Managing your finances is one of the hardest things about running a business and if you get it wrong, you’re going to be in big trouble. One of the most common reasons that new businesses fail is that they don’t manage spending properly and they run out of cash before they’re bringing in enough revenue to cover all of their overheads.
That’s why accounting is so important to all small businesses. If you don’t have any experience in business finance, trying to handle it all on your own is never a good idea. You’re far better off outsourcing it to a professional accounting company. A lot of business owners are reluctant to outsource accounting in the early stages because they consider it an unnecessary expense that they can avoid.
In other areas of your business, that might be the case, but it’s a different story when it comes to accounting. These are just some of the reasons why you should outsource your accounting.
More efficient use of time
Managing your time effectively is key to business success, especially in the beginning when you can’t afford to pay a lot of staff members (visit www.businessknowhow.com for some great time management tips for small business owners). That means you want to avoid any menial tasks that take up a lot of your time because they take away from the bigger picture elements of the business like new product design or marketing etc. Reviewing all of your spending, writing reports, dealing with payroll, and collecting receipts takes a lot of time that you could be spending doing other things around the business. But if you outsource it to an accounting firm, you’re not wasting all of that time.
Often, people think of outsourcing as a big expense but the alternative is paying the salaries of an in-house accounting team. If you decide to do neither and just try to do it yourself, you’re likely to make a lot of mistakes that will end up costing you a lot of money. Outsourcing to an accounting firm is a lot cheaper than paying those salaries (visit www.approved-accounting.co.uk to get an idea of pricing) and you can avoid any costly mistakes. For example, if you get your taxes wrong, you’re going to end up with big fines so the idea that outsourcing is more expensive isn’t accurate whatsoever.
This is a simple but important reason that outsourcing is your best choice, they know more than you do about accounting. A lot of people think that they’ll be able to manage it because they’re good at handling their own personal finances and they’ve read a couple of books on business finance, but there’s a lot more to it than that. If you outsource to an accounting company, you’ll have access to a whole team of very experienced accountants to handle your finances for you. That means that they’re not likely to make any of the same basic mistakes that you will, but it’s also a bonus because they can give better advice. If you find yourself in financial trouble, you’re probably not going to know how to get out of it. But an experienced accountant that has worked with countless businesses in the same position will be able to help you formulate a plan to get your finances back in order and save the company. In short, hiring an accounting firm could mean the difference between success and failure.
Reduced chances of fraud
Studies show that the most common victims of fraud are small businesses that don’t have a professional accounting team on hand. This is because they don’t have a professional there that can look over the books and pick up on any inconsistencies. If you don’t really know what you’re looking for, fraud can go undetected for a long time and you’ll be losing a lot of money, sometimes in the hundreds of thousands. But if you’ve got a good accounting team keeping an eye on your finances, they’ll pick up on anything untoward right away and put an end to it before you lose any significant amounts of money.
If things are going well, you should be thinking about expanding the business. But there are a lot of financial hurdles to overcome when you’re doing that. If you can’t manage spending effectively and find the capital that you need to fund the expansion, you’re likely to overstretch yourself and the business could fail. But if you’ve got a good accounting team to draw on, they’ll be able to help you write a solid financial plan for expansion to make sure that doesn’t happen.
If you have good accounting experience then you can handle your finances on your own, but if you don’t, it’s always best to outsource.
For more information on outsourcing accounting visit PKF Cooper Parry.