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Small Business Finance Blog

Want to gain full control over your firm’s finances but aren’t sure where to start? You’re not alone and you’ve come to the right place. Read on and reach out if we can lend a hand.

How Integrated Bookkeeper, CFO and Controller Services Deliver Critical Financial Insights

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Have you ever stopped to wonder if the staff you have running your firm's finance function is helping or hurting? You might be surprised to learn that the model used to manage accounting in most small businesses is flawed. It’s important to understand these common deficiencies so you can take corrective action that will help unleash your growth. To investigate further, let’s turn to a less obvious body of research, medical errors. 

What a Small Business Owner can Learn from Medical Errors

So how can medical research help a small business owner grow? Well, let’s begin with a surprising parallel between the medical system and a small business accounting function. That is, medical errors are the third leading cause of death in the United States today, while poor cash/financial management is the second leading cause of business demise and - we’d add - under performance. 

Now let’s look a little closer, as the similarities are striking. According to the Agency for Healthcare Research and Quality, there are 8 root causes of medical errors. Let's quickly run through them here as you will see that all 8 are directly applicable to small business accounting.

1. Communication Problems: Verbal and written communication breakdowns between team members.

2. Inadequate Information Flow: The right information isn't available to the decision maker when it's required.

3. Human Errors: Policies, processes, or procedures are not followed properly or efficiently, whether due to inadequate documentation, training or oversight.

4. Client-Related Issues: Positioning the client CEO as the "patient" to adapt this root cause to a small business environment, insufficient guidance on report interpretation and usage translates into reports gathering dust and opportunities lost.

5. Organizational Transfer of Knowledge: Inconsistent or inadequate education for those performing the day-to-day accounting work.

6. Workflow: Inconsistent or nonexistent accounting workflow puts accounting staff in situations where they are more likely to make a mistake or omission while they make a best guess as to what to do and when.

7. Technical Failures: Poorly implemented accounting technology often leads to manual workarounds which defeat the purpose of the technology and often cause accounting errors.

8. Inadequate Policies: Process failure or inadequate procedures lead to inconsistencies, reporting delays and yes... more errors.

The parallels do start to add up when you think about the importance information flow, human training and technology usage in both medical and accounting environments. While we'll leave the medical error remedies for the health care professionals, fortunately for the small business world, the root causes of accounting challenges are all readily addressable.

Taking a holistic approach to designing your firm's finance function is at the heart of the solution. However, it's historically been cost prohibitive for a small business to maintain a full-time finance staff under its roof. But thanks to the advent of cloud computing and innovative service providers, you can now cost-effectively outsource your entire finance function and gain access to top tier talent in a fully integrated fashion. That is, a small business owner can engage integrated bookkeeper, controller and CFO services to manage the entire accounting operation and put all the above issues to bed. 

What is an Integrated Outsourced Finance Department

To understand the integrated approach to managing your finance function, let's start by identifying the 3 most common roles in an accounting department: bookkeeper, financial controller and CFO. For simplicity, let's assume the controller and CFO roles absorb the financial planning and analysis (FP&A) role. This assumption can safely be made as leading integrated service provider embed the FP&A role in their offerings.

Most small businesses have a bookkeeper and some have a fractional controller and/or CFO. The bookkeeper role is sometimes carried out by an employee of the firm while other times it's contracted out to an individual or firm. The controller and CFO roles - more often than not - are contracted out to an individual or firm. 

What this means is that you could have as many as 3 or 4 firms involved in a finance function when you include the firm in question and the various staff sources. Even in the case of 2 parties - say, the client firm has an employee as bookkeeper and an outsourced CFO from a separate firm - real drawbacks exist. We'll address these drawbacks in a moment, but an integrated approach offers bookkeeping, controller and CFO services from a single outsourced firm. 

HOW AN INTEGRATED APPROACH ADDRESSES THE ROOT CAUSEs

To help bring to life the benefits of an integrated approach, we'll contrast it with a "split approach" where the client has an employee bookkeeper and a fractional CFO from the outside. 

One Team

Central to the advantages of an integrated approach for small business accounting is the concept that your bookkeeper, controller and CFO are all on the same team. They were hired to work together, have been trained on the same accounting practices and all report up through the same hierarchy. One team also means you have one account owner to manage, which saves you time and translates to fewer headaches. 

Consider how a split approach differs in this important regard. A company employee bookkeeper might report up through the firm's CEO, while simultaneously having a dotted line to the part-time CFO. The bookkeeper may not be involved with hiring the CFO so personality conflict is not uncommon in these situations. While both parties may have the company's best interests at heart, they're operating from separate teams. 

One Process

The integrated team has a standard method it customizes for each client engagement based on its industry, stage of growth and current set of challenges and opportunities. Everyone on the team has been steeped in this process, buys into its benefits and is held accountable to consistently adhere to it.  Standard workflows ensure consistent communication methods and knowledge transfer occurs systematically. 

Meanwhile, there's almost always tension with a split approach as the part-time CFO attempts to impose his or her accounting processes over a bookkeeper who has his or her own approach. Invariably, this leads to inefficiencies as the CFO must rework certain deliverables to conform with  her methods before she can begin her own work. 

A single, well defined and documented process also means fewer errors as there's no disagreement on where and when to apply the internal controls that are designed to prevent and catch errors. 

Technology Adoption

Implemented and used consistently, the right accounting technology can streamline procedures, eliminate human error and open the door to a world of business intelligence that has historically been reserved for large firms with deep finance and FP&A teams. An integrated accounting team invests in identifying the right technology and training its team on how best to leverage it. Since each member of an accounting team often touches a technology, it's critical to have complete buyin to harness these advantages. 

Since, we all know that adoption is the Achilles heal of successful technology roll outs, a split approach often falls short since since one camp will often feel that one or more of the technologies was forced upon them, along with the process, supervisor, etc.  

Better, More Timely Insights

A cohesive team following a well-oiled process that properly leverages powerful technology can't help but produce more insightful reporting and consistently hit its deadlines. Everyone on an integrated team is pulling in the same direction and knows their place in surfacing valuable nuggets of information a business owner will find invaluable.

In addition, an integrated approach cost effectively allows for a business owner to reap the benefits of three tiers of financial resources, a luxury which hasn't historically been possible. This is made possible because each integrated engagement is designed to maximize the portion of the work absorbed by the lowest possible cost resource. In other words, the process is thoughtfully designed so the bookkeeper can shoulder as much of the day-to-day work as possible because the bookkeeper is the least expensive resource. The controller, in turn, is tasked with as many of the remaining tasks as practical because a controller is far less expensive than the CFO. Which leaves the CFO to perform only those tasks that a bookkeeper and controller are unqualified to tackle. 

In addition to the built in redundancy of such a setup, having three sets of eyes focused on your success results in more sources for helpful insights. For example, a bookkeeper might catch an invoicing mistake before its sent to a customer. A controller might tweak report to illustrate more clearly why a particular offering is more profitable than others. And a CFO might draw your attention to changes that will enhance the results of a key performance indicator (KPI) to increase your firm's value in the eyes of prospective investors or buyers. 

These benefits offer a sharp contrast to the split approach and its natural tensions, inefficiencies and poor adoption of technology.  These compromised ingredients ultimately produce reporting that falls short on the opportunity to inform decision making and instill confidence. 

An Integrated Solution is Far More Cost Effective

On top of all the above benefits - and in large part due to these advantages, an integrated outsourced finance department is far more cost effective than traditional approaches. Read our post on the cost of outsourced accounting solutions for an in depth run down on current costs or click here for a custom proposal for your business.

Despite parallels with the shortcomings in our medical system, small business accounting issues are far simpler to rectify. To take control of your finance function by engaging a skilled outsourced partner with a proven. Many flavors of solutions abound so choose the one that fits your needs best. If you still need a hand thinking through your options, check out our Outsourced Accounting Buying Guide

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Dave Robinson

Written by Dave Robinson

Driven Insights founder, author of "Competitive Advantage through Financial Management", writes about informing business decisions.

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