The benefits of outsourced accounting
Outsourcing can be a big decision, especially when you’re just starting out. At this point you want as much as possible as close to your chest, feeling in ‘control’. At this stage, your company is like a child or a small plant; you are responsible for growing and nurturing it. We get it.
Avoiding Cheap and Risky
In the beginning, the non-income generating functions of your business are often done as cheaply as possible but often carry the highest risks.
When you are running your company and you’re in your first couple of years it is highly unlikely that you will have an accountant/bookkeeper in your office on your payroll. You may have a co-owner or founder acting as Finance Director (FD) or Chief Financial Officer (CFO) and understandably they should be working on a bespoke financial strategy if that’s relevant to your company. This is great, having someone that can zoom in from a strategic level and set up a system exactly how they want it at the most granular level is awesome. So, 99% of the time you’re probably safe.
…If you don’t have an FD or CFO and you don’t have an accounts person, you might have a PA or a close relative or friend that might look after your books. This can be effective, if they are good. But can you be sure they are? Moreover, if your company runs something slightly more complicated than sales receipts in, expenses out, how much does cheap actually cost you?
Say you trade internationally, or you run a client account, or your revenue gets funded at an intervention rate of 45% via taxpayer-funded grants? Doing it on the cheap is high risk and could lead to serious mistakes.
At Mushroom we replace the idea of you getting a cheap solution with a neat solution.
Get a Better Understanding of how Accounting Works
Back to the financial strategy part: If you are reluctant to outsource due to fear of loss of control then you may not fully understand how your accounts technically work or what is and isn’t compliant with VAT rules, PAYE, NI or a whole host of other things. Imagine your PA, close friend or relative plugging away at the numbers without asking questions for fear of looking stupid or jeopardising your relationship? It doesn’t bode well for the long-term success of your company, nor feeling comfortable about the financial stability of your firm.
When you outsource, you turn essentially an employee-employer, or friendship-based relationship into one based on a contract. A good supplier (like us 🙂 ) will ask you questions like “why do you pay your IT bill a couple of days after you receive your invoice, rather than to your standard terms of 30 days?”
You’d be surprised at the number of great business owners with great companies not knowing what we were talking about, let alone those providing a mediocre answer!
So often at Mushroom we tend to get entrepreneurs (who just want to sell or do what they do best) levelled up on their financial knowledge as well as giving them a small cash-flow boost each month.
Good outsourced accounting firms have a system of supervision that give you enterprise grade resources at very affordable prices.
Accounting is one job area but done well you are combining a whole range of skill-sets:
- posting income and expense items effectively
- applying VAT correctly
- chasing outstanding money
- spotting poor budget management
- paying salaries and administering the payroll accurately and on time
- ensuring all elements of a company’s financial system is running in accordance with the strategy of the firm
- complying with all relevant tax and sector specific regulations
Even as a small business owner, in order to have a faultless finance department you need a Financial Controller, Sales Ledger Clerk, Purchase Ledger Clerk, Payroll Administrator, Credit Controller and if you want good regular information you might need one of these people to be good at producing reports or hire a Management Accountant as well! Big salary bill huh?
The truth is when you outsource your accounts to Mushroom, you get:
5% of a Financial Controller, 15% of a top-quality bookkeeper, 2% of a Payroll Administrator, and 5% of a Credit Controller. So that’s 27% of one accounting person working for you on a full-time basis.
This is an enterprise grade team you might find in a 5 year old company turning over £2-10m per year.
Since you don’t (currently) need at least 4 people on a full-time basis you could get an equivalent service for around £8,000 a year, or £667 per month per year rather than £10,000 per month!
Not a fortune for enterprise quality really, is it?
Accounting isn’t just about counting, it’s about accountability. Accounting actually means holding a company to account for all the income it receives, expenditure it makes and taxes it pays. Removing that burden from your in-house demands and working on a contract basis instead means you can be properly in control. You, the customer, are king. A king without admin is a happy customer, too.
Find out more about Mushroom’s Accounting offering here.
Still not sure about outsourcing? Read more here and get a FREE review of your Accounting, HR or Privacy needs to see what these simple solutions can do for you!