outsource accounts receivable Archives -

How Accounts Receivable Outsourcing Improves Cash Flow

The funny thing about being a small business owner is that the more successful you are, the harder things get to manage. Take your accounting, for example. When you are a small operation, it is relatively easy to keep track of things like billing, collections, and accounts payable. However, as your business grows and has more moving parts, successful owners need to transcend their earlier roles from working in their business to working on their business. In a nutshell, that means letting go of certain tasks to concentrate on managing sales and operations. If you don’t, you just might be so successful you go broke. How could that happen? Without proper oversight and controls, the increased costs of payroll and materials a growing business requires could lead to your company spending faster than your accounts receivables can replenish your cash and literally starve your business.

So hiring an outsourced CFO to handle your accounts receivable function can be a cost-effective way to improve cash flow. Why? Because with proper oversight from a professional, you can have greater controls in place to track and report on aging of receivables and develop effective collections strategies. In addition, your outsourced CFO can help you balance payables with your receivables in order to ensure that sufficient cash flow exists to manage your growth needs without damaging your vendor relationships.

An outsourced CFO can also help you develop a more strategic way of conducting your business, at least from a financial point of view. As your business is always on the move, there will be opportunities requiring capital investments, whether these decisions involve equipment purchases, leases, or vehicles, significant financial decisions are best made with the big picture in mind. A CFO can help you develop a plan for capital investments, including helping to source advantageous financing, timing of purchases that best match your cash flow, and taking advantage of tax opportunities, such as the Section 179 deduction, a rule that allows you to deduct larger equipment and vehicle purchases in the year purchased.

It all starts with improving your books and records. That means using reliable software to maintain control of your expenses as well as your billing. Doing so will provide a valuable history of your business that is so critically important for planning your future financial needs. Those timely entries into your bookkeeping system also help manage cash flow issues by replacing guesses and impulse purchasing with solid facts and greater financial discipline.

The CFO can take this financial data and, together with payroll data help you to develop vital statistics for your business. For example, determining the true cost of your products and services, your profit margin, and determining if your costs are in line with your pricing and profitability. That CFO can also use this reliable data to help you manage your receivables.

Wouldn’t it be comforting to know that your cash flow is being monitored and maximized? Wouldn’t also be comforting to know that you are managing your receivables to ensure your customers are not using you as their bank?

If the idea of managing your receivables sounds like a good idea for your business, and the concept of hiring an outsourced CFO is worth discussing, feel free to reach out to our firm for a no-obligation consultation about your business and your unique situation.

Accounts Payable team working example image

Outsourcing Accounts Payable: 5 Things You Should Know Beforehand

Outsourcing is a terrific way to manage your expenses while providing your company with much-needed expertise that is both reliable and up to speed on the latest software, regulations and best practices.

The outsourcing option is excellent for young and emerging businesses that don’t have the staff resources. It’s hard for a lean organization to effectively develop and manage the accounting function; particularly when a misfire with a task like payables can impact your bottom line and disrupt/delay cash flow. From coding errors to botched payroll, there is no room for amateurs when it comes to your small business’s accounting needs. After all, who needs dunning notices from creditors, or worse, late payment notices from the IRS.

If you are thinking about hiring a company to handle accounts payable, or even payroll and other bookkeeping matters, it is important to note that all outsourced service providers are not created equal. From experience to capabilities and pricing, outsourcing providers vary wildly. With that in mind, before you hit the search engines to shop for an outsourced accounts payable service, here are five important matters to consider before you pull the hiring trigger:

#1 Security

Every company should have some sort of disaster plan. Fires, power outages, even floods can destroy a physical business in minutes. Without a plan—and proper system back-ups—your company is dangerously exposed. Outsourcing is an excellent solution for keeping operations running smoothly when disruptions threaten the flow of things. That said, will the outsourced accounting service you select deliver their solution on a secure platform? Will your data be safe/backed up in the cloud? How difficult will it be to retrieve information if you need to make a change?

#2 Continuity

One of the key benefits to an outsourced solution is that your financial information is not locked in the mind of an employee that can leave on a moment’s notice. Will your outsourced solution have back-up staff and common procedures in the event of a staff change? Do they follow common protocols to ensure your bills get paid, checks prepared and accounts updated without disruption?

#3 Service History

Since your outsourcing selection will be a new relationship, there is really no guarantee how well they do their job until you experience their service first-hand. For this reason, it may be valuable to check some references. Are there clients that you can speak with about the timeliness, accuracy, and attitude they provide to others? While no one offers a potential client a bad reference to speak with, there is still value in speaking to people who depend on this outsource to learn how they do their job.

#4 Expertise

It may seem obvious, but there are many companies on the web that offer outsourced bookkeeping, but the staff they hire are less than knowledgeable when it comes to accounting, or even math, for that matter. It is always worthwhile to ask what other kinds of services the company can provide in order to learn the depth and breadth of the expertise available in their company. Can they help you rebuild your chart of accounts if it is not giving you the reporting you need? Can they help you run reports that add value to your management? If bookkeeping is all they do, the service might not be right for you, particularly if you are concerned with regard to the tax-impact of how certain accounting is performed. In addition, you more than likely will have questions down the line that require some accounting muscle to resolve.

#5 Other Services

As we mentioned earlier, your outsourced accounting service is a small, but important piece of your financial puzzle. You can really leverage the value of a smart outsourcing firm if they offer other services, such as reporting, tax planning, and financial planning to offer if and when you need them.

Conclusion

Armed with the information above, your selection process should be a successful one. However, if you still feel unsure, feel free to contact our office for a no-obligation conversation about your needs, budget, and timeline. We welcome your thoughts.