Startup entrepreneurs know the importance of lean, mean, and agile operations — especially in those tender and exciting early stages of a business. Whether bootstrapped or investor financed, startup stage businesses need every dollar and every minute they output to pull its weight and then some. That’s why time and money are the main reasons that growth focused founders turn to outsourcing for the more routine needs of their core business. That shortlist of functions includes needs like bookkeeping and accounting.
While time and money are the top two general reasons that startup founders outsource their finances, these two can usually be broken down into two very specific constraints in each category. Read on to see if you can relate.
Money Reason #1 – Reduced Overhead
Hiring any sort of in-house staff requires an employer to consider payroll, benefits, and 401k options, even in a business’ early stages. In startups, you may be able to sidestep paying into some of that in exchange for company equity, but that’s usually a deal that’s only left on the table for C-suite or uniquely skilled contributors who work on your core products or services.
Accounting has earned a reputation as a common field, but one where talent and know how can either sink or fuel an organization’s success. It requires experience, education, and skill, and that combination doesn’t sign on for cheap — particularly if your business requires CPA support. That’s also not including the extra overhead you’ll spend on giving each employee either their own tech equipment for remote work or supplies and office space for on-premises collaboration.
Outsourcing your accounting relieves you of the burden of assembling benefits packages and finding the cash for extra office space and supplies. Also, instead of budgeting for a consistent payroll, your expenses in this area can be more limited, and reserved only for monthly, quarterly, or annual accounting support as needed. This all allows you to keep things lean, while still cultivating a trusted, reliable relationship with an accounting partner who will get to know your business’ financial needs and liabilities schedule, and who will keep their billable hours targeted tightly around those imperatives.
Time Reason #1 – No Training Commitments
Different types of startups prioritize different KPIs and accounting data to keep their business running effectively and above board. One thing to consider is that you may not yet be fully aware of what all those KPIs are in your industry. Another thing is that training a new hire on these, even if you are aware of which ones to monitor, will take time away from your primary objective of growing your business. Plus, if your new hire doesn’t work out, you’ll have to retrain their replacement. Altogether, that adds up to days and weeks of lost productivity.
When you work with an outside accounting firm that has experience with clients in your industry, you get to opt out of that time waste. Your accountant firm’s own internal management will handle the hiring, onboarding, and training of new bookkeeping staff. Another bonus is that they’ll also bring them up to speed on both the KPIs of your industry and the internal record of your business’ books.
Money Reason #2 – Improved Results Oversight
How many mistakes happen in business due to a lack of oversight and second looks? Most startups lack the liquidity to invest in multiple levels of accounting hires, which means that the accountant you have is not only your main workhorse, but that they are also likely the only one in your organization with the background needed to check their own work.
When you outsource your accounting needs to a multi-employee accounting firm instead of keeping it in-house or choosing a solo freelancer, you have the instant added benefit of knowledgeable oversight. While your role as the client keeps your primary accountant contact obliged directly to you, their own in-house leadership will help quality assure the work they do for you. This helps prevent potentially costly mistakes, like inaccurate adjusting entries or missed filing deadlines, from happening.
Time Reason #2 – No Pulling Focus from Startup Growth Activity
Due to budget constraints and the speed of new business development, startup founders often struggle to balance working on their business with working in it. Working on the business involves tasks that no one else can really do. That means focusing on the things that build the startup’s foundation as an organization and cement the market readiness of the product or the delivery of the service.
When you as the founder shift focus from the tasks that fuel the business to the ones that simply sustain healthy operations (especially if those fall outside of your natural skill set), you’re making poor use of the little time that you have to drive growth. Don’t spin your wheels. If you can outsource something like bookkeeping and accounting in the early stages of your business, do it. You may even be able to find a partner like Remote Accounting Experts that offers special, entrepreneur packages at a more affordable, startup-friendly rate.
Ultimately, the time and money you invest in your startup business will be what allows it to succeed both in the short and the long term. Use both wisely, and bring in pros like RAE where it makes sense.