The Financial Management Blog for Surprise, Arizona

Reduce These Four Risks by Outsourcing Your Back Office

 

When businesses outsource bookkeeping and accounting, they reduce their risk and gain better insight.

You probably have dreams that you want to realize if you own and run your company. The problem is that you need a recipe with the right ingredients to achieve your goals. You’ve got the foresight, ingenuity, and tenacity, but have you got time, energy, and peace of mind? Smart professionals know that they need to alleviate pressure in order to expand. If their dreams are going to last, they also need to minimize risk.

Most small and medium-sized companies (including a few billion dollars) opt for outsourcing. From research and development to information technology, outsourcing functions of your business will  

          allow your owners and innovators to do their best,

          reduce costs and overhead, and

          reduce risk.

For most businesses, the most often outsourced roles are “non-core” divisions. If your business fails your bookkeeping and accounting department, do not wait for appropriate action to be taken. Take the constructive approach and begin to consider contracting out these functions.

Many business owners are surprised at the impact on the bottom line of a business that a poorly managed back office has. For example, you open up yourself to employee error when the person running your accounting is stretched too thin. Or worse, when your company’s books fall on one person’s plate, you put yourself at an increased risk for fraud. Here are four additional risks that you can reduce by working with an outsourced reliable accounting firm.

Technology –Most small businesses do not have the time to research, evaluate, and learn or keep up with the latest channels to find one they like. When you hire a service provider, you also hire their system, which means you have access to the industry’s latest and best technology (with a service liaison, to boot!).

Compliance – There is considerable regulation for accounting firms. This ensures that you will have peace of mind when you hire an accounting company provider ensuring that the person who performs your bookkeeping and accounting is trained and up-to-date on the latest news of compliance.

Data – In business, staying one step ahead is dependent on your ability to respond to your financial data. When your financial statements are timely and accurate, and the person delivering the numbers is an expert, you will be able to make strategic decisions based on reliable data.

Reporting – You don’t need to survive each month with the bare essentials. An outsourced accountant can empower you to improve your financial position by running the right reports and setting up financial dashboards. You will assess your success and prevent over-expenditure if you monitor the right metrics. When you have access to easily digestible and accurate dashboards, you can quickly assess how your business is performing and identify which areas need your attention. Here are a few ways strategic reporting can reduce your risk.

          Consumers who are not successful frequently fly under the radar. Your outsourced staff will help you determine which clients are no longer suitable for your company (in their present state at least)

          Cash flow problems often occur from incomplete data or from an untrained interpretation of good data. An outsourced expert will be able to head off cash flow circumstances by synchronizing the timing of your payments and receivables, renegotiating terms, and developing predictive models, and more.

          If you do not have key performance metrics, measuring the financial success of ad campaigns and ROI from marketing efforts is challenging. Trained professionals will help you better understand the actual costs of your company and recognize the specific KPIs for your success.

Bookkeeping nuances have the potential to change your situation very quickly. In the hands of an experienced professional, accurate and timely data will allow you to focus on making informed decisions instead of reacting with your gut.

When businesses outsource bookkeeping and accounting, they augment their growth and significantly reduce their risk. Outsourcing your back office will help you maintain financial integrity and allow you to sleep better at night. Allow yourself to do what you do best. If you need help deciding which aspects of outsourcing will most benefit you, give the professionals in our office a call today.

Accounts Payable: The Best Practices for a Competitive Advantage

There are many reasons why an organization’s revenue can slip through the cracks. Outdated technology, lack of training, employee turnover and complacency are common culprits. Accounts Payable tends to be the land of the lost-disregarded and undervalued. Ignoring best practices in this department leads to loss of revenue and poses significant financial risk to your operation. Accounts Payable is critical to optimizing capital; it’s time to shed light on this core strategy.

Taking a strategic approach to Accounts Payable requires a business owner first to identify which practices are holding up their business. Common mistakes include:

  • Onboarding suppliers without following a standardized procedure
  • Duplicating payments due to workarounds in the ERP system
  • Missing the risky behaviors that expose your business to disbursement fraud
  • Taking liberties with late vendor payments
  • Not separating the duties of new supplier approval from invoice payment

A well-functioning Accounts Payable department is an opportunity to optimize payables and free up the working capital needed to fuel growth. Strengthening your accounts payable department processes and procedures is a big task. Addressing the following areas first will help build momentum:

  • Automated invoice and payment processes. Too often, small businesses use error-prone manual processes to approve requisitions, scan supplier invoices, and issue payments. Adopting automated systems will reduce the number and mistakes and increase the effectiveness of process controls.

 

  • AP Workflow. Unless you have an AP workflow in place, your ERP system will only act as a gatekeeper. Without an intentional workflow, manual loopholes make it possible to outsmart the very systems you have in place to prevent these mistakes. Setting up a workflow – a series of checks and balances – will help you avoid these errors before they begin.   For example,

 

  • Duplicate Payments. One challenging area for some of our clients are payments to vendors via check and by credit card. To avoid duplicate payments, we often suggest requiring PO numbers for payments made by credit card.

 

  • Three-Way Matching. It is always a good idea to confirm that the supplier invoice amount aligns with the goods or services you have purchased. Failure to do this can leave your organization susceptible to paying for things you did order, receive or approve. To prevent this, consider adopting a three-way matching approach to your checks and balances. This steps triple checks your process for oversights or mistakes. The three documents you will review are the vendor invoice, purchase order and receiving document (packing slip or report).

 

  • Airtight Master Files. Take vendor management seriously before an internal audit. Establishing and maintaining a clean vendor master file will safeguard you against potential fraud. Keeping records and contracts up-to-date will help you identify red flags and make it easier for your procurement personnel to do their jobs.

 

  • Proactive Behaviors. Your organization will benefit from a proactive approach, but three main areas will outshine in the Accounts Payable department.
    • Dynamic discounting produces a risk-free, annualized return on investments, simply by leveraging payments terms to your advantage. In simplified terms, the purchasing organization offers to pay their suppliers early in exchange for a discount. This synergistic approach is dependent on transparent and up-to-date disbursement systems and works best in organizations that have an efficient AP workflow.
    • On average, fraud takes 18 months to uncover. In addition to internal and external audits, businesses need to commit to regular, rigorous fraud monitoring. Being proactive in this area means establishing controls that look for red flags such as employee-vendor matches, invoice anomalies, or prohibited entities in your master list. Aggressive monitoring should not invoke a culture of distrust; it should instill a core value around trustworthiness.
    • A great byproduct to careful monitoring is an instinct toward recovery audits. When a department initiates recovery audits as part of their quarterly review process, they catch incidents like overpayments and pricing compliance before they require emergency mitigation.

 

  • A Thriving Team. If members of your accounting team have made a habit of extending payment cycles or accepting discounts without calculating the costs or neglect to take advantage of maximum savings through volume rebates, it might be time to reassess your staffing structure. Reactive accounting will not support your growth; it will curb your progress. Be sure your AP team knows their value, is adequately staffed, sufficiently trained, and has the right skillsets for tasks at hand. Personnel in this department need to have an analytical mind and the tools to get the job done.

Poor accounts Payable procedures happen in both developing and mature enterprises. If you need help strengthening your Accounts Payable department processes and procedures or if you want to talk about creating a capital optimization strategy, our office professionals can help! Give us a call to start today.

We have two locations for your convenience:

 

Want to stay informed? Sign up for our newsletter:

 

Avantax affiliated advisors may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.

Securities offered through Avantax Investment Services SM, Member FINRA, SIPC. *Investment advisory services offered through Avantax Advisory Services SM ** Insurance services offered through an Avantax affiliated insurance agency

The Avantax family of companies exclusively provide investment products and services through its representatives. Although Avantax Wealth Management SM does not provide tax or legal advice, or supervise tax, accounting or legal services, Avantax representatives may offer these services through their independent outside business. This information is not intended as specific tax or legal advice. Please consult our firm and your legal professional for specific information regarding your individual situation.

Content, links, and some material within this website may have been created by a third party for use by an Avantax affiliated representative. This content is for educational and informational purposes only and does not represent the views and opinions of Avantax Wealth Management SM or its subsidiaries. Avantax Wealth Management SM is not responsible for and does not control, adopt, or endorse any content contained on any third-party website.