Outsourcing your accounts

Tim Paley extols the virtues of outsourcing your accounts


A new venture faces an urgent decision to make or buy in a back office and accounting function after winning a major contract to set up ‘concession stores’ throughout its client’s national chain.

Initially it is opening 40 outlets before rolling out to 500 across the country. Not only that, the client expects this company to move fast, with the first sites up and running in 60 days and a total of 40 in 120 days.

Once the euphoria has subsided, the reality of such a quick start hits home. In cases like this there’s a lot to organise: accounting; setting up the control processes and being able to monitor the business so control of stock could remain tight; getting the VAT right; making the PAYE returns on time; and keeping the bank onside.

These challenges are faced by every new business and there are a number of good solutions: ‘build your own’; share a facility; ask an accountant; and others. However, urgency and the need to be in control from day one means ‘build your own’ is not an option. A traditional offering from a firm of accountants would be more geared towards management accounts than operational accounting and piggy-backing on a similar company could mean sharing information with a potential competitor.

Under these circumstances buying in a full accounting service seems to work well. With variable costs and a readily scalable function, it provides immediate access to work, proven systems and requires a low capital expenditure. There is also the potential benefit of being able to satisfy the bank with visibility of how the initial loan was spent. A good solution all round.

In the second scenario a small, but growing, established services company deals with the challenge of updating its accounting processes (without disruption and upfront cost) while also freeing up time for some of its key staff.

Automating payments

This growing media consultancy, by and large, has its accounting needs sorted. Each month one of the partners spends a day or so updating the spreadsheets and posting entries into one of the leading small business accounting packages. However, time spent on accounting is beginning to increase. So, as the number of suppliers and cash entries rises, it seems time to automate payments and move to online banking.

In looking at options the company does not want to pass over control of invoicing (the directors feel invoicing clients requires the personal touch) and the volume of invoices received is still small enough to be inputted on the day of receipt. Plus the idea of batching them for processing by a bureau is seen as likely to add, rather than subtract, the amount of time required.

Also, it is recognised that direct entry into the accounting system, rather than posting totals from a spreadsheet, would save time and improve analysis. One concern is being sure proper backups are taken regularly (a competitor has almost gone to the wall when its system crashed with no back-up and debtors had to be recreated from scratch) and there is still the nagging need to do something about the management accounts.

Again, in this scenario, outsourcing can really pay off with the idea of using a hosted accounting system which provides online access via a web browser, a particularly good solution. The standardised processes would be both more efficient and offer stronger controls, and the business would have access to a portion of the time of a good financial controller – someone who, if you could recruit them, would have added £60,000 to the payroll. Once again outsourcing makes sense.

Tim Paley is one of the founding directors of outsourced accounting services bureau BizzServ FM. www.bizzservfm.com

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