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 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
Reduce financial risk
Be audit ready at all times
Improved process flow and automation
Eliminate staff turnover
Reduced IT headaches (upgrades and maintenance)
Integration with your other applications to eliminate information silos
Outsourced Accounting or Accounting as a Service (AaaS) provider 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 audit and internal controls. CFO 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.
Small and mid-sized businesses (SMB) often have budget and staffing constraints – making it even more important to have accurate forecasts and budgets. Yet, SMBs tend to make small mistakes that often result in a financial loss – or worse – closing up for good. To create an accurate and solid budget that you can rely on; avoid the following three common budgeting mistakes.
1. Overestimate sales projections
Sales projections should be based on data and research; however, many SMBs pick a figure out of thin air. Instead, look at past sales, the conditions of the macro-economy and competitors to create a forecast that is realistic and relevant to your business.
2. Spreadsheet errors
As discussed in our blog post Can Excel Be Bad For Your Business?, there are plenty of companies that have suffered financial losses from Excel blunders. With as many as 90% of Excel spreadsheets being prone to errors, the easiest way to avoid mistakes is to move to the cloud. Software as a service (SaaS) systems offer remote access and the ability to collaborate among employees, which has many benefits. Not only can employees access the data from anywhere, anytime and from any device; but, employees can also collaborate and work on the document simultaneously without the risk of having multiple versions of the data.
3. Ignoring the budget
Creating a budget is of course important, but if you’re not following the budget it is not doing you any favors. It is important to continuously follow up with the budget to make sure you stay on track with your projections. The use of visual dashboardshas made this much easier for finance leaders, as you can easily track expenses and compare with the set budget.
Outsourced accounting continues to be an alternative that businesses chose to pursue instead of doing the work in-house. In 2016,Deloittefound that outsourcing of financial functions was projected to increase by 27% globally. However, whether you’ve been considering outsourcing or not, you may still be hesitant to take the leap due to some myths that exist. Many of these beliefs are based on outdated information, misunderstandings and misconceptions. Because of this, we wanted to share the top 5 myths and truths about outsourced accounting.
1. Outsource = Overseas
The mere definition of “outsource” is that you obtain goods or services from an outside source; however, many make the mistake of thinking that outsource directly means that you obtain work from overseas. You can outsource your services to a local firm in your own city. The term does not mean that you have to hire someone offshore to complete the work.
2. Losing Control
While many may believe that outsourcing your accounting procedures is risky and makes you feel like you’re losing control – it is quite the opposite. Allowing another company to control and manage your business actually enhances your control. Outsourcing gives you real-time data that offers you better control over your cash flow and other performance indicators. Additionally, you set the guidelines and expectations for the provider to meet your needs.
3. It’s Expensive
Contrary to beliefs; outsourcing will most likely save you money. InDeloitte’s 2016 Global Outsourcing Survey, a majority of surveyed companies said the main reason they choose to outsource was because it is a cost cutting tool and allows them to focus on their core business. Instead of having to hire someone that you have to pay wages and benefits, you can spend your valuable time on growing your business. This allows you to focus on your core competencies and essentially grow your business while reducing cost.
4. My Business is Too Small
Small businesses may actually enjoy more benefits with outsourcing their accounting than larger firms. Outsourcing removes overhead costs that lets you shift more revenue to operational growth, while also freeing up your own time. Economy of scale usually leads to lower costs than if your small business does accounting in-house.
Sending sensitive information to a third-party can be concerning, but there are some questions you can ask your outsourcing agent to make sure your data is secure and safe. First of all, make sure you know whether the third-party is using a secured network for its business. Secondly, ask the provider what they do once they are finished with your files (do they destroy, store or keep them on hand?). Finally, if your outsourced accountant gives you access to data via cloud storage, you might want to ask them what security measures they use for data protection. Outsourced accounting can be done in a secure and safe matter; however, you need to make sure that whomever you choose can be trusted and is willing to answer your concerns and questions along the process.
What do you think about outsourced accounting? Have you been reluctant to take the leap on outsourcing due to common myths?
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
According to recent survey published by The Sleeter Group the top 6 services desired by companies currently using a CPA are:
Create Dashboards to monitor business
Represent me at Government Audits
Compare that to the top 5 services received:
Tax return preparation
Compile, review, audit business records
Represent me at government audits
Why are They Different?
There is a general misconception about the types of services CPA firms are able and willing to provide small and medium sized businesses (SMBs). Lots of SMBs don’t think about their CPA when making technology decisions. And lots of CPA firms focused on the SMB market do not have the expertise or knowledge to make qualified recommendations. Technology is rapidly advancing and enabling SMBs to have access to enterprise quality solutions to provide invaluable information about their company. Businesses who plan revenues, margins, and operating income regularly and compare actual results to these plans will do significantly better than those who do not. Without technology it is extremely time consuming and difficult to get access to the necessary information which leads to many SMBs flying by the seat of their pants.
CPA Firms Should Be Ahead of the Technology Curve
The top 4 desired services can be achieved by SMBs with technology. Large corporations are already using accounting firms for technology services. It makes sense for the SMB market to start to do the same.