full time CFO or Controller is not economically viable. However, outsourcing accounting, utilizing a fractional CFO or Controller service to access the financial expertise they need is affordable. On average, most small businesses (subject to size) should only spend between $15,000 and $60,000 annually for fractional services, compared to $90,000 – $120,000 annually to hire a full time CFO or Controller. Clearly, utilizing outsourced fractional CFO/Controller services makes sense for small businesses who are looking to identify cost savings and drive efficiencies.
