How Outsourced Accounting Benefits Your Private Equity Clients

How Outsourced Accounting Benefits Your Private Equity Clients

by | Feb 13, 2023 | Accounting, Outsourcing

Today, more than half of market private equity firms use an outsourced accounting partner, and for a good reason. Working with a financial operations management and outsourced accounting firm benefits both your firm and your clients.

Jump Ahead

In the sections below, we’ll explain how a financial planning and accounting firm can help you.

Instill Confidence in Your Investors

Investors like funding good ideas, but only if they know an experienced team will manage that good idea to its full potential.

Investors will be looking at how well your team works as individuals and as a group before trusting your firm to source, negotiate, monitor, and exit fund investments.

So, when meeting with potential investors, you want your team laser focused and ready to answer every question investors throw your way, like:

  • How forward-thinking is your team on issues that impact private equity?
  • How comfortable is the team managing a complex portfolio like mine?
  • Describe the technology you use to implement proactive portfolio strategies.
  • How quickly can the team produce high volumes of customized reports?

Your team’s biggest barriers to making a good impression?

Admin Distractions

If your team has to manage basic accounting tasks or stay on top of regulation changes, their focus will be split between essential and non-essential business functions.

An unfocused team has a greater risk of delivering reactive and lackluster strategies or accruing costly regulator penalties.

Disorganization

When your team doesn’t have a central platform to store, view, and extract financial data, it’s easy for teams to mistakenly (and unknowingly) work off of inaccurate or dated information. Without a centralized location to store client data, your team is more likely to stumble over unnecessary redundancies and inefficiencies.

By outsourcing your firm’s financial operation management and accounting, you let your fund admins focus on improving investment strategies, reports, and client dashboards – tasks that have a direct impact on the business.

Furthermore, your team will all be able to leverage accurate data, the bedrock of effective and proactive investment strategies.

Preserve Your Reputation to Attract Investors

As private equity firms grow, it gets more difficult to maintain a high growth rate. But a high growth rate is exactly what attracts investors.

In response, private equity firms are eager to find efficiencies and cost savings that don’t impact core business functions.

Outsourcing your financial and accounting processes is an excellent way for firms to reduce overhead costs while maintaining transparency and accuracy. Plus, private equity firms can still maintain management fees this way.

Additionally, you can retain a penalty-free track record by relying on your financial partner to monitor regulatory changes and how they impact your business. Plus, your financial partner can make sure your firm is always financial audit-ready.

Broaden Your Proficiency

The very best outsourced accounting firms are the ones that can explain the meaning behind the numbers.

At Lavoie, we go a step further by also identifying:

Think of a company like Lavoie as an extension of your team that you can tap when, for example, you don’t understand why cash flow is low when the business is performing. Your financial partner has both the time and experience to investigate the problem and deliver a list of actionable next steps.

Finally, there is a degree of credibility you can achieve with investors when they know that a professional team is overseeing all the nitty-gritty details of their investment. This also reassures investors that your team’s focus is on their funds.

Free Up Cash Flow to Reinvest in Teams & Tools

There is a multitude of ways to enhance the investor experience at your firm, but very few of them are free.

An important benefit of partnering with an outsourced financial operations management and accounting firm is that it can free up more cash flow. This allows you to reinvest in other things such as team training, hiring new team members, or purchasing industry-leading tools.

When private equity firms experience rapid growth, they are suddenly inundated with heavy cash flow. A partner like Lavoie ensures that you can manage those funds efficiently.

Your financial partner can also manage your accounts receivable, allowing your company to collect payments faster or identify clients who are behind with payments.

They also have the time to carefully review invoices before they’re paid to check for any inaccuracies that can cost you.

The biggest cost savings come from not having to staff an in-house accounting team. With a financial partner, you only pay for additional financial support when you need it.

Meet Expectations of Digital-Savvy Investors & Regulators

Today’s most successful firms leverage the speed and accuracy of financial software to deliver superior client experiences and abide by current regulations.

All client investors expect financial transparency and accuracy and – with the emergence of technology – they expect them at a moment’s notice.

The Securities and Exchange Commission (SEC) also expects greater transparency and accuracy. The surge in private investments, plus the fact that private companies aren’t required to file information with local regulators, drew enough attention for the SEC to tighten regulations.

Today, regulators are more likely to request a report on performance or economic activity. All signs point to more regulations, re-emphasizing the importance of accessing financial information at a moment’s notice.

Financial software could easily alleviate these issues — but the software can’t do all the work by itself. Someone from your firm has to research and select the right product, learn the tool, and train other employees.

Realistically, private investors do not have enough time to do this, but the good news is that they don’t have to. Not when they partner with a financial operations management and accounting firm.

At Lavoie, for example, we make software recommendations to our clients based on the functionalities they need. We are proficient with several programs that satisfy a range of accounting needs.

We also:

  • Set up the software for you
  • Create custom dashboards for your clients
  • Show you how to maximize the tool in ways that add value to your strategy

In Summary

Private equity firms of all sizes can glean deeper insights at a faster pace and with greater accuracy when they have the support of a financial operations management and an outsourced accounting firm.

Firms like Lavoie can reduce operational costs, streamline inefficiencies, and introduce your team to the right software. The resulting improvements in accuracy, communication, and transparency will only enhance the client experience at your firm.

If you’re a private equity firm looking for financial support, contact Lavoie today!

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In-House Accounting vs. Outsourced Accounting

In-House Accounting vs. Outsourced Accounting

by | Oct 1, 2021 | Accounting, Outsourcing

When a business is in growth mode, executives need to make more difficult decisions that are efficient and cost-effective for their organization. The foundation of these decisions is a firm grasp of the financial health of the organization. That is why business owners need professional assistance with core business operations like accounting and financial management. Organizations, however, have the choice to have that professional accounting assistance in-house or hire an outsourced accounting firm. 

While in-house accounting staff performs specific business operations such as accounting and financial reporting, outsourced accounting staff can conserve costs and optimize performance through tailored solutions. Businesses get to conserve time and focus primarily on core operations through outsourcing tedious functions. Reviewing the pros and cons of both options will help your business choose which is right for you. 

Contents

What is In-House Accounting

Hiring employees and paying them a fixed payroll to perform specific business operations such as accounting, financial reporting, strategic planning, and HR management is referred to as an in-house resource. In-house accounting teams provide budgeting for the company, as well as bookkeeping, and accounting services.  

Pros of In-House Accounting

  • Dedicated workforce is aligned to the business goals making teams efficient with specific accounting needs
  • Dedicated teams provide quick solutions as they know the organization inside out 
  • In-house professionals can be trained for other in-house operations
  • Sensitive financial information remains undisclosed

Cons of In-House Accounting

  • Teams become a financial burden when workflow is limited
  • Hiring dedicated resources have a huge retention cost, including state taxes, benefits, training, and employee office supplies and equipment
  • Owning licensed accounting software for each employee is an added cost
  • There is a huge time burden for replacing employees that quit, plus you have to train a new employee from the ground-up

What is Outsourced Accounting?

Seeking professional assistance with accounting from certified firms rather than hiring dedicated in-house resources is referred to as outsourced accounting. Outsourcing projects to skilled firms equipped with resources to perform specific accounting tasks saves businesses from various managerial challenges. Business owners can also make calculated decisions based on information from finance specialists.  THis is because many outsourced accounting firms offer more robust reporting, insights, and software. 

Pros of Outsourced Accounting

  • Outsourcing ensures you only pay for the workload you need to get done 
  • Proactive businesses outsource and get the job done helping in house employees focus on other pertinent tasks
  • Vulnerability to fraud is higher in small and medium-sized businesses, which businesses can avoid by working with a team of skilled specialists
  • Access to top-level professionals who understand the latest trends in accounting and can apply their skills to your company’s finances 

Cons of Outsourced Accounting

  • Instructions and communication between a company and an outsourced account firm must be very clear for getting desired results within the approved budget 
  • Business owners have limited control over the processes of outsourced teams
  • In some cases, outsourced accounting teams are not as responsive as you would want them to be

In-House vs. Outsourced Accounting

It is vital to consider your business’ particular needs when looking for an accounting solution. Here is a list of things to consider when deciding between the two:

Cost Factor

Businesses need to calculate whether they have enough workload to justify hiring a full accounting team. A dedicated in-house accounting team can provide a lot of value but can be expensive when you consider the employee costs (salaries, benefits, overhead). Outsourced accounting can be a more cost-effective option, especially for seasonal work or big projects. 

Efficiency 

While in-house teams can do the same tasks assigned to outsourced teams, the latter can be more efficient. That is because an outsourced accounting firm’s sole focus is the accounting tasks at hand, whereas your in-house staff may have other responsibilities that require their focus and attention.   

Security

While it is unfortunate, there are instances where employee fraud can happen. Companies sometimes prefer outsourcing finances to avoid these situations. Non-disclosure agreements signed between the business owners and outsourced firms ensure protection against fraud. On the other hand, companies that deal with sensitive information may be more comfortable working with an in-house team.

Working Hours

Dedicated employees generally work regular office hours. However, accounting firms operate round the clock and deliver immediately if required. The nature of business is once again a factor of consideration that determines efficiency. 

In House Vs Outsourced Accounting – Which One Should You Choose

Both, in-house accounting and outsourcing accounting operations are viable solutions. Once again, business owners must review their business models and decide accordingly. The outsourcing industry is progressing rapidly as businesses are opting for outsourced services in different fields to simplify their operations. 

Outsourced accounting teams focus on the particular tasks provided by their clients. While in-house teams can also be highly effective, sometimes they don’t have the experience that some outsourced teams have. For some businesses, hiring outsourced talent is cheaper. At the end of the day, your business needs a professional touch to tackle laborious operations so that you can focus primarily on business development. 

Outsourcing projects can significantly reduce various hassles for your business that in-house teams may not be ready to handle. If you require assistance with accounting management services, financial reporting, strategic planning, as well as HR services, consider contacting Lavoie. We also provide cloud-based corporate performance management, accounting, and financial management software solutions that accurately meet the specific needs of small and medium-sized businesses.