In today’s complicated, fast-paced economy, it’s not easy for business owners to stay on top of their accounting. As an entrepreneur or business leader, your focus is on running the business: building relationships with your customers, managing your team, and envisioning new strategies that will deliver growth. 

Among all these day-to-day activities, it can be difficult to find time for your accounting, even though you know how important it is to your business. Maintaining accurate, timely financial information is vital in enabling you to make better decisions for your business. But for many businesses, the process of arriving at that point of financial clarity is lined with challenges. 

Because accounting can be so complex, it’s often pushed to the back burner. Smaller businesses might get by with a basic Quickbooks set-up, but once you start growing, building a more sophisticated financial infrastructure is vital. The problem with that? Staffing an internal finance and accounting team is expensive and can place significant demands on your time. 

The solution?

Outsourcing your accounting needs to a third-party vendor. 

You may think that outsourcing is only a practice for large, well-established businesses that offshore basic operations. But in reality, many businesses across the country, big and small, are embracing outsourced accounting. 

If you’re curious about what that process looks like, you’ve come to the right place. In this comprehensive guide, we’re exploring every element of outsourced accounting. We’ll share the types of tasks that can be outsourced and highlight the key issues business owners need to consider when assessing outsourcing accounting providers.

Done right, outsourced accounting can supercharge your business. Your company can gain game-changing financial insights and unlock benefits including increased cash flow and higher profit margins. If that sounds like something you’d be interested in, read on to learn all about outsourced accounting. 

We’ll cover:

  1. What is Outsourced Accounting?
  1. Why Do Businesses Use Outsourced Accounting Services?
  1. Common Outsourced Accounting Myths
  1. Outsourced Bookkeeping
    1. Which Bookkeeping Tasks Can Be Outsourced?
    2. Advantages of Outsourced Bookkeeping
    3. Disadvantages of Outsourced Bookkeeping
  1. Outsourced Controller
    1. Which Controller Tasks Can Be Outsourced?
    2. Advantages of Working With An Outsourced Controller
    3. Disadvantages of Working With An Outsourced Controller
  1. Outsourced CFO
    1. Which CFO Tasks Can Be Outsourced?
    2. Advantages of Working With An Outsourced CFO
    3. Disadvantages of Working With An Outsourced CFO
  1. LBMC: Outsourced Accounting Services

LBMC is a Tennessee, Kentucky and Indiana CPA firm dedicated to helping entrepreneurial businesses excel. We provide a wide range of outsourced accounting services to clients in a range of industries. To learn more about outsourcing your accounting needs to LBMC, contact us today

What is Outsourced Accounting?

Before you can start thinking about how outsourced accounting might benefit your business, it’s crucial to understand exactly what outsourced accounting is (and isn’t). 

When a business outsources its accounting, it essentially transfers responsibility for some or all of its accounting tasks to a third-party accounting firm. 

The tasks that can be outsourced are at your discretion. If you need help with CFO-level strategic initiatives but have the resources to handle bookkeeping in-house, a good provider will have no hesitation in working with you. All great outsourced accounting providers offer a suite of services that are customizable to the needs of your business. 

You might also see outsourced accounting referred to using terms including Client Accounting Services (CAS) or fractional accounting. For the most part, these services are identical to outsourced accounting services, although it’s important to bear in mind that different providers will offer varying services. 

The majority of companies that work with an outsourced accounting firm do so on an ongoing basis. At first, there may be a lot of work in building the financial infrastructure and accounting services. But after this initial set-up period, the relationship typically reverts to a stable monthly business cycle.

Outsourced accounting services typically do not include services like tax planning, audit work, or strategic advisory services. However, many businesses rely on the same firm for their outsourced accounting services and their tax planning services, adding these engagements to their existing agreements. 

Why Do Businesses Use Outsourced Accounting Services?

There are a number of benefits that businesses can realize from partnering with an outsourced accounting services firm. At a high level, working with an outsourced accounting services firm allows businesses to embrace high-quality accounting processes at a fraction of the cost of managing these processes with an internal team. 

Additional benefits that business owners can realize include:

  • Exposure to Best Practices: outsourced accounting firms work with a wide range of clients, many of which may also operate in your industry. Their teams live and breathe accounting every day, and will replicate best accounting practices from across your industry into your business’s workflows, boosting efficiency and productivity.
  • Flexibility: many outsourced accounting service providers offer completely bespoke packages to their clients. For business owners, that means you only pay what they need. You’ll have the ability to add supplemental services as the needs of your business change. 
  • Time Savings: recruiting, onboarding, and managing an internal finance and accounting team takes up a significant amount of time. By partnering with an outsourced accounting services firm, business owners can free up the time they would have spent managing their accounting department to focus on running their business. 
  • Increased Financial Clarity: to make important business decisions, leaders need access to timely, precise financial data. An outsourced accounting firm provides exactly that with real-time financial dashboards, monthly reports, support with long-term financial planning, and more. 
  • Objective Perspective: outsourced accountants offer a fresh viewpoint on your business. They bring a healthy skepticism that encourages business owners to take a more intelligent, nuanced approach toward decision-making. 

This is not a complete list of benefits that businesses can expect when partnering with an outsourced accounting firm. Every situation is unique. 

The overarching point is this: working with an outsourced accounting service gives your business access to proven financial leadership and processes that give you a better understanding of your business. And when you understand your business better, you can lead your business better. 

Common Outsourced Accounting Myths

If you haven’t worked with an outsourcing provider before, you might have some doubts about how well this relationship will work for your business. In years gone by, it’s fair to say that the practice of outsourcing did have some negative connotations.  

However, the outsourcing industry has changed significantly in recent years. Many of the concerns that might be swirling in your mind have been addressed. 

Let’s take a look at some common outsourced accounting myths and explore how outsourced accounting service providers like our team at LBMC are addressing them to build a better client experience. 

1. Outsourcing Gives Up Control of Your Business

Your business is your pride and joy: your life’s work. Giving up control of any element of it, particularly the financial aspect, can be intimidating. 

But with the right approach, outsourcing your accounting actually gives you more control of your business, not less. It’s not your outsourced accountant’s job to make decisions for you: they’re there to present the data and help you interpret and contextualize it.

In doing that, your outsourced accounting firm will work closely with you to develop an approach that works for your business. They’ll track KPIs that are important to you, provide regular financial reporting, and be responsive to your needs when you call with questions. 

2. Outsourcing is a Practice for Large Companies

It’s true that many large companies outsource portions of their operations, although accounting is typically one of the areas that tends to be handled by internal teams. But the fact that public companies are embracing outsourcing shouldn’t dissuade you from exploring outsourcing elements of your own business. If anything, it should encourage you to follow their example. 

Today, many outsourced accounting providers are purpose-built for the needs of private businesses, from closely-held family businesses to well-established mid-market firms. The accounting needs of these types of businesses are different from those of larger firms, and the services available to clients reflect that. 

At LBMC, our mission is to support entrepreneurial businesses at every stage to go further. Building a robust accounting infrastructure is a foundational element of that. That’s why our outsourced accounting services are set up to provide firms with the exact level of support they need. 

3. Outsourcing is Expensive

It’s rare that adopting an outsourced approach to accounting will be more expensive than hiring and staffing an internal team. When evaluating the price of an outsourced accounting vendor, it’s important for business owners to consider the full scope of costs associated with staffing an internal team. 

Payroll. Taxes. Health Insurance. Office Equipment. Training. Paid Time Off. These are all expenses that go into hiring an employee, and if you want to run accounting entirely in-house, it’s likely you’ll need more than one team member. 

Today, the average salary for a bookkeeper in the U.S. is $45,160, the average controller earns $104,338, and the median CFO salary is $393,377. By comparison, outsourced accounting services typically cost a fraction of these rates and deliver better results. 

Outsourced Bookkeeping

Good bookkeeping is a crucial ingredient in the success of any business. Without strong bookkeeping, it’s impossible for business owners to understand the financial position of their business, forecast budgets, or understand their cash position. 

At the same time, bookkeeping is a relatively manual, labor-intensive process that takes up a significant amount of time. Organizing all of your business’s financial data into a centralized, accurate record is a monotonous task. Although technology has streamlined the process somewhat, bookkeeping remains a challenge for many business owners. 

Many businesses employ bookkeepers, often on a part-time basis. But as your business grows and your financial needs evolve, it’s common to find that your initial approach to bookkeeping is no longer delivering the results you need. If that sounds familiar, you might want to consider outsourced bookkeeping. 

Which Bookkeeping Tasks Can Be Outsourced?

Practically every bookkeeping task can be outsourced to an outsourced accounting firm. The primary role of any bookkeeper is to maintain the financial records of the business. This typically includes responsibilities such as:

  • Recording and categorizing transactions
  • Maintaining ledgers
  • Reconciling bank accounts
  • Preparing and sending invoices
  • Monitoring accounts receivable and accounts payable
  • Producing financial reports
  • Running payroll

Many of these tasks are very detail-driven. If your firm doesn’t have a bookkeeper on staff, it’s likely they take up a significant portion of your time. 

Advantages of Outsourced Bookkeeping

Outsourcing your bookkeeping tasks can make a significant difference in the day-to-day operations of your business. The staff who previously managed these responsibilities will be free to work on new projects that help to grow the business, resulting in improved morale and productivity. 

In addition to that, there are also operational benefits. Outsourcing your bookkeeping to an accounting firm ensures that your business’s financial data is organized according to best practices. Outsourced accounting firms tend to use cloud-based bookkeeping technologies that provide business owners with a real-time overview of their business’s financial position. 

Beyond this, having a clean, organized financial infrastructure makes things significantly easier for your business come tax season. If you’re aiming to raise additional funding or are targeting a potential exit, well-organized financial record-keeping will significantly streamline the due diligence process. 

Disadvantages of Outsourced Bookkeeping

There are a few drawbacks to outsourced bookkeeping. With the right partner, it’s possible to mitigate these downsides entirely, but to do that, you need to be aware of what to be on the lookout for.

Because an outsourced bookkeeper isn’t immersed in your business the same way an internal employee would be, there may be some intricacies of your business that they don’t understand at first. It’s important to find an outsourced bookkeeping partner that will invest the time required to truly get to know your business. 

Additionally, when you outsource bookkeeping, you lose the ability to walk over to your bookkeeper’s desk and ask them a quick question. This can make it feel like you have less control over your accounting. However, provided your outsourced bookkeeping partner embraces cloud-based accounting software, you’ll have access to your books 24/7. 

Outsourced Controller

Businesses can outsource more than just basic bookkeeping tasks: it’s also possible to outsource more advanced accounting tasks that typically require a CPA. These services are known as outsourced accounting or outsourced controller services and are typically offered in addition to outsourced bookkeeping services. 

Which Controller Tasks Can Be Outsourced?

Controllers are more advanced finance professionals that are usually responsible for managing the day-to-day financial operations of a business. They have a wide range of responsibilities, from managing bookkeeping staff to working on more strategic initiatives. 

There may be some crossover between the tasks performed by a controller and those performed by a bookkeeper or even a CFO. In general, controller-level tasks that can be outsourced include:

  • Implementing and managing digital accounting systems
  • Creating and explaining month-end financial statements
  • Ensuring compliance with financial reporting standards and other regulations
  • Running payroll
  • Monitoring cash balances
  • Preparing and updating financial models and budgets
  • Participating in internal financial reviews

These tasks are more strategic in nature than the work typically performed by bookkeepers. As a result, many controllers are qualified CPAs. 

Advantages of Working With An Outsourced Controller

Partnering with an outsourced controller gives businesses many of the same benefits as partnering with an outsourced bookkeeper, but on a more strategic level. Outsourced controllers are experienced accounting professionals who have worked with a diverse range of businesses. Access to this expertise can be invaluable for many business leaders. 

Outsourced controllers also bring a tried and tested approach to helping manage your business’s finances. As a result of their experience, they know what works and what doesn’t. That know-how gives them the ability to build your business a financial infrastructure that’s resilient to all kinds of challenges. 

There’s also the consideration that an outsourced controller has many additional skills that can benefit your business. This might include a knowledge of tax strategy, insights as to how you should structure your personal compensation to be tax-efficient, and more. 

Disadvantages of Working With An Outsourced Controller

Much like outsourced bookkeeping, there are few disadvantages inherent in partnering with an outsourced controller. However, there are a few caveats to consider. 

The majority of outsourced controller work is performed remotely. That means you won’t get to spend as much face-to-face time with your accountant as you would if they were your employee. If you’re bringing in an outsourced controller to help manage your existing team, it’s necessary to carefully consider what this relationship will look like. If you’re the type of person who likes to shake someone’s hand and look them in the eye, the remote nature of outsourced accounting may require some adjustment.  

Challenges in working with an outsourced controller typically occur when communication is infrequent. To avoid these issues, prioritize relationships with outsourced controller service providers who call out responsiveness as a key element of their client service philosophy. 

Outsourced CFO

Chief Financial Officers (CFOs) provide invaluable leadership in businesses all around the world. Their job is to head up a business’s financial strategy, designing and implementing financial systems and processes that enable the business to operate more efficiently. 

It’s easy to think that the CFO role is a position reserved for larger companies, but that doesn’t have to be the case. Many small to midsize businesses stand to benefit significantly from working with a CFO but tend to lack the resources to hire these experienced professionals. 

Working with an outsourced CFO offers business leaders the opportunity to access this financial expertise at a fraction of the cost of hiring a full-time CFO to work for their business. 

Which CFO Tasks Can Be Outsourced?

Outsourced CFO services are much more advisory in nature than outsourced bookkeeping or controller services. These services can be provided by established financial leaders who operate independently, but if you want a full-service outsourced accounting package, take the time to find an accounting firm with outsourced CFO capabilities. 

Many outsourced CFOs are experienced finance professionals with significant amounts of leadership experience. If you choose to partner with one, you can expect them to provide strategic guidance and support around tasks including:

  • Designing and implementing financial infrastructure and controls
  • Creating long-term budgets and forecasts
  • Managing your internal accounting and finance teams
  • Raising capital through debt or equity funding
  • Providing guidance on financial strategy
  • Advising on transactions, mergers, and acquisitions

Of all the outsourced accounting services, an outsourced CFO service is by far the most customizable. Whereas outsourced bookkeeping and outsourced controller work largely follow a predefined framework, an outsourced CFO relationship can be anything you want it to be. 

Advantages of Working With An Outsourced CFO

It can be difficult to understand the benefits of partnering with an outsourced CFO before starting to work with one. Many times, businesses have all kinds of hidden opportunities hidden in their internal systems and accounts. It’s the job of the CFO to uncover these inefficiencies and implement strategic changes to remedy them. 

As your business grows, it’s likely you’ll experience new financial challenges, whether that’s securing funding to fuel an expansion into a new market or building the systems required to manage multiple revenue streams. It’s likely that an outsourced CFO has experienced these challenges before, making them well-qualified to advise your business on its strategic direction. 

Outsourced CFO relationships tend to be extremely flexible. Many businesses work with an outsourced CFO on a short-term project basis, although longer-term, ongoing advisory relationships are also common. 

Disadvantages of Working With An Outsourced CFO

As you evaluate different outsourced CFO options, there are several things to bear in mind to ensure you make the right choice. By keeping these considerations in mind, you’ll be able to avoid any of the drawbacks that can impact businesses that partner with an outsourced CFO that isn’t a great fit for their business. 

Firstly, establish whether the outsourced CFO you’re interested in working with has a proven track record in your industry. An outsourced CFO that’s experienced in the nonprofit sector might not grasp the financial challenges that a fast-growing technology company deals with. 

Equally, focus on finding an outsourced CFO that has significant experience navigating the challenges that are currently top of mind for your business. If your main financial goal is to sell your company, make sure you hire an outsourced CFO that has previously advised on a number of successful transactions. 

Above all, find an outsourced CFO that you can build a long-term relationship with. An outsourced CFO should be a trusted strategic partner with whom you work intimately – not just another vendor. Listen to your intuition and find an outsourced CFO you know you can trust. 

LBMC: Outsourced Accounting Services in Tennessee, Kentucky, Indiana, and Beyond

Outsourcing some or all of your accounting needs to an external third party can represent a major win for business owners. Aside from the cost savings, partnering with an outsourced accounting firm gives businesses access to proven finance professionals with the skills and resources required to take their business to the next level. 

At LBMC, we’re proud to provide outsourced bookkeeping, controller, and CFO services to businesses in Tennessee, Kentucky, Indiana and beyond. Our team has experience across a wide variety of industries, from well-established construction and real estate businesses to new companies in emerging markets including the brewery and hemp industries. 

We design our outsourced accounting services to fit your needs – not a predefined checklist. Our team brings an entrepreneurial mindset paired with a commitment to technical excellence: a winning combination for any business. 

To learn more about LBMC’s outsourced accounting services, contact an advisor today.