Find Comfort in Finance Department Alternative

You believe in quality. You want every aspect of your business to be first rate. Yet your priorities are many and hours in the day so few. So what are you postponing in order to address those immediate crises that arise on a daily basis? In most instances, it is finance. Finance rarely presents itself as a crisis du jour, but the long-term effects of neglect hang like an albatross when it comes time to meet payroll, get another round of financing, or sell product to a large company that looks deeply into the books before buying. So, how can you end each day with the comfort that your books and records are complete and accurate, knowing that costs are being managed and that projects are being appropriately executed, all without having to make the expensive and permanent commitment to hiring a full finance department? If your company is a new startup, early-stage or emerging growth company, your focus is bringing your technology or service to market and developing relationships with appropriate third parties, such as technical or development partners and investors. From an employee standpoint, your focus is developing the core team that will successfully bring the product to market. Your last priority is your accounting system and accounts payable. Yet, you know that maintaining accurate records is critical. You also may be feeling the need for assistance with high-level financial matters. Or perhaps your company is midsize and encountering issues of high payroll costs or intense foreign competition. Something needs to be done quickly to cut costs and get needed projects off the ground, like rectifying cost or process inefficiencies. Your company could even be large, with many projects in various stages of completion or, worse yet, not even started. Building the right, permanent finance department is most likely not at the top of your list at this moment. But with daily, weekly, monthly or project-based contracting, an outsourced finance department can help you bring the financial excellence to your company that you demand in all other areas of your business. The compelling arguments for outsourcing in general apply to the financial function — lower cost, specialized training, hire and fire when specific skills are needed, right-sizing and more. Hiring the right outsourcing professionals at the right times ensures that you are receiving quality and experience without making an expensive, long-term commitment to hiring and developing an internal finance department. In a growing number of companies, outsourcing everything from bookkeeping to the CFO is built into the business plan — with investors enthusiastically embracing these plans.In total, there are three basic levels of financial skills that you will need at varying times in the life of your growing business. The following will give you an idea of what various staff levels could do for you and a timeline to consider regarding the right time to draw on these different levels of skill.

• The CFO should be your partner, your sounding board and your advisor. The CFO can take responsibility for or assist with fundraising efforts; negotiate contracts; develop relationships with bankers, attorneys, insurance agents and other third parties; develop and update forecasts and budgets; and create or be a key member of the team creating the strategic business plan. The CFO can also identify the appropriate alternatives and help you select your employee benefit plans. As the company starts out, checking in regularly with a strategic-thinking CFO is an invaluable strategy for many entrepreneurs. And, an outsourced CFO has no political agenda. She is not an employee and can be more objective.
  
  
• An accounting manager or controller would close your books each month, compile basic financial statements and produce management reports, such as actual-to-budget comparisons and trend analysis. An accounting manager or controller can set up your accounting system as well as develop accounting policy and procedures for the entire company to use. The accounting manager/ controller can also assist with many HR functions, such as managing benefit plans and ensuring appropriate policies and procedures are followed for hiring and terminations.
  
  
• Accountants take care of all the day to day transactions, such as payables, payroll, receivables and fixed assets. Depending on volume, perhaps you only need the accountant one day a week or a few days a month. Outsourcing your accounting needs will help you contain costs and, most important, provide you the expertise that only a trained, experienced accountant can bring to the task of managing the company’s books and ensuring accurate and complete records. What can go wrong if you don’t use qualified and experienced finance professionals? Some of the more common examples include paying vendors twice, maintaining records that are not in compliance with generally accepted accounting principles, numerous year-end adjustments, unfavorable contract terms, or not closing a round of financing. When just starting or growing a small business, you may think keeping QuickBooks yourself or assigning billing or check writing to an office manager is the best way to go. But consider the impact on your cash flow when the billing is incorrect. Consider the opportunity cost of not spending as much of your time on developing the product or business. With the right level of expertise advising you on financial strategy, strong financial systems and controls and daily execution, your business will grow more soundly and you will avoid potentially lethal financial headaches. If you aren’t convinced outsourcing is a cost effective alternative to hiring and developing a fully educated and experienced finance department, take a look at these numbers from a real company that chose to outsource its financial function as it grew:
  
  

How do you find the right outsourcing professionals? Talk to your investors, board members, auditors, attorneys and organizations to which you belong. Search the Internet, too. Why talk to all of them? Because each one will likely have a different recommendation and you need to select from a field of professionals to ensure that the person you hire today is right for your company at the time you need him or her. By outsourcing, you can have the right talent, the best talent, when you need it.

Ann Vickers is the founder of Wellesley-based AccountAbility Outsourcing. Her company provides outsourced financial services to growing and established businesses throughout New England. Donna Lopolito, CFO, contributed to this article.

Reprinted with permission by Women’s Business Boston 2/04