There are so many hoops every company must jump through when scaling. And there are always new things to think about or plan for because Murphy's Law is real, especially when you're a small to medium sized business. (What can go wrong will go wrong for the uninitiated.)
Savvy business leaders know a few tricks of the trade when relieving some of the burdens of continually having to put out fires.
One of those things is outsourcing.
And one of the most effective outsourced jobs is perennially accounting work. It doesn't matter how small, big, or weird your company might be - letting the accounting pros handle the job of keeping the books clean is one less headache.
Keeping accounting internal seems nice - till it isn't
Giving one person the power to manage the books with little supervision of where money is going – or being moved, can create big problems. Outsourcing accounting means you won't rely on a single internal accounting head.
By outsourcing your accounting, you're not only getting a team of dedicated career professionals, but you're also getting data. Do you know how the market is moving? Are you getting sophisticated financial insights? What's the cost of paying someone a full-time salary versus a monthly bill? These are all questions your in-house person is likely not answering.
With a full team, multiple sets of eyes are on your business, so there's accountability woven through the methodologies. Plus, there's also the technology aspect. Someone who's been doing the books forever is likely stuck in their ways; what if new technology emerges that can cut processes in half or show data that clarifies how money can be saved by cutting an unnecessary cost? Saving a few bucks is never a bad thing. Not in this economy.
People make mistakes
What if you're doing record business and your internal bookkeeper is overworked? Just like the government, there needs to be checks and balances. If a single bookkeeper manages everything, there's a higher chance of a mistake slipping through the cracks.
An outsourced company offers multiple sets of eyes because what happens if a mistake isn't caught? What if you're tight on cash, but an error wasn't noticed, and for the last six months, you've been paying a $500 bill for a service you're no longer using? You can't expect one accountant or bookkeeper to bat .1000 every time.
You'll understand what things really cost
Expenses add up. Every line item needs to be understood so that money is going out, there's a clear idea of what's essential and what's "nice to have." If someone's busy managing multiple aspects of the accounting department, chances are, getting a broken-down spreadsheet of all external costs will be something that takes the time that they don't have. Knowing raw materials, labor, and overhead cost allow you to price your goods or services adequately.
You'll know who your most profitable clients are
If you're a business owner, chances are you've built some solid relationships over the years. But are your favorite clients the most profitable ones? A data-driven accounting department will increase return on investment (ROI) by examining profit and loss to know who's coming in the strongest. If you know who's the most profitable of your clients, this might be an opportunity to focus on offering more of whatever it is that you do. By doing so, you might be able to land further sales because they already love your company.
Do you know who your best-sellers are?
This is the same logic – just because someone is landing a few big fish every quarter, it doesn't mean they're the strongest seller. An observational accounting team will identify what salespeople are most successful regarding profits and selling value.
How up to date is your accountant? Do they know every new change to the tax code? Staying on top of every instance where you could be slapped with a penalty for non-compliance is crucial. An outsourced team of pros (like us) will know what changes have occurred for this fiscal year because non-compliance fines cost a ton of money and could damage reputations or put your license or insurance at risk.
You'll understand profit margins better
What if you're not pricing your jobs correctly or selling your services for too little?
A good accounting department will increase your gross profit margin by looking at pricing and labor costs. Understanding profit margins is a massive part of running a successful business. Adding sales isn't always the answer.
Only a portion of sales ends up on the bottom line because it costs money to generate sales. It's possible to lose money on revenue when goods or services aren't priced to cover their share of overhead costs. If prices, sales strategies, and operations aren't designed to optimize overhead costs and protect profit margins, you can't sell your way out of a crisis or to a better bottom line. You need an accounting department with actionable financial intelligence designed for data-driven decision-making.
Avoid the pitfalls of cash flow issues
If you don't have a detailed view of your financial information, you'll likely see some cash flow challenges. A cash flow shortage results from money moving out rather than money coming in. Cash flow fluctuations happen. It's a part of business, but entirely relying on an in-house accountant may not be able to predict what the next few months will look like accurately, and in this bearish economy, arming yourself with the knowledge to make intelligent business choices is critical.
Work with the pros who know accounting
It's a challenging time for America. The life of your business relies on building and maintaining a solid foundation. You need to know the risk levels for making business decisions and what to do as the market faces challenges.
And remember what we said about the R&D tax credit? That's the kind of advice we love to give. Those credits are market-proof, and that's money you can count on rather than base profitability on sales alone. If you are interested in seeing if you qualify for R&D Tax Credit, let's chat!
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