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Should companies own their accounting and finance function or outsource it?

Should companies own their accounting and finance function or outsource it?

Let’s set the scene. A privately held company’s longtime controller gives notice. With only one other accounting person on staff, the owner is left scrambling for a fix until a new controller can be hired.

The owner reviews the job responsibilities and realizes 80% of the controller’s work consisted of staff-level tasks, so he quickly finds two people with the right skills to tackle these functions — by bringing in outsourced accounting professionals to do the job.

Fast forward seven years, and the company has grown from a $5 million business to a $25 million business. The original outsourcing support team remains, but has grown to four people … and they never hired a full-time controller to replace the one who left years ago.

What would you do in that situation? And how do you know if outsourced finance and accounting services are right for you?

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In brief, outsourced finance and accounting professionals help direct the financial processes that would typically be done by your own employees. The services can vary in scope, from completely taking over a department and its day-to-day functions to supplementing a current need or creating a virtual accounting department.

Outsourced finance and accounting options include:

• Support to meet your staff accounting needs, such as invoicing customers, processing payroll and managing vendors

• Controller level knowledge and guidance to provide trend analysis, forecasting, budgeting, and finance department assessments

• Access to CFO level insights and experience to assist with growth initiatives, capital planning, board governance, contract review, and strategic planning

• Full-service outsourcing firms can also provide access to tax and wealth advisors to help with business succession, individual tax planning, personal financial planning, and insurance and risk management

One of the principal advantages of outsourced support is the ability to customize a high-functioning team with additional knowledge and resources. Outsourced professionals who understand industry-specific operations and common practices and have access to the latest technology can often enhance processes and productivity as well as complement the current team.

For privately held businesses and nonprofit organizations, bringing in outsourced support allows you to segregate duties without hiring additional staff. A team with multiple layers and several sets of eyes looking at the numbers can enhance internal controls and reduce risk. For publicly traded companies with full accounting departments, bringing in additional resources can help transition through times of peak workload.

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For many businesses, the finance and accounting functions are often managed behind the scenes and are not linked to a core competency of the business or the customer experience. When performing well, the accounting function contributes significantly to operational performance, yet the time spent on it internally may be out of balance with the value it brings. Outsourcing can be a way to enhance your resources or help internal team members gain the knowledge and training needed so you can focus on growing your business.

If you’re used to having your accountant sitting next to you, it can be difficult to visualize any other way. Some leaders fear they’ll lose control if they don’t have internal employees managing the accounting function. But good outsourced professionals don’t feel like a third party. They join management meetings, participate in video calls, and create solid relationships.

For some organizations, there is also a perceived risk that using an outsourced professional will be costly; however, the cost is often comparable to that of having a full-time employee, considering the indirect and managerial cost of a full-time employee, benefits, unemployment taxes, and other direct costs related to salary.

Marc Mallory

Marc Mallory

Often the biggest challenge of outsourcing accounting and finance duties is determining which tasks could be accomplished with external professionals. Identifying your core needs and the time and resources it takes to do those tasks will help you compare your current state to what outsourced professionals may be able to provide. If you’re not sure where to start, a business opportunity assessment can help uncover your sticking points. Once you know what you need, you can turn to the task of finding the right people to work with.

For more information, contact Marc Mallory at [email protected] or 612-397-3263. For more information on CliftonLarsonAllen LLP, visit CLAconnect.com.

This article originally appeared on The Patriot Ledger: Advantages to outsourcing your accounting and finance function