Outsourced Accounting Services Bring ‘On-Demand’ Economy to the Finance Department

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Right-sized Services Produce Real-time Data and Insights

By James Bailey, CPA and Michelle Ryan, CPA

The “on-demand” economy is most commonly associated with companies like Uber and Airbnb, which found their fortunes in selling services utilizing assets that were already owned by someone else. In the case of Uber, the company sells rides in cars that are owned by the drivers, not the company. In the case of Airbnb, owners of houses and condos rent out time in their own dwellings.

But on-demand services also are rapidly growing in the finance marketplace, where companies are finding it advantageous to use outsourced services, paying for a certain number of hours per month for CFO, controller and bookkeeper services. These clients are realizing that if they need only 10 hours per month of CFO-level services, supporting a highly paid fulltime position diverts money away from other initiatives that may be needed. Similarly, if the functions performed at the controller or bookkeeper levels can be broken down into a certain number of hours per month, why pay for fulltime staff?

For increasingly more companies, the solution is outsourced accounting services. The companies that are turning to outsourced accounting services range from small to very large, and they have many common characteristics.

 

Real-time Data and Insights

 The difference between traditional staff-based finance functions and outsourced accounting services is real-time data and insights. By utilizing current technology and integrations that come along with outsourced accounting services, such as QuickBooks, Intacct, Bill.com, and Expensify, among others, business owners benefit from insights that help them make immediate decisions to help their businesses grow.

The cost for outsourced accounting services for many organizations is about the same as having a bookkeeper on the payroll. However, the investment brings a more sophisticated mix of services and levels of expertise that produce real-time data and advice on how to use it. Many smaller companies include quarterly controller-level services and semi-annual CFO-level expertise.

Here are some profiles of the types of companies that are utilizing outsourced accounting services:

Small Company

Revenues:          Up to $1 million

Existing Staff:     Part-time bookkeeper

Complexity:        Low

A company at this level may have a bookkeeper who also is tasked with other non-finance functions, such as office management or administrative work. This person may not have previous bookkeeping or accounting training but has become adept at using QuickBooks for invoicing, receiving payments, and posting expenses.

Typically, financial information moves slowly in this environment with reports being generated monthly or quarterly. As a result, the CEO has little insight from the financials to guide quick decision making. He or she may be looking for more timely, visible data to help diagnose weaknesses.

When the bookkeeper leaves the company, the CEO is faced with recruiting, hiring, and training someone who may not have the same level of skill as the departed bookkeeper.

Or they can turn to outsourced accounting, which provides right-sized services for smaller businesses looking for actionable insights to help them grow.

The outsourced solution:

Typically, smaller companies benefit from about 10 to 20 hours per month of outsourced accounting services, primarily focused on bookkeeping and, possibly, upgrading the accounting software. Before the right solution can be designed for this small business owner, a discussion takes place about the nature of the finance function. How many hours per month are typically spent on bookkeeping, AR/AP, and payroll, and what is the level the complexity of the finance work? Is it a high-volume environment with multiple deposits from several sources into bank accounts? Are there cash flow issues? Is the accounting software up to date? The answers to these questions help create a profile that determines the level of bookkeeping, accounting, AR/AP, payroll, and controller-level services a smaller business needs.

Mid-Sized Company

Revenues:          $1 million to $5 million

Existing Staff:     Fulltime bookkeeper and an AP clerk

Complexity:        Medium

Though a company at the mid-level has fulltime accounting staff, the owner is probably still wearing a finance hat.

Mid-sized companies have more volume and complexity – more transactions per month and perhaps more than one business entity. Often, they are using spreadsheets that were created years earlier, but they haven’t automated their finance functions. The internal finance processes have not kept up with the company’s growth, or with current technology.

The key opportunity for a company at this level is to streamline processes, automate and leave the spreadsheets behind. Mid-sized companies benefit from upgrading technology integration – adding apps such as Bill.com, Tsheets, Expensify, Square and PayPal, among others.

Often, companies at the mid-sized level want to outsource their payroll and, perhaps, bill paying. With the added volume that companies in this size range experience, fluctuations in workforce and orders can put stress on the finance and payroll functions.

The outsourced solution:

Typically, companies of this size benefit from about 20 to 40 hours per month of outsourced accounting services, including bookkeeping and AR/AP. The mix of skill levels at this type of company will usually involve a few hours a month of controller-level services for insights and analysis, as well as some of the consistently complex transactions. They may also receive monthly or quarterly CFO advisory services.

Large Company

Revenues:          $5 million and up

Existing Staff:     CFO and/or controller, staff of accountants and bookkeepers

Complexity:        High

Large companies often have multiple locations, multiple product lines and multiple entities. That adds up to a lot of volume and complexity. They are always on the lookout for ways to reduce spending and overhead.

Generally, companies in this tier consider outsourced accounting when they re-evaluate what they are spending on the finance department. Do they need all the finance positions they are paying for? And has the company outgrown the knowledge base and technology skills of its current CFO, as well as other finance staff?

The finance department may be partially automated, but its systems aren’t integrated. Without the real-time data and analysis that integrated finance automation can bring, the company CEO is unable to make timely decisions that are tied to the company’s results. End-of-month data – or worse, end-of-quarter data – just doesn’t cut it in a company of this size.

The outsourced solution:

Matching selected outsourced services to the needs of a large company may involve keeping certain services – such as invoicing and AP – internal, but layering in the higher level skill sets such as CFO advisory and controller analysis on an outsourced basis. Typically, large companies utilize about 80 hours per month of combined outsourced accounting services, with more emphasis on the controller and CFO-level services than their smaller counterparts. Services often involve guiding the company through special projects such as strategic planning or a merger.

Vision for the Company’s Future

What is common to all size companies that seek outsourced accounting services is that they know there are resources beyond what they currently have that will benefit the company in the long run.

Contact Adams Brown

If you would like to know more about how outsourced accounting services can help your business, please contact your Adams Brown advisor.