There is no denying that the entrepreneurial spirit is alive and well in corporate America. A revolutionary idea for a life saving device, a new manufacturing process that saves time, or simply an entrepreneur with a strong passion for delivering services or solutions to businesses that support productivity all have the potential and the opportunity to become the next big thing.
Whatever the inspiration, a successful entrepreneur must be flexible, open, innovative, and adaptable. To facilitate such a combination of characteristics it is imperative that a leader focus on strategic areas such as sales, production, operational performance and improvement, and account management. Unfortunately, this often means important tasks such as accounting and fiscal management is neglected. Often, the result impact is an accounting process that operates below the level of optimal performance creating unanticipated, unexpected, and unwanted issues or problems. Here we outline some of the key signs leaders of organizations should be alert to in their organization. If these situations occur a business leader should seriously consider whether outsourcing the organization’s accounting function would be a valuable investment for the long-term success of the business.
Incomplete or Late Reports
For management to successfully lead a company they need access to the most complete and latest financial reports. When such reports are incomplete or chronically late, it prevents management from making the best strategic decisions because they don’t have necessary information to make such decisions. As a company’s needs exceed the ability of internal resources to deliver these reports, a change needs to be made.
The cost of maintaining a strong accounting department can be expensive with the two main cost drivers being the human resources needed to refine and drive the process and the associated accounting software expenses. Depending on the kind of company and complexity of data collection and reporting, these costs can grow quickly. Rather than continue to manage rising expenses, it may make sense to consider outsourced accounting. This will not only ensure robust and accurate reporting, but it will make costs more manageable.
No Internal Controls
In smaller companies it’s quite common to have one accounting professional in charge of writing and cashing checks, as well as reconciling the bank (among other responsibilities). Unfortunately, statistics have demonstrated that such circumstances present the opportunity for increased fraud. Under this arrangement, it would be very easy for a single employee to take financial advantage of the company. While no one thinks that it can happen to their business it often does. As reported by the 2016 Report to the National on Occupational Fraud and Abuse, the average loss to a company due to fraud was more than $140,000. By outsourcing an organization’s accounting function you can easily build in an acceptable internal control process to minimize this risk.
Delays in Invoicing
For all businesses cash flow is the name of the game. A company that doesn’t routinely and regularly issue invoices for services rendered and products sold will have significant cash flow issues. This impairs the ability to purchase new equipment, hire additional resources, or make technology and other upgrades. If your company has chronic issues with sending out invoices in a timely fashion it reflects serious issues with your accounting process. Rather than tolerating these issues and succumbing to frustration, it may make sense to consider outsourcing. A third-party provider will ensure that invoices are sent out on time so cash flow doesn’t suffer.
Ensuring that the company’s books are updated and accurate is essential to the company’s vitality. Access to the right information in a prompt manner is necessary for management to make the best possible decisions. While accounting is not the reason most went into business it is a critical component to the health of a company. If you have noticed some of the issues outlined above, Selden Fox can help. For additional information please contact us.