Accounting For Startups: Knowing When to Outsource Your Startup’s Accounting

Mallika Khandelwal

23rd Aug'22
Accounting For Startups: Knowing When to Outsource Your Startup’s Accounting | OpenGrowth

Establishing a startup can be overwhelming. Moreover, you didn’t sign up for tasks such as sending invoices or balancing books. Up-to-date financial records are critical for the success of your business.

Outsourcing accounting, bookkeeping, and CFO services are becoming popular among firms looking to reduce their overhead expenses while increasing efficiency.

 

What is Outsourcing?

Outsourcing refers to the act of getting certain job functions carried out outside the organization. If your business decides to outsource, you delegate part of your work to an outsider or third party. However, you’ll find that companies usually take up outsourcing as a cost-cutting measure.

 

When to Outsource Your Startup’s Accounting

 

When to Outsource Startup Accounting

As a startup owner, you are looking to free yourself of tedious duties like bookkeeping, which need regular updates. Here are reasons why you should consider outsourcing accounting functions for your startup.

 

1. You Need to Save Money

One of the driving forces of outsourcing is the need to keep your business afloat while watching your costs. Outsourcing enables you to cut costs because you don’t have to spend on employee salary, health and travel expenditure, or retirement benefits.

Companies that offer outsourcing services do so at a low cost, enabling you to save. In addition, you will save the money you’d have otherwise spent on purchasing software and equipment essential for handling accounting and financial services.

 

2. You Need Access to Experts

Outsourcing accounting for startups can help if you are looking to benefit from expert services. You may have a background in bookkeeping, but that doesn’t excuse you from making accounting mistakes. You can outsource accounting to avoid these mistakes that could have disastrous repercussions on your business, including cash flow issues and penalties.

Outsourcing critical functions like accounting, CFO and bookkeeping services can give you access to a team of qualified professionals with the latest technologies to ensure accurate and secure data.

 

3. You are Looking for Time to Scale Your Business

As a business owner, the most critical task is ensuring business growth. Outsourcing accounting for startups can free the business owner, allowing them more time to focus on the core business processes. With outsourcing, a business owner can focus on the tasks they are good at while allowing experienced staff to take over other critical responsibilities.

 

4. You are Looking for Flexibility

Outsourcing is flexible by nature. By outsourcing accounting for startups, business owners give the work to a company that specializes in finance and accounting. Outsourcing services allows you to enjoy services tailored to your business needs.

When you outsource accounting for your startup, it means you can also add or remove accounting processes depending on your business needs. For instance, you could choose to outsource for a while and pick up from there.

 

When to Outsource Your Startup’s Accounting

 

5. The Need to Improve Internal Controls

A 2012 study by the Association of Fraud Examiners revealed that small businesses are the biggest victims of fraud. These are firms that employ less than 100 employees. Most small businesses are caught in this mess because they lack access to an accountant or CFO who can spot fraudulent activity.

Outsourcing accounting for startups can benefit businesses from the possibility of fraud as you will have allocated accounting and other financial responsibilities to a team of accounting experts.

Outsourcing accounting for startups can also lower the risk of having your books manipulated by untrustworthy employees.

 

6. You Need Enhanced Data Security

Like most other businesses, you may be handling large volumes of personal data from your customers that need to be stored. In addition, some of the customer data may be sensitive such as information about their credit cards or invoicing that needs security.

Startups often spend a lot of time installing security systems to ensure that customer data is kept safe. Even then, companies may still find themselves missing an important update leaving the data exposed to the public.

If you outsource accounting for your startup, you will be less likely to experience this problem since outsourcing firms usually have cybersecurity systems to ensure data encryption and protection. You can also access your data whenever necessary, although this will be over a secure connection in the cloud to avoid breaching.

 

When to Outsource Your Startup’s Accounting

 

7. If You are Looking to Expand Your Business in the Future

Outsourcing accounting for startups can benefit businesses with growth and expansion knowledge. You will be working with experts to help prepare all the necessary documents, including business plans and growth forecasts, to raise capital for growth.

 

Conclusion

Running a startup can be demanding as it requires fearlessness, ingenuity and grit. However, one feature that startup managers overlook is the need for adaptability in the era of technology. You must stay on your feet to ensure that your startup processes align with current trends. 

Your financial requirements increase as your business expands. When you feel overwhelmed by these processes, consider it time to outsource critical functions like accounting. This will also free you to focus on other business processes that enhance business growth.

 

We at OpenGrowth, are committed to keeping you updated with the best content on the latest trendy topics from any major field. Also, both your feedback and suggestions are valuable to us. So, do share them in the comment section below.

A staunch proponent of karma, Mallika believes in what goes around, comes around philosophy. She is ecstatic with her life and strives to live it to the fullest.

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