As a start-up, usually the founder (one or more) are wearers of many hats from that of Strategy to Finance to Administration. It is a common practice to outsource the accounting function at the incubation state of the start-up and in most cases it is an efficient solution to ensure that data gets properly recorded and necessary compliance managed through a reliable agency.
However, as the enterprise grows in terms of business and staff, this arrangement should ideally be revisited to ensure that it still remains as efficient as it was at the nascent stage of the enterprise.
How does one decide? What are the signs which can indicate whether or not it’s time to bring the accounting and finance team in-house. Here are some practical pointers that can help you decide.
1.) Bills bills everywhere! – Do you notice a significant increase in approval requests for payments and are losing track of what you paid for and what is pending or is your administration staff struggling to keep up with basic book-keeping responsibilities. If either of this is happening it means the arrangement is not efficient anymore.
2.) Real-time information – Increase in instances where back-of-the-napkin calculations are no longer good enough and decisions are stalled because real-time information is not always available through an outsourced service. For e.g. you are negotiating with someone for a senior level position and need to now if you can afford to pay her the amount she is quoting but are not able to immediately agree because you don’t have the data to back it up, you might loose a good resource.
3.) Growth and opportunities – When you start missing out on or delay in responding to growth opportunities due the limitations of an out-sourced arrangement which is not dedicated exclusively to your enterprise and its growth. For e.g. there is a proposal that needs to be sent urgently but expenditure data to estimate and quote fees is not available immediately, you may end up losing the opportunity.
4.) Team complaints – When the various teams start complaining that their performance and response time is suffering due to delay in getting the necessary information of budgets, sales, expenditure etc.
5.) Organisational integration – When the scale of the enterprise reaches a point where an integrated view of Finance and business is critical to measure performance and profitability/ impact as well as team cohesiveness. For e.g. If you are a B2B trade platform, your performance measurement is done both through the amount of funds generated and passed through on the platform as well as the number of active users and level of engagement, it is imperative to have integrated indicators.
6.) Business of money – When you are a company in the business of money, where stakeholder money and data passes through you, trust is crucial. An outsourced arrangement may be risky due to confidentiality reasons.
The decision to bring accounting and finance inhouse is in addition to be being a factor of scale, also depends of the timeliness of the decision. Do not leave it to the last moment, if you see one of more of these above indicators striking true in your enterprise, it’s time to make the choice.