Outsourcing your accounting function was historically a case of passing over the compliance aspect of managing the business’ accounts and finances. However, with the improvements in fin-tech technology in recent years and the use of automation via cloud accounting software, outsourcing to a firm of accountants now focuses on bringing efficiencies to the businesses processes; providing business owners with access to greater tools and information to run their business and other value adds – all without incurring additional costs to recruiting a traditional financial controller.
The traditional understanding of the role of an outsourced accounting function was split into two key roles: functional and reporting. These two core roles have remained unchanged, except that they are now performed utilising the latest technology and cloud software.
- Functional support ensures that the inputs to the accounting systems are correct, e.g. uploading sales and purchase invoices, payments and receipts and other points of data capture. With the help of automation, these can now be done effectively in real-time and help with the day-to-day running of the business.
- Reporting supports the process of closing down the reporting period, reconciling month-end balance sheet accounts and reviewing the postings before producing management information and creating board packs. Bespoke reporting including analysis of key performance indicators, trend analysis, benchmarking and cash flow forecasting help management to understand how the business is performing from all angles and aid in management decision making.
At Price Bailey, our clients have continued access to their accounting systems and information, meaning they can review sales targets and cash balances in real-time to enable the businesses to be agile and react quickly to the information at hand. However, we would normally advise our clients not to make high-level strategic decisions until we have completed the month-end closedown and a full review of the financials.
Often we come across business owners who, by their own admission, are not financially literate and consequently hire a financial controller who they put implicit trust in to monitor, manage and improve the business’ financial performance. We often find that after several years away from practice and continued professional development, these recruits can be out of touch with latest regulations as well as not being able to make suggestions to improve the businesses’ efficiency. Unfortunately, this often accumulates outside of the business owners perception and only comes to light when either the person leaves the position or things noticeably are not going right and mistakes start appearing – often leaving the business owner in a very difficult position, which can be very expensive and time-consuming to put right.
Outsourcing can provide a viable solution to support or replace those individuals. We feel one of the key benefits is that instead of replacing the individual one-for-one, an outsourced finance team can provide added value, through having access to a team of specialists and experts sitting behind them, who can support and advise on a wide range of specialisms. This means they can support the business through any of the challenges that it faces and enable the business leaders to focus on the strategic aims of the business.
If you are considering whether you are doing things as efficiently as possible, or if your finance team aren’t performing, we are able to come and visit to perform a ‘system review’. In preparing these, we would ask your existing finance team to run through the systems and procedures in place, we would then provide you with a report that identifies potential risk areas (where internal controls may be lacking) and any inefficiencies in the procedures, where we believe the current process can be improved or technology could be used to potentially automate certain steps.
We find clients find these particularly useful where:-
- They have a long-standing finance team and believe they have out of date processes/procedures and maybe doing things inefficiently;
- Their current finance controller is leaving and they are considering whether to recruit and replace them like for like or to outsource the role; and/or,
- They are experiencing issues with the current finance team and not receiving accurate financial information or management reporting.
We would suggest the main benefits of outsourcing your accounting function are:
- Expertise on best practice and efficient processes – Experiences in using the available technology and seeing it used in practice in other businesses enables an outsourced team to advise on how to use them.
- Objectivity – An individual that is one step removed from the intricacies of the business and therefore can scrutinise data more objectively,
- KPIs focussed – An outsourced team will be able to look at the Key Performance Indicators (KPIs) that the business would be expected to report against and those that relate to the business’ goals. Typically, KPIs are a mix of financial, commercial and people-based data. Your accountant will be able to both extracts and objectively scrutinised the data in the system, in addition to identifying what information you need to input in order to track progress; in doing so, identifying the best reporting structures for the business.
- Benchmarking – By outsourcing to an external team, the business may be able to benefit from privileged insight to benchmarking data, as your accountant captures the performance metrics of other businesses in your sector, whom they act for or have access to via external databases. This enables business owners to assess how they are performing (e.g. on the basis of revenue, profit margins and overhead) against others in the industry; so for example, if a business operates at a 55% gross profit margin but others average at 65-70%, the owners may need to assess cost structures and sales strategy.
Therefore, by outsourcing, you not only have peace of mind that your accounting and finance requirements are taken care of and compliant, but that you have the additional support of specialist information, experience and advice, in order to make agile, strategic decisions.
This blog was written by Lee Shaman, a Senior Manager at Price Bailey. If you would like to discuss how outsourcing might benefit your business and improve efficiency, please contact Lee via the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.