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How Outsourced CFOs Can Keep Bookkeeping From Ruining Their Clients


When it comes to a company’s bookkeeping practices, the business will only operate as efficiently as the processes that are in place. Proper bookkeeping is essential to the health of any company. If it’s done poorly, it can ruin a business gradually through higher costs, canceled vendor services, and lost profits. As you move into a small or midsize business to oversee its financial affairs, consider reviewing the company’s books and bookkeeping procedures to make sure that the division is operating as it should be. A reliable bookkeeping system is a basis on which all of a company’s vital financial information is built and on which outsourced CFOs can rely to make intelligent decisions.

How Can Bookkeeping Ruin a Business?

Bad bookkeeping can ruin a business in a number of ways. For instance, a company may unknowingly fail to pay its bills on time, bounce checks or pay vendors the wrong amounts. This situation tends to snowball because payment problems are likely to cause the company to lose vendors and suppliers. When vendors and suppliers abandon a business, it won’t have the merchandise or the products that it needs to serve its customers, which will ultimately result in lost sales. Even a temporary production delay can cause lasting damage to a company as its customers will turn to competitors for their needs. Once they leave, they may never return.

When inadequate bookkeeping causes a company to pay its bills late, credit problems may ensue. This is a major concern for small and midsize businesses as they may be more likely to need a loan. Credit problems trigger higher interest rates as well as trouble regarding loan approval.  

Bookkeeping can also ruin a business by causing missed opportunities. If a business owner believes that his or her company is making less money than it is actually earning, then he or she may delay expansions or pass up lucrative investments. It also prevents fractional CFOs, from operating the financial side of a company efficiently. 

Legal problems are another consequence of poor bookkeeping practices. When a company’s books are kept inaccurately, legal problems such as late or unpaid taxes can occur. In some cases, incorrect deductions are put in place. If your company doesn’t have the funds to pay its vendors, they may sue for the money or a lien could be placed against the company.

Bookkeeping Solutions

When an outsourced CFO arrives at a new client company, they should first be sure to review the business’s current bookkeeping practices to confirm that they are operating properly. When it comes to bookkeeping, many companies have common problems. The following tips will help you correct these issues. Common problems in bookkeeping include:

  • Accounting inefficiencies
  • Lack of documented processes and procedures
  • Too much power resting with one person
  • Improper or non-existent accounting technology integrations

Accounting Inefficiencies

Bookkeeping inefficiencies include inaccurately classifying expenses, adding transactions to the wrong period and forgetting to save receipts. When examining a client’s bookkeeping and accounting, spot check for inefficiencies by flagging all major accounting activities for review. Ask the people involved in executing the tasks to describe the functionality of the activities. Often your first resource for finding opportunities for improvement is to simply ask the people currently doing the work. 

Lack of Documented Processes and Procedures

Typically, accounting inefficiencies occur due to a lack of document processes and procedures. While this may be a big undertaking, working with professional bookkeeping staff to create and document processes for each accounting task will ultimately be one of the best ways to improve bookkeeping and prevent major problems. It will help you spot potential risks, improve data accuracy and setup a safety net of checks and balances.

Too Much Power with One Person 

Complete an assessment of the company’s workforce to confirm whether one person is in a spot to pose a major risk to the health of the company. If you come across this situation, make changes by separating job tasks. For instance, the employee who is in charge of approving the business’s purchase invoices should not be the one who enters it into the accounting system. In addition, this same person should not be approving the payment. Modern processing systems offer an option that allows you to set up different job duties for each employee within the bookkeeping program.

Put an extensive review process into place. For instance, require all of the company’s invoices to go through accounting before sending them on for payment approval. If the company is small and doesn’t have an accounting division, outsource this service to a firm that will separate processing duties and put controls in place.  

Improper or Non-Existent Accounting Technology Integrations

Today’s accounting technology options have made possible a plethora of advanced integrations to support outsourced CFOs, two-way data syncs and comprehensive reporting. However, it also opened up an onslaught of problems and complications related to implementing and managing accounting technology. With untrained bookkeepers managing highly advanced systems, companies often find themselves in a bind to leverage their systems to produce the reports they are capable of.

When companies find themselves in this position, outsourced CFO services can provide a significant advantage by leaning on the resources of outsourced bookkeeping services that specialize in accounting technology implementations and management. Unlike internal accounting staff, outside accounting service providers like outsourced CFOs keep on top of all accounting technology innovations, are tasked with staying abreast of new developments and know key industry leaders in charge of research and development for new applications.

Policy Considerations

To keep the company profitable and organized, focus on the policies that are in place for its bookkeeping procedures. To ensure quality, implement a companywide approval and review process that requires everyone to abide by a standardized set of bookkeeping guidelines. Confirm that the company’s policies include the requirement that financial employees are to follow the business’s commonly accepted accounting practices and principles.

Upon taking on a new client company, assess the bookkeeping manual and training for bookkeeping staff. The document should include procedures for managing company transactions. If they’re not already in place, set up the company’s accounting policies, methodical procedures and standards. This step will ensure that your business’s daily accounting activities remain steady. With step-by-step procedures in place, you can trust that your company’s bookkeepers will complete their daily tasks consistently. This also provides a detailed record of the business’s operations while creating a comprehensive monthly benchmark of its performance.

Your company’s bookkeeping policy manual should also include details about who within the business is authorized to sign checks, make bank deposits, complete wire transfers and process credit card disbursements. Make sure that the manual also expresses how the company’s payroll should be managed. Above all else, ensure that the bookkeeping efforts are leading to the production of the detailed reporting and financial insights that you as the outsourced CFO require to make key decisions. 

When to Bring in the Experts

Modern-day technology and innovations have made it possible for small and midsize businesses to thrive. Because these companies tend to be run by just a few employees, outsourcing has become a needed commodity. As you begin the task of managing a company’s financial operations, knowing when to outsource will increase the value that you bring to the business.

To keep a company operating profitably, consider outsourcing bookkeeping services outside the core competencies that can be better done by external professionals than limited internal staff. You can even outsource a company’s bookkeeping processes to ensure that it gains better reporting and on-time service as well as the peace of mind that comes with knowing that its financial division is secure.

What Are CFO Services?

As a professional outsourced CFO, an outsourced bookkeeping service provides a full range of accounting and finance services to its clients. It is often required that you have experience in at least one other field in addition to accounting, such as general management or public accounting.

The most important aspect of what your company does is providing financial services to other businesses. It’s your job to work with the accountants, CPAs and bookkeepers of your client companies to provide them with financial insights that help them make educated decisions for their business.

In addition, as a CFO you will often find yourself conducting an analysis of historic costs, revenues and expenses or researching potential acquisitions by a client company. You can also provide your client with a list of financial reports so they better be aware of the status of their business at all times.

What Skills Are Required?

A professional outsourced CFO needs to have expert knowledge in many fields, including accounting software applications and data analysis programs. He or she must be able to multi-task, prioritize, communicate well and have the ability to work in a fast-paced environment.

The CFO needs to be able to provide leadership skills for his or her team, as well as possess excellent interpersonal abilities. He or she must also have strong organizational tools that will enable him or her to handle difficult tasks under stressful situations. The outsourced CFO professional must also know how to communicate financial information in a way that is both understandable and actionable.

When discussing your company with potential outsourced bookkeepers, you will want to determine the following things:

- What types of services they provide, including cash flow management; general ledger; revenue recognition; payroll administration; accounts payable; accounts receivable; purchasing card programs, budgeting and forecasting.

- What software the bookkeepers use for their jobs. You will also want to look into whether or not they are up to date on all relevant systems currently in use by businesses today.

- How do they handle accounting reconciliations? It is important that your outsourced bookkeepers are experts in your preferred accounting software.

- What training does the outsourced bookkeeping service provide its employees? The level of quality training that each outsourced bookkeeper receives will be reflected in how well they perform their jobs and in their ability to handle client needs.

- How much experience does the outsourced bookkeeping service have with outsourced CFO services? Look for an outsourced bookkeeping service that has extensive experience in the field of finance and accounting.

- How does the company handle different time zones? This is particularly relevant when you consider outsourcing bookkeeping services overseas. Your outsourced bookkeepers should be able to operate in any time zone with no problem, including your own.

- What are the company’s policies on confidentiality? An outsourced CFO service is likely to deal with highly sensitive client information of all kinds. You will need to ensure that your contract with each bookkeeping agency makes it clear how this information is to be handled.

Why Hire an Outsourced CFO Service?

Outsourced CFOs can provide your business with a number of advantages, including:

- Improved cash flow management, financial forecasting, and accurate daily and monthly financial statements.

- More time to focus on other areas of your business growth.

- Professional expertise in the field of finance and accounting. Outsourced CFO services will report directly to you based on your needs.

- No need to train new employees or search for replacements when key employees leave. You can be confident knowing that all the outsourced bookkeepers in your company are well trained and reliable.

- Outsourcing CFO services gives your business access to knowledge, skills, and experience that would otherwise not be available to you in-house.

- Ability to trim operational costs by outsourcing your bookkeeping services.

- Improved cash flow management, increased productivity and greater access to financial information all contribute positively to your business’s bottom line.

- You will reduce the chance of errors that are commonly made in manual data entry, leading to improved accuracy with your accounts.

- Outsourcing your bookkeeping services will provide you with more time to spend on other areas of your business.

- A CFO service provider, or outsourced CFO, is able to draw up budgets, track spending, and spot financial issues before they become problems for your company.

General Considerations To Take Into Account When Hiring Your New Outsourced CFO Service

- Determine your company’s budgeting needs. You need to ensure that the virtual CFO services you choose is able to deliver what you require in terms of monthly and yearly projections.

- Find out if your new outsourced CFO service has experience dealing with different accounting methods, such as cash or accrual basis.

- Determine if the outsourced bookkeeping service provides financial reporting services that are fully customized to your company’s specific needs.

- Get recommendations from other business owners who have used outsourced CFO services successfully.

- Look for an outsourced bookkeeping service with excellent communication skills and strong customer care practices.

- Find out if the outsourced bookkeeping service you are considering holds relevant accounting certifications and can provide the financial reporting you require, especially if you work in regulated industries.

- A Chief Financial Officer that offers flexible hours, excellent customer support, and easily accessible services will be a big help to you as your new management accountant.

Some Insights Into a Successful Hiring Experience

- Compare a minimum of three potential candidates before making your final selection.

- Discuss your current tax and financial issues with each service provider to make sure they are able to provide the solutions you require.

- Make sure each outsourced CFO service you consider has enough experience in the field of finance and accounting to meet your particular needs. Pay particular attention to the financial forecasts and financial planning services available.

- Ask to see examples of previous work that the outsourced CFO services you are considering have undertaken.

- Check for availability, turnaround time, and response speed before selecting outsourced CFO services for your business.

- Ensure each candidate is able to provide professional references from former clients.

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