Entrepreneur Academy

Having accurate financial data is critical to make informed business decisions. Whether you outsource this or hire someone in-house who also wears other hats at the start-up to prepare this information, you need to ensure that the preparer has the proper skill set so founders can focus on their core competencies of building the business and selling.

Given the limited resources and funding start-ups usually have, it is never a good use of your scarce funds to hire a full-time resource unless you absolutely have the demand for it. Keeping your spending variable and in sync with your needs and growth is a better approach. The decision to move from outsourcing to full-time will be obvious based on how much you ultimately are spending on your outsourced relationship. Eventually, the number of hours required will justify moving that role in-house. I have worked with numerous clients where more than one accounting or back-office position was required to provide the best information to management. This is where outsourcing will be helpful as you have access to multiple disciplines, skillsets and expertise as needed to ensure accurate information is captured and available to you and your board.

By outsourcing your accounting operations to a professional accounting firm, you are effectively hiring a team of experts. The most important quality to look for is a firm with professionals who have the right experience in accounting for your early-stage companies. The right partner will save you countless hours and provide you with valuable experience that will help you avoid mistakes and missteps and afford you full-time coverage in a cost-efficient manner for only part-time pay.

As the company grows, you will have additional needs required to scale with your growth. For example, you are going from pre-revenue to revenue, pre-funding to funding. Your outsourced firm should recommend the proper advice to support the growth of the business, including upgraded control and accounting processes, a more comprehensive platform with the appropriate technology stack, and an engagement model that can keep up with your growth.

To summarize, some of the benefits of outsourcing versus hiring internally include the following:

1. Outsourcing your accounting and other back-office functions such as finance and HR, is generally more cost-effective than hiring someone in-house – especially at this early stage. If you hire internally, you usually have to hire for the highest and most expensive level of competency, which ends up being a large, fixed amount, including equity. However, when you only use what you need through outsourcing, you have a variable cost and does not require equity in the form of an employee option grant.  
2. Working with an outsourced firm will give you, the founder, time back to focus on developing the product and services that will differentiate you from other startups while at the same time ensuring the core back-office functions are handled properly.    
3. You gain access to trained, experienced, and knowledgeable accounting professionals.  It is very rare that a founding team has the accounting and operational management experience to avoid some of the pitfalls that come with early-stage companies.
4. A cost-efficient way to access accurate financial data that should be the backbone of your business decisions.
5. An outsourced accounting team offers the expertise to reduce the risk and allows for greater internal controls.  
6. Outsourced accountants are typically experts in implementing a powerful and scalable software, and the implementation is seamless.
7. If your provider offers other back-office functions like we do – finance and HR – you can take advantage of those as needed.   

Many of our clients come to us only when it is essential to do so, while others are more proactive. The sooner you pay attention to your accounting and back-office needs, the smoother your start-up journey will be. If you have any questions, please feel free to start a conversation with us.