Episode Three: Delegating Your Calculating (Outsourcing Your Accounting)

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They say that if you want something done right, you should do it yourself. But, when it comes to your business’s accounting and bookkeeping functions, we think it’s a different story.

For many businesses, it’s more efficient to outsource financial functions to a fractional bookkeeper, accountant or CFO. But how can you know if it’s a good fit for your business? How should you evaluate and pick an accountant to outsource to? What does it mean to outsource your accounting in the first place?

Paul and Kim talk with Donna Conte, CPA and Roger Spain, CPA, CFA to answer these questions and more as they dive into a new episode of The Wrap to explore the intricacies and benefits of outsourcing your organization’s accounting.

At the end of this podcast, you’ll be able to:

  • Understand what outsourcing your business’s accounting entails
  • Start identifying your business’s needs when it comes to your financial functions
  • Determine if your company might be able to benefit from outsourcing financial functions over doing them in-house
  • Ask the right questions to identify the accounting provider that would be the best fit for your business

Click Here for more resources.

  1. If your business hasn’t given much thought to a strategy behind filing taxes, what should your first steps be toward making a tax strategy? Why make one?
  2. When is the best time to create a tax strategy?
  3. What should you discuss with your tax advisor at the end of the year to be the most prepared for filing your taxes? What are the fundamental pieces to know when formulating a tax strategy?
  4. Are there different conversations to have about your tax planning when it comes to state vs. federal taxes?
  5. What should business leaders know about what business expenses are deductible and which ones aren’t?
  6. What documentation should business owners review themselves and/or bring to their advisors to inform a tax plan?
  7. As we are wrapping up, what is one piece of advice you would give to a business owner as they start preparing for their tax filings?

Intro: (00:00) Welcome to The Wrap, a warn Avery podcast for business leaders designed to help you access vital business information and trends when you need it so you can listen, learn and then get on with your day time is tight. That’s why our advisors have wrapped up today’s most timely topics into a podcast with actionable advice. Now let’s get down to business.

Kim: (00:22) How are you doing this morning?

Paul: (00:23) I’m good. How are you doing today?

Kim: (00:24) I’m great.

Paul: (00:25) Good to be here.

Kim: (00:26) It’s always good to be here and I’m excited about another season of the Wrap and two more exciting guests.

Paul: (00:34) I can’t wait to talk to Roger and Donna today.

Kim: (00:36) That’s right. So our guests this morning are Donna Conte and Roger Spain. Welcome.

Roger: (00:41) Thank you.

Donna: (00:42) Thanks Kim.

Kim: (00:43) Yeah, we’re excited you’re here.

Paul: (00:44) So today we’re going to kind of talk about the different services that come out of outsourced accounting, integrated financial services platform and companies that are looking to outsource. They don’t always know what they need, they just know they need some help. And so hopefully today after we talked to Donna and Roger, we’ll have a better understanding of, you know, where is it that, uh, what, what is it that’s causing me to need that help?

Kim: (01:10) Sure.

Paul: (01:11) What do we think the driving force behind this is?

Donna: (01:13) One of the things we see as a driving force is just that, with the unemployment rate so low right now, the talent on the market is just really hard to find. So, outsourcing some of those finance functions can give you a leg up on the talent and the expertise

Paul: (01:37) Growing the bench of your company, right. Without actually growing it.

Donna: (01:41) Exactly.

Roger: (01:42) You know, Donna makes a great point and one of the things that we often talk to clients about is the idea of having a single point of failure as it relates to staffing. And if you, or a business owner or in charge of a segment of a business and you put all your chips into one basket, that being one key employee and for whatever reason you lose that employee, that’s a huge loss for the company. However, if you outsource that, then whoever you have contracted with for outsourcing functionality is responsible then and we’ll be able to plug in a new person and keep that function moving.

Kim: (02:18) Sure, we see that, you know, a lot with clients where one person is responsible for so much with the company and then they leave for whatever reason could be under good circumstances, but still the amount of downtime for the client in terms of trying to get back up to speed and hiring and onboarding and getting that person familiar. You know, it’s a significant disruption to their business.

Roger: (02:46) And that strategy then becomes, I guess a strategy for risk mitigation that people often don’t think about the value of that, but it can be significant.

Paul: (02:56) So what are some of the examples of the functions that an outsourced accounting team would perform for someone?

Roger 5: (03:00) Yeah, Donna did a great job of referencing the, the infrastructure that’s in place within a company. And so the first thing that, that any provider of outsourced accounting or financial services, or as we call it integrated financial services, where we try to integrate into the companies infrastructure as it exists is to build on those strengths that they have within the company currently and, and augment, supplement or enhance their existing strengths. And so it could be that the company already has great clerical people or perhaps a good controller or perhaps a good CFO and any one of those three functions may be insufficient. And so we, we may be asked to come in and provide whichever of those stages of the F the finance function that may be insufficient.

Donna: (03:52) Right. I agree with that. And, um, one of the things we talk about many times is the spectrum of services that are offered. So it starts with anything from just transactional level support and moves up the spectrum all the way to outsource CFO work.

Kim: (04:07) So how, and how would one of our clients benefit from an outsource accounting team?

Roger: (04:12) The benefits are many, one is mitigating the risk associated with that single point of failure. Another is enhancing the skill level with the exact skills that are needed. So when a company seeks to bring in a contractor or an outsourced provider of services, they can target the exact skillset that is needed that will most, you know, best benefit that company. That’s more difficult when you’re hiring, especially in a tight labor market. So and then the last thing is that breadth of service it could be that a company needs an entire accounting functionality built because maybe they’ve had some key losses or have grown into a level of complexity that didn’t exist even a year ago and they’re not prepared for that. So it could be any one of those things.

Donna: (05:04) Right. And another benefit that I see a lot is that with outsource services, many times it’s much more scheduled. So meeting with key team members on a scheduled repetitive basis, it helps to drive accountability and, and progress with the company’s goals. Another thing is someone who specializes in outsourcing generally has a wide range of experience to draw from. So you get not just that experience that that person has, but they also have many resources that they can pull from that’s beneficial.

Paul: (05:42) So they’ve probably seen a problem before, multiple ways know how to solve it. And so you’re not bringing somebody in that maybe hasn’t experienced that. So are there, are there different levels of service that that one could see specifically? Hey, I need you for five hours this month. I need you for 50 hours this month. Is that kind of the different level of services that, that are out there?

Donna: (06:04) Well in a nutshell, yes, there are many different levels of services and we think of it more instead of how many hours do you need? What roles and functions do you need help with? So like I mentioned the spectrum of services from just basic transactional help all the way up to any other, you know, high level of expertise. I can use an example with a client that we’re working with currently. They have had, like we talked about, high level of turnover in their accounting department. So we’re working with them and kind of designing some different options for them. We’ve met with their leadership, spent a significant amount of time thinking about their goals and strategies and what their needs are. And so based on what they have in place, we’ve been able to come up with some options. So they are kind of a newer company growing, have had multiple turnovers in their controller controller spot, but they’ve never hired a CFO and they are at the point where they clearly need somebody to help develop strategy, um, develop those key performance indicators. Somebody who knows how to work with those and who is future thinking. So one option would be, you know, depending on the market, depending on what their budget is, they could hire a controller, get their house in order because they’ve been behind with all the turnover, get everything cleaned up and then just layer in that outsource CFO spot. Alternatively, they could hire a CFO and hopefully develop some of their younger staff into that controller level spot. So they’ve got options. And there’s just the different levels as far as just what their needs are and what their strategy is.

Kim: (07:54) And I think that the point you’re making here is and is important in this economy, and I think y’all mentioned that previously, but you know, with unemployment so low, the, the market is expensive. And so a lot of times people have this perception that outsourcing is at such a significant cost, but in fact it might be more economical because you’re having to pay such a high price for a permanent placement when in fact you might be able to get more in terms of an a team rather than hiring one person for the same or more cost.

Roger: (08:31) So that’s often part of the discussion is that what companies need quite frequently is a little more talent, but the more talent you acquire, particularly in one or two people, the more you have to pay for that. And the need for the company may not be full time. It may be fractional use the term that, that you often hear as it relates to outsourcing. And it’s great description of the service that’s provided because a company is able to access a much higher level of talent for a fraction of that individual’s time and therefore they get much better expertise and advice than they would have access to. And they don’t have to pay for that in terms of having a full-time employee at a much higher rate

Paul: (09:20) And it’s probably, Roger, people will hire a controller. I mean, that’s not what they needed, right. So, so they’re bringing in the wrong skill set. That person may have a great skill set as a controller, but as a company, they don’t know exactly what they need some time. Right?

Roger: (09:32) Yeah. And, and I, I should have a real clever name for that phenomenon, but uh, but I don’t, but yeah, it’s a, it’s simple to understand and it’s that folks will hire based on the budget that they have set in mind, hoping to get a skillset that is not commensurate with the budget line item price that they’ve put in.

Paul: (09:51) I’ll, I’ll look forward to whatever that term is that you come up with.

Roger: (09:53) Me too.

Donna: (09:54) One of the things I like to talk about in that way is does the person know how to answer the questions or do they know what questions to ask? And that’s sometimes a difference in, in that level of CFO versus controller.

Kim: (10:11) And a lot of times when I’m talking to clients and they say they’re, you know, they need to hire a controller or a CFO and I say, well, don’t hire based on where you are today. You know, where are you trying to go? Because if you’re in a growth mode or you’re positioning for some sort of acquisition or whatever that is, you need to be hiring for someone that can take you through those steps, which to your point may be significantly higher cost to bring that person in where you might be able to bring in somebody at a, you know, a lower level in terms of expertise and supplement that to your point, the different levels of services that we can provide. Bring in somebody at a high level but on a fractional basis. And you’re not, you’re not absorbing 100% of that cost permanently.

Roger: (10:55) Yeah that’s a great point, Kim. And often one of the toughest things to, for any business to navigate is periods of extreme growth. And what they often can afford today is not what they need in the very near future, but it’s, it’s then they’re in the chicken or the egg type of quandary and, you know, do they go ahead and pay for the, you know, the expertise that they’re, they’re going to need and really even need today to plan for that hypergrowth that they’re in the middle of or that is coming. And you know, the, the good companies find a way to navigate that, but it’s not easy. And outsourced professional services is a great way for a company to grow into that next level so that they can get the expertise they need and they can get the advice they need to help them navigate those, those difficult growth periods.

Donna: (11:47) Right. And another benefit to that. A lot of times I’ve seen companies in that transition hiring an outsourced CFO and then they end up loving the benefit of having somebody from outside the company with that objectivity, a strong drive for growth and drive for just making traction and progress and accountability that they end up sticking with it for the long term.

Paul: (12:14) That’s an interesting point. Companies hiring folks and those becoming almost yes men, right? Are you, that’s what I’m in. Right? So, Hey, they’re going to say exactly what I want them to say. If I get somebody that’s in there that their interest doesn’t lie with my company, it lies with doing the best they’re going to, they’re going to tell me what I need to know. They’re going to speak straight on, Hey, this is an issue. You need to solve it and it’s not, let’s just sweep it up under the rug.

Kim: (12:36) Yeah, that’s a good point. I have a client that recently did that. They had a full time CFO and said we don’t really have a need for someone to be here on a full time basis. We really only need, you know, 20 hours a week or something like that. So they brought in a fractional CFO and that fractional CFO reviewed their budget going into the next year and saved them, you know, like 15% of expenses just because he was having an objective look at things and didn’t feel, you know, the political pressure to challenge maybe people that were, he was reporting to. And so you’re right, I mean that that is a very good benefit that probably people don’t anticipate coming out of something like this. But it does

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Paul: (13:35) So for those business owners and executives that are listening, you know, who’s the candidate that you want to talk to? What’s, what’s a good candidate for this type of service?

Roger: (13:45) Yes. So that is a great question because who needs to think about this? The profile is often what I was, you know, includes a few groups. One is the, the folks that I was referring to just a moment ago, the, the, the companies that are approaching growth. And you know, that’s a very difficult thing to manage. Obviously cash flows capital structure, I could go on and on with issues associated with growing the business. Another is, and we’ve made reference to this earlier, to the loss of a key person. You know, that is a, frankly, we get a lot of calls for that reason because, you know, owners wake up, business owners wake up one day, losing a person and you know, they have an oh goodness moment where they say, golly, gee, what do I do now? And they, we get a call frequently to, to try to help them out. And um, and so the loss of a person hypergrowth um, realization that, um, what they thought they had in terms of skill set is not quite what they had or what they need. And so augmenting what is there, even if they haven’t lost anyone. Those, I think those three are probably the most common reasons why people wake up one day and look to outsource some of their financial services.

Kim: (14:59) And I would think there would also be a candidate who maybe has a new reporting requirement, right? Maybe they’ve never had to have an audit or review of their financial statements or maybe they’re trying to get into government contracting and have a new level of reporting. And a lot of times candidates that have never been through something like that, that can be a big challenge. And so being able to bring in someone, a fractional CFO, someone with high level experience may be of benefit to, I know we see that a lot with clients that you know, for the first time or having to go through that process, it can be daunting and overwhelming.

Donna: (15:35) Right. Another area where we see clients really appreciate having an outsourced accountant is because they are just wary of having to manage those people, those functions. That’s not what they do. They want to focus on their business. And if they can bring in experts to focus on the finance piece, then that just gives them a big, a piece of mind and takes a lot off their plate. They don’t, they don’t have to worry about.

Paul: (16:06) So speaking of that, is there an industry or two or three that y’all are seeing this kind of grow more than others? I’m sure this is industry agnostic. Everybody needs it, but are there ones that are needing it more than others?

Roger: (16:22) Yeah, Donna and I can both probably speak to that and probably offer different answers that build on one another. But the healthcare industry is certainly one where, you know, it’s difficult, particularly for doctors’ offices, physicians’ offices with multiple doctors, often struggle getting the expertise in that they need in order to maximize their revenue stream. Another is government contractors. You mentioned a moment ago, Kim there are some reporting requirements and some, you know, industry nuances that are important to navigate correctly. Professional service firms are another, it’s that similar to doctors, but, you know, I’m thinking more here of law firms, architecture and engineering firms and the like manufacturing is another where we see a lot of interest. And then some other specialized industries like the real estate area. You know, our industry where we see folks who may be developers of one sort or another or even property managers who have called us because they’ve said, God, you know, gosh we sure could use a little more bench strength here. Donna, what have you seen?

Donna: (17:36) Sure. Your list is just about spot on with what I had in mind, but a couple of others I would add are, I’m in the not-for-profit segment. Many times, their reporting is different. It’s more complex, it’s grant management, budgeting for those overlapping years. It can get pretty complex. So, we see that they really struggle and like we talked about before, can’t necessarily even afford to hire a full time CFO, but they need some good guidance. And so they’ll outsource that piece along with accounting functions since usually since they’re more complex, a lot of not-for-profits want to outsource the whole thing. So that’s one area. And then we just see a myriad of small to medium sized businesses that just either aren’t ready to hire or, like I mentioned before, just don’t want the headache of dealing with that. They just outsource the whole thing.

Paul: (18:40) I’ve always heard doctors that I’ve worked with in the past. I always say, I’m here to treat patients. I’m not here to perform a reconciliation or report on my finances. So, I mean that, that kind of speaks to the healthcare piece.

Roger: (18:50) That’s a great point. And let’s not limit it to doctors because often a business owner or a high-level management is in the position that they’re in because not because they’re good at accounting functions or administrative functions, it’s because they have expertise in the industry in which they’re working. And if we can help them and unshackle them from the duties associated with administrative and accounting work and turn them free so that they can run wild in whatever area is their strength in their industry, everyone wins. The provider of accounting service wins because they’re helping and supporting that and certainly the business and business owner are winning because they’re then concentrating on what’s important to help grow their business.

Kim: (19:36) That’s a really good point. So, I’m a business owner, I’m a CEO and I’ve made the decision that I want to pull in this integrated financial solutions team. What, what type of questions should I be asking when I’m looking for that right provider?

Donna: (19:56) I would say that you should evaluate any outsourced service or person the same way you would an employee. You know, it needs to be a good fit personality wise. Of course you need to make sure they have the expertise that you’re looking for. A big thing, a thing is just key to success is evaluating the communication. How is that going to happen? Not just responsiveness but security as well. Because we’re talking about somebody coming in from outside your company, how are they going to write, make sure your data and your information is secure

Kim: (20:37) And you’re going to tell him to talk to Paul, right?

Donna: (20:39) That’s right. So, Paul, that’s a great segue into another point I’d like to make about the skills that an outsourced accountant should bring with technology changing like it is and so rapidly it is crucial to stay on top of those because there’s just the disruption of new technologies. You have be thinking all the time about what’s a better way to do this? How can we automate this? Because there’s just so many opportunities there that we miss out if we’re not adept at keeping up with technology.

Paul: (21:17) And you need to make sure that, that that thought process is, you know, a year out, two years out, some people say I need a five year it strategy. No, because in five years it’s going to be completely different and there’s going to be things available that we didn’t even know about. So having somebody else that helps you with that piece is it’s crucial.

Roger: (21:32) You know, I think there’s one other item that there were aspect to, uh, the, the question you were asking, which is what should I ask of a potential provider of these services? And I, I think, and Donna referenced fit and I think it’s important to keep in mind not just cultural fit, but also you know, the fit relating to expertise because we, we spoke earlier about the spectrum or continuum of, of accounting functionality and that goes from the most basic level of clerical work through controllership all the way up to strategic CFO type of work. And I think that a business owner needs to very candidly ask of him or herself, what are the talents that I currently have in my staff group and what do I need relative not just to today but also to tomorrow. So I think that that spectrum or continuum of accounting work or services is very crucial for business owners to think about as they’re, you know, interviewing, uh, if I can call it that potential service providers because they need to be sure that the expertise they need is the expertise they are seeking.

Kim: (22:45) Right, very clear on expectations. And a lot of times someone may have a title that they think they want, but when you actually get into the details of the specifics of what they’re looking for out of that person, that isn’t the position that they really need. And so I think being clear and as you said, candid about what they have and where their gaps are and what they’re looking for, that’s a very necessary thing.

Roger: (23:10) And it’s often true. The, the old adage is so true, you know, you do get what you pay for. So if you, if you pay clerical rates, you’re not going to get controllership functionality and you can move on up the spectrum and have that same conversation.

Paul: (23:26) That’s a great point. So here on the wrap, we’d like to wrap it up in about 60 seconds. If you want to leave, you know, just a, a sentence or two with, with our listeners. You know, what, what is that about? outsourced accounting services.

Donna: (23:38) I just piggyback on what Roger just said, that businesses need to take a good look at what your needs are, what your roles and skill skillsets that you currently have are and what might be missing. And if you don’t know or maybe don’t know how to evaluate that, consult with an advisor to help you identify the best strategy and goals to help your business grow.

Roger: (24:06) Yeah, and two words that come to mind for me are risk mitigation and planning for the future. So you know, as, as anyone’s thinking about services that they need or are considering outsourcing, you know, think about the benefits of risk mitigation and how best to plan for the future.

Kim: (24:23) This has been great. Thank you Donna. Thank you Roger for joining us.

Roger: (24:26) Thank you.

Donna: (24:27) Thanks for having us.

Outro: (24:26) And that’s a wrap. If you’re enjoying the podcast, please leave a review on your streaming platform to check out more episodes, subscribe to our podcast series, or make a suggestion for other topics to cover. Visit us at warrenaverett.com/thewrap.

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