Economic uncertainties continue to plague the United States due to the Delta Covid variant. According to a September 2021 Wall Street Journal article, “In recent weeks many economists lowered their forecasts for third-quarter economic growth . . . amid the spread of the highly contagious Delta [Covid] variant.”
For early-stage, high-growth businesses and private equity firms, the challenge of navigating economic downturns has rarely been more prolonged and confusing. Extraordinary supply and demand challenges brought about by the pandemic have made it very difficult for businesses and private equity firms to manage and report their finances as well as to predict future business performance.
One of the solutions many businesses and private equity firms are moving to is an outsourced accounting service. Outsourced accounting services offer highly integrated and technologically advanced solutions for weathering the accounting and finance storms brought about by the current economic downturn.
Here is a closer look at 3 ways an outsourced accounting firm helps businesses and private equity firms during an economic downturn:
1. Providing Reporting and Analytics That Are Up to Date
One of the challenges presented by economic downturns is the speed at which changes occur. Negative surprises brought about by an economic downturn can have immediate effects on business performance and financial results. A difficulty arises in these cases when business and financial reporting is lagging.
For example, if you are a large catering equipment manufacturer and pandemic policies have suddenly closed buffets and catering events, you need up-to-date reporting quickly so that you can forecast how these policy decisions will affect your future revenues. If your financial reporting system typically takes a month or more to complete, you will be left flying blind in your decision-making as to how to react to these policy decisions.
Outsourced accounting firms leverage best-in-class software solutions and integrated, real-time analytics to give you accurate reports fast so that you can make informed decisions for your business. With the cutting-edge technology offered by outsourced accounting firms, your critical financial data is no longer siloed but instead is integrated so that you can see how financial performance in one area impacts all other areas of the business.
2. Allowing Businesses to Focus on Growth
For high-growth businesses and private equity firms, it can be difficult to run accounting and finance operations well and grow revenue at the same time. With an outsourced accounting firm, business owners are freed up to focus on growing their businesses knowing that a highly experienced financial management partner is taking care of managing and optimizing the business’s financial and accounting operations.
In an economic downturn, it is critical that businesses and private equity firms spend more time and effort than normal to generate new streams of revenue for the business. In order to have the extra time and resources needed to grow revenue during downturns, business owners may want to consider an experienced outsourced accounting firm to help them during these turbulent economic times.
Outsourced accounting firms are experts in utilizing the latest accounting and finance technology for the benefit of high-growth businesses and private equity firms. Outsourced accounting firms keep up with all the latest developments in accounting and finance software and how they can be best applied to your unique business. By applying these software programs to the financial operations of your business, your business will be better positioned to scale. With a better scale, you will have more time to focus on growing the sales and customer services operations of your business in order to weather the economic downturns.
3. Offering Access to Professional Financial Expertise
With an outsourced accounting firm, you always have access to a qualified controller or fractional CFOs who can provide you with valuable guidance on financial decisions about your business. Many young, high-growth businesses have dynamic sales leaders, product designers and customer service operations, but they do not have experienced and sophisticated finance and accounting teams in-house.
Furthermore, the cost to hire and develop in-house accounting and finance teams can be expensive and time-consuming. With an outsourced accounting service, you have access to an experienced accounting and finance team from day one. Your outsourced accounting service is not only running your accounting and finance operations day-to-day, but they are also there when you need them for any guidance and insights you need about the financial matters of your business.
These outsourced financial experts can help business owners make the best decisions possible about how to allocate and utilize capital during economic downturns. These experts can also help business owners think strategically and plan for how to weather an economic downturn for the next 12-24 months. When an economic downturn is happening, the stakes are much higher for businesses, and it is very important to avoid making unhealthy business decisions.
For example, if you decide to invest in a capital project at the wrong time and then an economic downturn occurs, your business may be left without adequate capital to continue operating and you may be forced to go out of business. Having an expert outsourced accounting partner who knows the exact financial status of your business is an invaluable asset in these situations by preventing you from making an unhealthy business decision during an economic downturn.
As a business owner or private equity firm, you may be looking for ways to reduce expenses during an economic downturn. One of the largest, unexpected expenses for employers is when an employee leaves the company. According to Gallup, the “cost of replacing an individual employee can range from one-half to two times the employee’s annual salary.” Employee turnover expenses can be especially detrimental during a downturn because they are oftentimes unexpected.
With an outsourced accounting firm, you not only have the benefit of scalable financial operations led by proven experts, but you also receive the added benefit of knowing that you will not have unforeseen turnover expenses from accounting and finance employees who leave the company during a downturn like the Covid pandemic. Instead, you will have the constant support of a dedicated outsourced accounting team that knows the financial status of your business inside and out.
Partner With Lavoie
Our outsourced accounting team is here to offer you an accurate assessment of the current financial health of your business. Our team is also here when you need us the most during an economic downturn. We’ll help you decide the best course of action to take to weather the economic storm and return once again into calm waters for your business. To learn more about Lavoie’s outsourced accounting services, please contact us today.