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Outsourced finance? 6 reasons why it’s better than keeping it in-house

Article By Brent Charlton | | Accounting & Tax, Business Consulting, Financial Planning

Are you, like most SME owners, managing your finances by yourself? Are you doing the books after hours or maybe you’ve grown to a size where you can employ an accountant?

If so, you may want to consider the benefits of hiring an outsourced finance team…

Six benefits of an outsourced finance team

Keeping your finances in-house with one employed accountant or doing it yourself poses significant risks to the business and places severe limitations on this critical function.

Here are six of the main reasons to go down the road of outsourcing finance…

1. Lower chance of fraud and errors

With only one person responsible for the finance function, there is an increased risk of fraud and/or error.

This is due to a lack of oversight and review. It’s not practical for business owners to have the knowledge or time to review the finance function to pick up on all errors or fraudulent activities.

Best practice calls for a segregation of duties. This requires more than one person involved in all finance functions.

For example, the person doing the banking shouldn’t also be responsible for debtor collection, as there is a risk of under-reporting the banking.

2. No key person risk

If your own finance person is sick, on holiday or resigns, you no longer have a finance function for a day, week or at all.

An outsourced finance team fixes this problem, as there’s always someone available to help.

3. More valuable strategic advice provided

A one-person finance team invariably gets stuck in the ‘doing’ whirlwind. This results in essential elements of the finance function being overlooked: reporting, strategy and planning may not get done or, at best, be done inconsistently.

Opportunities are lost when these elements aren’t successfully prioritised – which an outsourced finance team should be trained to help with.

Each element is discussed in more depth in the following points.

4. Better quality reporting

Like all businesses, SMEs have their statutory reporting requirements such as BAS and tax returns.

These reporting elements are, by and large, done on time as required by in-house accountants or bookkeepers. However, this is where the reporting ends for most SMEs.

An outsourced finance team can provide weekly and/or monthly reports showing how the business is tracking against its key performance indicators and cash flow projections.

It goes beyond providing a quarterly profit and loss statement, balance sheet and cash flow statement showing the results for the quarter. It extends to valuable analysis that highlights key business trends and concerns.

5. Bigger picture thinking

Only one in three SMEs does any strategic planning. Most SME owners know they need to be doing more strategic thinking – but where to start?

An outsourced Chief Financial Officer (CFO) can help you address some of the tougher questions you need to ask:

  • Why do we do what we do? What’s our purpose?
  • Where do we want to be in 3-5 years’ time? 10 years’ time?
  • What do we want to achieve in the next 12 months?
  • What level of sales and profit do we want to achieve?
  • How many clients or customers do we want?

Your CFO and finance team should play a key role in strategy discussions, as they are across your current financial position and may provide valuable insights on how to bridge the gap between where you are now and your strategic goals.

6. Planning expertise

Once the strategy is set, the implementation or action plan needs to be developed.

An outsourced finance team can help with setting financial budgets and projections, to model out the financial aspects of the strategy and set the financial goals and actions needed.

These projections provide clarity on what can be achieved if the strategy is implemented and, importantly, any funding that may be required.

Bottom line: Outsourcing finance makes business sense

To achieve the results you want for your business, a finance team would generally require a bookkeeper, accountant, financial controller, and CFO.

For an SME, the costs associated with having all these team members are not viable. The annual salaries alone for these roles range from $50,000 to $200,000.

A far more cost-effective and sustainable solution is to outsource your finance team. You get access to all these roles while controlling finance team spend, minimising your business risks, and having a team of experts by your side to help you grow your business.

If you’d like to know how an outsourced finance team would work for you, please contact me to arrange a no-obligation discovery session.