Start-up Business – Options for Accounting and Financial Operations (Part 2)
There are 3 different options for managing your Start-Up venture’s accounting and financial operations, the Do-It-Yourself approach, outsourcing to a CFO/Accounting Firm, or hiring the employees directly. Each of these approaches has both positives and negatives and each may be the right fit for your Start-Up at different times of the growth cycle. This blog will address the second option: outsourcing to CFO/Accounting firm approach.
The outsourcing to a CFO/Accounting Firm approach is where the entrepreneur will hire a firm to handle all of the accounting, treasury and financial reporting functions. There are many positive and negative aspects to this approach, so let’s address both aspects of this to help determine if this approach fits your current business needs.
- The ability to pay for the full oversight and operation of your finances. By hiring a firm you get several people and multiple levels of expertise to give overall attention and focus to managing all of the financial operations.
- Less expensive and more cost effective approach to hiring internally. While the costs are more than the DIY method, it is less expensive than hiring, training and acquiring the hardware and software to run the financial operations internally. Not only are these hard costs, but the time needed to set this up is costly as focus is taken away from other aspects of building the business of the venture.
- Adds a layer of internal controls at a lower cost. By outsourcing to a firm that already has internal controls and staff in place, this can be a time and cost save to the Start-Up.
- Gives the entrepreneur the ability to focus on the core business. This can be crucial to the development and success of the Start-Up venture.
- This option is more expensive than the DIY approach and may not be a viable option at the earliest stages of development for the Start-Up.
- The team is not internal, rather a paid consultant. This can create problems for the start-up as the firm will have other clients that will require its attention. Thus you have a team that isn't 100% focused on only your Start-Up.
- At later stages of Start-Up development it be needed to have the internal staff to support the day to day financial operations and could be more cost effective as well.
In order to figure out whether this option is the most viable for your Start-Up, you would need to analyze your current needs and look at the cost/benefits of taking this particular approach managing the financial operations.