In the fast-paced world of technological advances and startups, managing the accounting function effectively is crucial for sustainable growth. Businesses in the early stages of their operations, as well as those growing and scaling up, can find themselves facing challenges related to employee hiring and retention, adapting operational processes to meet changing trends and the pace of growth, and the increased importance of in-depth accounting expertise and accounting technology utilization.
The technology industry has specific accounting needs due to dynamics that don’t exist in other sectors. Intangible assets, constant technological change, subscription metrics and revenue recognition, capitalization of development costs, equity-based compensation, and taxation are just a few nuances specific to the industry.
Overall, outsourcing can be a strategic tool for growth and efficiency, helping emerging tech companies navigate the competitive landscape and achieve their goals. Outsourced accountants can take on a multifaceted role, from supplementing the existing in-house accounting team and handling specific tasks (co-sourcing) to overhauling the entire accounting function (full outsourcing). Outsourced accounting teams can assist with:
- General Ledger Management
Outsourced providers often have access to modern cloud-based accounting platforms, which they can help set up and implement to align with the business’s needs for reporting, compliance, and strategic decision making. Our article, “Guide to Accounting Platforms for SaaS Business Management,” provides a short list of general ledger platforms and their benefits and considerations.
- Accounts Payable
Outsourced teams often use modern accounts payable cloud-based tools to help reduce manual processing and payment issuance while maintaining approval workflows and audit trails and mitigating the risk of vendor fraud. Outsourced accountants can assist with evaluating and recording prepaid invoices and capitalizing assets, helping the business properly report balance sheet and income statement items.
- Accounts Receivable
Accounts receivable is a vital function for each business, especially in the growth stage, controlling its cash flow, revenue generation, and client relationships. An outsourced team can assist with recording customer payments, following up on past-due invoices, and streamlining collection procedures. The team also can help review the integrations of existing third-party billing, subscription, and customer relationship management (CRM) platforms with the general ledger system to support data integrity.
- Monthly Close & Reporting
Monthly reconciling of bank, credit card, and other balance sheet accounts, evaluating loan statements, and making adjusting journal entries, especially related to revenue recognition, are just a few areas a well-rounded outsourced accountant can assist with. Leveraging modern technology, the outsourced team can set up dashboards, including custom reporting and key performance indicators (KPIs), and help produce accurate and timely reports for internal management, thus enhancing business decision making.
Increasingly, outsourced accounting teams can deliver advisory and consulting services that go well beyond traditional bookkeeping. These teams often work with trusted tax professionals to provide tax return preparation and planning alongside core accounting support. Outsourcing professionals also can appraise existing accounting technology stacks and processes to recommend updates to help improve efficiency and automation. In addition, advanced outsourced accounting teams can leverage their network of accounting technology and payroll service providers, offering emerging tech companies access to solutions that can bring measurable value.
The following are some of the direct benefits of outsourcing your accounting functions:
- Access to talent – Outsourcing can provide access to a wider talent pool not restricted to industry expertise in certain geography. Instead of hiring an in-house worker, an outsourced accounting team often works remotely and can have access to all systems necessary to complete the accounting tasks.
- Focus on core business functions – Innovation and developing new products are often top priorities for emerging tech companies. By outsourcing the back office, key team members and management can concentrate on primary growth initiatives.
- Risk management – Outsourcing firms implement enhanced security measures such as providing secure cloud storage and encryption to mitigate the risk of data breaches and help protect sensitive and confidential information.
- Cost efficiency – Hiring, training, and retaining an in-house accounting team can be quite costly. By outsourcing part or the entire accounting function, the emerging tech business has the flexibility to only pay for the services needed.
- Flexibility – Accounting needs change with each phase of business growth and market conditions. Outsourcing allows companies to scale up or down while maintaining the level of support they need.
- Technological advancement – Outsourcing firms can leverage modern accounting platforms and often offer a discounted subscription to outsourcing clients. Outsourcing teams are trained to use the technology as part of their service delivery, with flexibility to adapt if specialized technical needs arise. Emerging tech companies can benefit from access to cutting-edge solutions providing real-time financial insights without the need to maintain their own accounting technology infrastructure.
Businesses should consider what accounting tasks and cycles would be beneficial to outsource based on their needs. Setting up and communicating expectations and timelines are very important steps in establishing a well-functioning outsourced accounting services relationship.
Outsourcing accounting functions for startup technology companies is a strategic move that can help enhance efficiency, reduce costs, and improve financial accuracy. By leveraging specialized industry knowledge and advanced technology, outsourcing providers offer services that can empower emerging tech companies to focus on growing their business and innovating products.
For more information regarding outsourced accounting or for any questions, please reach out to a professional at Forvis Mazars.