Benefits of Outsourcing Accounting and Bookkeeping for Startups
The 80/20 principle states that 80% of outcomes can be attributed to 20% of causes or inputs for a specific event. This rule is often used in the business world to describe that 80% of profit is derived from 20% of customers. This rule also applies to many other business examples. Entrepreneurs and startups would be glad to know this same principle also applies to time management.
Think of all the time consuming activities startups and entrepreneurs task themselves with each day that do not add a dime to their revenue. Whether it is running to the store for office supplies, dealing with computer problems, cleaning their office or workspace, or working on the accounting and bookkeeping for their business, this is valuable time each day that could be better spent getting new customers, closing new deals, and growing the business.
Accounting and bookkeeping, specifically, can cost startups and entrepreneurs entire days of the week. Establishing an efficient accounting system and recording each business transaction is not as easy and painless as most startup business owners first think.
There is a lot of time invested up-front learning the business function of accounting, then the specific accounting software must be learned, and finally the knowledge must be kept fresh as the business transactions are recorded each month. If any mistakes are made in this process, it could cause major issues that could cripple a business. After all, what are the primary goals of recording business transactions?
- To provide accurate and timely financial information to make day-to-day business decisions along with driving the overall business strategy. If transactions are not recorded timely or are incorrectly recorded, and business decisions are made based upon these inaccurate financial statements, the desired business results may not achieved.
- To increase the value of your business to potential investors and banks. Yes, it may seem benign, but most investors and banks place higher values on companies with organized, accurate, and professional accounting and financial records.
- To raise capital or achieve that multi-million dollar buy-out you are dreaming of. Just as investors and banks place higher values on companies with solid accounting and financial records, they flat-out require these types of records before ever investing, lending, or acquiring a startup.
- Tax reporting. Yes, the topic no one wants to think about is greatly impacted by your accounting system. If your financial statements are incorrect or inaccurate, your CPA will likely need to perform “clean-up work” before preparing your tax return. This will add additional fees to your tax return preparation, and may leave deductions on the table which will cost you tax dollars. Both of these situations cause a reduction in your bottom line; that is, your net income; that is, a financial measure of the success of your business.
Consider the benefits of outsourcing your startup’s accounting and bookkeeping functions to your CPA:
- More time to focus on what you do best, whatever that may be. Focusing your time and efforts on what you do best is what will drive your income higher.
- Relax. Instead of catching up with your bookkeeping on Sunday, kick back on the couch with your favorite book or grab a beer and catch a game.
- Rest assured that your CPA has access to top accounting systems and can prepare timely and accurate financial reports to allow you to make the best decisions to grow your company.
- Financial expert opinions are only a phone call away. Do you need to raise additional capital, but do not want to give up 50 percent of your company on Shark Tank? Call your CPA who will have a deep understanding of your financial operations from being in the detail on a regular basis.
- Save money. For non-financial professionals, hiring, training, and supervising an accountant is a very difficult challenge. Let along paying the required salary and benefits to a hopefully competent internal accountant. Rather than attempting this with your startup, outsource the accounting function and only pay for what you need when you need it. You’ll also be receiving the right level of accounting expertise at the right time which is next to impossible without hiring an internal bookkeeper, controller, and CFO.
Contact your Anders Advisor today to learn how you can take back more of your day and free yourself from your accounting burden. Focus on what you do best and leave the rest to a CPA; you’ll be able to grow your business smarter and faster. Mark Cuban retired by age 29, and he did not do so by spending his nights and weekends preparing the company’s accounting records himself.