Most companies that are thriving view accounting as a strategic function. Companies relying on bookkeeping have a hard time keeping up in today’s changing climate. Bookkeeping by itself does not provide opportunities. In a fiercely competitive work environment, companies that properly manage finance can grow and protect themselves from risk.
The opportunities are exciting for the future but it also comes with lots of challenges. Too many companies are stuck looking into the past because of lack of expertise and or technology. It is important to understand the past, but essential to have the knowledge and tools to be able to see in real-time and make educated predictions into the future. As companies grow, hiring and retaining qualified employees can be a difficult task with lots of uncertainty.
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.
Being the CFO in a high growth company is challenging. Handling business responsibilities, strategies, managing people and responding to setbacks can really chew up your day. Here are 3 things I have learned from great leaders that drives business growth.
1. Empower Your Employees to Act Like Executives
By empowering employees to act as managers, you’ll free up your time to focus on your to-do list. This is a step beyond delegation. When you give trusted employees the power to make decisions, you lift the burden from your own shoulders. At the same time you fuel your staff members’ confidence in their own abilities to lead. This strategy is only successful if you let your employees what your expectations are and how they will be measured. If you have chosen the right employees, they will proudly embrace their new responsibilities and strive to exceed your expectations and drive growth.
2. Leverage Technologies That Pave The Way Toward Easy Management
Take advantage of technology solutions that integrate data and eliminate information silos that are difficult to breach. Decision making is much easier when you have a set of best-in-class applications that integrates and gives you 24/7 access to data in the office and remotely. You and your employees will spend less time struggling to generate useful data and more time analyzing your metrics. This will in turn allow you to make more informed and strategic decisions that will drive business growth.
3. Understand Your team, and Plan Around Its Strengths and Weaknesses
Every group of employees is different. Working with your employees, instead of imposing a workflow on them, will remove friction between leadership and your staff. Examine your employees and establish procedures and policies for work that allow each employee to have the opportunity to reach his or her full potential. As a result, your employees will be settled and comfortable with the company culture and the personalities on your team and can focus on strategies that drive growth.
Do you have any tips on how to drive business growth? Feel free to share in the comment section.
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.
Office billing and accounting procedures are essential to running a business no matter its size. If there are no rules in place, chances are very good that at some point you will have a big mess on your hands if you haven’t already had one. Accounting procedures give structure and organization to processes. For example, if your business’ procedure is to pay bills every Friday, then bills are paid on Friday with no exceptions. The procedure is not suggestion; it is a business rule. SMBs can strengthen their procedures, making them more effective and useful when running their organizations by following the three steps below.
Related: Accounting Solutions for Early Stage Companies
1. Identify Your Risks and Weaknesses
Figure out the areas that your business can improve. First you need to identify any problem areas. Then you will need to analyze the cause of those issues, which are often not readily apparent. Look for bottlenecks in the process. Examine if there is a chance for fraud with current procedures. Are errors happening? If so, why? For example, you may notice that your collections of receivables is too slow. This is often because bills are sent out too late, or because the bills are confusing. Would accepting credit card payments or offering online ACH options accelerate payment? Maybe the reason behind the slow payment is as simple as the mail not being opened promptly by your customers. Identifying problems and root causes behind the problem can be tricky.
2. Be Aware of Checks and Balances
Public companies are mandated by SOX Section 404 to establish internal controls and procedures for financial reporting and must document, test and maintain those controls and procedures to ensure their effectiveness. Many times the quickest way to solve a problem, may not be the best one because it may eliminate “checks and balances”. For example, a person doing the billing should never be the one receiving payments. This is a basic concept known as segregation of duties. Often smaller companies lack segregation of duties which opens them up to the potential of fraud. If the same person sends bills and receive funds, and there is an error, it can be hidden or missed altogether. Worse, if the billing person steals funds, it is hard to catch. Have at least two people involved in the main accounting processes of receiving money and bill payment.
3. Talk to Your Customers and Vendors
Welcome all feedback – good and bad. Make sure you follow up after you implement changes to make sure the issues have been corrected. Also look for patterns. For example, when multiple customers complain about a particular staff member, then he/she may need to be trained to ensure procedures are being followed to keep your customers happy.
Read More: A Solid Accounting Strategy is Key to Your Success
