Is Outsourced Accounting Right for Startups?

outsourced accounting department

Indeed, new startups, which are available to investors, often do not have the luxury of either time or money to waste. At the initial stages of establishing the business, it is common to feel that one can manage all the tasks to reduce costs. But, one of the fields where contracting out the work to the specialists right from the start may bring the most significant benefit, is, accounting.

Top reasons outsourced accounting makes sense for startups:

1. Recruiting from the top talent without having to maintain the overhead of employing them is a key benefit.

Since you are in the early stages of the startup or are a startup, you probably cannot afford to hire a full-time CFO or an experienced accountant. However, by outsourcing, you have direct access to experienced senior people in accounting who are available for projects at reasonable rates from professional services firms. This talent can bring startup accounting experience which most business owners themselves will not have.

Outsourced CFOs & Accountants have provided services to over 50 startups & early-stage ventures. It’s not that they’re smarter than you, but they know more about what to avoid and what can be taken advantage of as much as you can learn from a seminar. It means that their services are most definitely worth the investment in the early stages of business experience.

2. Undoubtedly, keeping track of compliance issues is rather challenging, but violating the law could prove even more costly for your business.

Depending on the type of business, the taxes might include income taxes, sales taxes, employment taxes, licensing requirements, filing regimes, and much more. Failure to submit necessary documents by mandated deadlines may result in audits, future fines, and penalties, not to mention the headache and loss of trust that comes from late filings and eventual penalties for entrepreneurs.

However, good outsourced accountants ensure that they’ve adapted to the ever-changing regulations in your sector and region. They attend to filings, documents, and payments strategically to make sure that you do not face risks and penalties. Any non-compliance issues, especially those involving cash and other resources, are prone to drain the meager resources early-stage startups possess; hence, getting help with compliance is a godsend.

3. Unlock Better Financing Options

To attract investors and funding, startups need to show a clear, working business model and a properly managed cash flow. Still, few of the ventures have well-developed corporate structures with adequate internal financial checks and balances during the initial years or sufficient business assets that can be used to secure the obligations assuming they have access to credit facilities.

This is the area where financial experts you outsource can be of great help. By having great accounting systems in place, and preparing and presenting regular financial reports, they ensure that startups meet the financing requirements which enable them to access better financing terms. It is for this reason that audited or quality-reviewed financial statements are more believable to lenders and investors as well.

4. Gain Strategic Financial Insights

In practicality, for the owners obsessed with the day-to-day management of a startup from developing a product to its marketing, it is challenging to take an outsider’s perspective and make a sobering financial analysis. The financial data of organizations tend to be decentralized and fragmented over different systems and employees. This is where outsourced accounting comes in handy.

For matters of budget differences, cash flow, and other metrics, outsourced financial partners…reassure stakeholders that fragmented financial data is not random. His/her strategic advice assists startup CEOs to make informed choices on what to focus on or how to expand. In the long run, they amount to what separates the success from failure of startups.

5. Let founders be able to concentrate on the key aspects of their start-ups.

Outsourced accounting is not simply an ability to tap into professional knowledge and experience that the early-stage startup founder and his team do not possess. It is equally about saving your precious time and directing your attention where it matters too.

Delegating issues related to billing, expense reimbursement, financial statements, tax returns, and other monetary-related issues enables one to conserve energy on aspects such as the right product-market mix, acquiring users, fundraising, and other startup prerequisites. Alternatively, the opportunity cost of not outsourcing accounting is even higher for founders in the crucial early phases.

Outsourcing is a common practice among startups due to its several benefits as explained above They include the following considerations when outsourcing startup accounting.

Well, if you have decided that outsourcing accounting services is good for your startup, how do you go about choosing your provider? Here are some tips:

● Hire someone who has experience primarily in startup accounting, not just any general accountant. Some questions to ask prospects include asking them about their experience with handling startups and, in the affirmative, asking about their success stories.

● As a result, it is crucial to understand their startup accounting process and the deliverables that come from it to ensure that the expectations are in sync. Are they the ones who actively participate as an advisors or do they just do the filings and the reports?

● Contract support should be offered through vehicles that offer fixed monthly service rates plus project work so that if more support is required it will be priced appropriately. Entrepreneurs make decisions arbitrarily, and the frequency of accounting activities is often low.

● There is no better question than asking about their technical ability. This way, you can determine whether their platforms can connect with your other systems and applications. Are there online portals through which users can easily structure their access to documents?

● Consider chemistry too. In general, accounting is a science of figures used to make numerous decisions and form strategies. It is always important to work with a provider who knows the goals and the kind of style that a startup has.

● Look for multiple suppliers before opting for a long-term contract and select a provider for a trial period. Outsourcing of accounting services is a long-term business decision; therefore, it must be done right.

Last but not least, do not be discouraged by such issues as the cost of the services and confidentiality issues to enable you to consider outsourcing your start-up accounting. Apart from the mentioned concerns, advances in virtual accounting technology and shifting service paradigms mean that accessible, cost-effective help is achievable even for startup founders. In my view, the benefits that startups receive from using lean startup methodologies far outweigh the costs in terms of risk reduction, strategic value and not to mention founder sanity.

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