Outsourced accounting helps professional services firms play to their strengths.
Momentum Outsourced Accounting Services.
If you have a firm of high-priced talent providing specialized expertise, you want your people to be completely focused on solving client problems and bringing in new business.
Across a spectrum of industries – marketing, IT, HR, architecture, engineering, wealth management, and consulting – outsourcing complex, non-core business functions is a strategic way to improve efficiency, streamline operations, and reduce costs.
This is especially true when it comes to accounting.
While each of these industries has its own unique set of accounting challenges, many of the benefits of outsourcing are common to all.
Focus on what you do best.
The fundamental value proposition of outsourcing is to free up time and resources to focus on core business functions. By outsourcing non-core functions such as accounting and bookkeeping, professional services firms can improve efficiency and productivity.
Get access to accounting expertise.
You know the value of being “best in class” in your area of expertise. That’s how you differentiate yourself from the competition. Critical functions such as accounting, payroll, and bookkeeping deserve the same. Is accounting a strength for your firm? Do you really want to invest the time and resources to raise your accounting game?
It is far easier to find an outsourced accounting provider that is already there and can take you to the head of the class.
Tailor your solution precisely to your needs.
Professional service firms often find it challenging to get the level of accounting expertise they need at the right salary. For example, they can afford a bookkeeper, but really need a controller. Or they only need a controller but are paying for a CFO.
When you outsource accounting, you can select just the services and expertise you need.
Better decision making.
Almost every decision your business makes has financial implications. Do you have the data you need at your fingertips to make informed decisions? Outsourcing accounting, bookkeeping, and payroll functions to a tech-savvy, cloud-based provider can help ensure that you always have access to accurate and up-to-date financial records anywhere you have a connection.
Lower your operating costs.
Outsourcing can be cost-effective compared to hiring an in-house team to manage accounting, payroll, and other functions. Outsourcing eliminates the need to provide employee benefits such as health insurance, vacation time, and retirement plans.
Additionally, outsourcing can help firms avoid costly accounting errors that can lead to penalties and fines.
Scale up, scale down without hiring and laying off personnel.
Seasonal fluctuations in business volume, landing a big contract (or completing one) can greatly impact your staffing needs. Taxes and audits also create fluctuations in your accounting and bookkeeping needs.
When you outsource, those challenges shift from you to your provider. You only pay for the services you use and you don’t have to tie-up HR with the time-consuming and costly process of hiring and training new employees.
Critical considerations for choosing your outsourced accounting provider.
When selecting your accounting partner, make sure they have policies, procedures and the latest technology to address these important matters.
Financial data needs to be protected from breach and theft. Your outsourcing provider should have security measures in place and leverage the cloud to ensure that data is kept secure and confidential.
Make sure your provider establishes clear expectations for effective communication and collaboration. The best providers have regularly scheduled meetings to provide updates, reports, and resolve any issues.
Your outsourced accounting provider should be able to streamline and automate accounting functions with a fully integrated, cloud-based tech-stack. Anything less, should be a red flag.
Accounting challenges for professional services firms.
Timekeeping and billing:
Accurately tracking and recording billable hours can be difficult, leading to underbilling or overbilling.
Professional service firms often have employees utilizing company credit cards for both overhead expenses and client-related expenses, like travel. Tracking this spend, billing it back to clients or managing expense reimbursements can take a lot of man hours if modern technology is not used.
Many firms work on large, complex projects that can last for months or even years (for example a multi-year consulting engagement, etc.). These projects may involve multiple phases, teams, and clients, and can be difficult to track and manage. Project accounting is critical to ensure that costs and revenues are accurately recorded and that the project remains profitable.
Specialized accounting software can be complex and difficult to use. Firms may struggle to find software that meets their specific needs, or they may struggle to train staff on how to use the software effectively.
Cash flow management:
Many firms often have uneven cash flows, with periods of high revenue followed by periods of low revenue. Properly managing cash flow is critical to the firm’s financial stability and success. Firms may need to carefully manage their accounts receivable and accounts payable to ensure that they have sufficient cash on hand to meet their obligations.
Accurately tracking costs is essential for firms to ensure profitability. These costs can include direct labor, materials, subcontractor costs, and overhead expenses. Cost accounting can be complex, particularly when projects involve multiple teams or subcontractors.
Depending on your industry, your firm may be subject to a variety of tax regulations, including sales tax, use tax, and income tax. These regulations can be complex and vary from state to state. Compliance with tax regulations is critical to avoid penalties and fines.
Firms may have complex revenue recognition challenges, particularly when revenue is generated through fees or commissions. Revenue recognition policies may be impacted by regulations, client contracts, and accounting standards.
Firms have to ensure that payroll taxes and other deductions are accurately calculated and paid. This process can be complex, especially with firms that have employees in multiple states, which complicates compliance requirements.
Firms are responsible for managing employee benefits, including health insurance, retirement plans, and paid time off. Managing employee benefits can be complex and time-consuming, particularly when dealing with multiple plans and providers.
Overall, professional services firms face several unique accounting challenges due to the nature of their work. To overcome these challenges, firms need to find an outsourcing provider that has experienced accounting professionals, specialized accounting software, and is familiar with regulatory compliance and accounting standards.
Accounting in the cloud is a game changer for professional services firms.
Across all industries, the cloud and integrated software solutions are enabling incredible levels of process automation, with improved effectiveness and efficiency. It’s what many people refer to as “digital transformation.” And the ones who successfully adopt and adapt are going to pull farther ahead of those who sit on the sidelines.
If you’d like to know more about how outsourced accounting can turn accounting into a competitive advantage and enable you to play to your strengths, schedule a brief discovery call with Ashley here.
Stop juggling. Start focusing.
“If you need more (beyond just bookkeeping), then it’s a no brainer, they are awesome and they will be there as you grow.”