The Buck Stops Here: Outsourcing Finance & Accounts

Why outsourcing the finance and accounts functions to a third-party service provider makes sense – from a startup perspective.

Money matters to a business. But money-matters have become so complex that companies are struggling to manage the life-blood of the business. From managing payments, collecting receivables, accounting data in a centralized and systemised way, complying with various statutory provisions, to applying for loans or equity funding and reporting to management on financial performance, the challenges are complex and varied. The more time and effort, a company puts on tracking such data, the less it is able to focus on its core activity – making more money. This gains further importance as start-ups have a smaller talent pool and require to be completely focussed on the product or service they are developing and deploying.

Enter the world of Financial and Accounting Outsourcing. First deployed by IT Enabled Service companies to cater to the lucrative off-shore markets of North America and Europe, they have now turned their eyes to the bustling domestic market, especially focussing on providing services for start-ups. There are multiple benefits that accrue to start-ups choosing to outsource their financial and accounting functions.

Expertise: Navigating a complex plethora of regulatory requirements, choosing the right accounting software, finalizing accounts are critical activities which require expertise of various professional accountants. Since, the outsourcing companies employ the best financial minds, start-ups can tap in to this lucrative talent pool to ensure their finance and accounts are prepared according to latest principles and guidelines and are in compliance with statutory requirements and present a true and fair view of the financial position and performance of the entity.

Economy: Maintaining a dedicated accounting team, purchasing the accounting software packages and the cost of implementation can be taxing for a new company. From a cost perspective, it makes more sense to outsource the F&A function as the service provider can deliver much cheaper rates by leveraging economies of scale. This would help the company to reduce the overall cost of operations and improve the competitiveness of the company in the market.

Efficiency: Streamlining processes to maximize efficiency and using the best accounting packages can be unrealistic for companies when they may not have the time and money to invest in such initiatives. Most F&A service providers would be having a Centre of Excellence where they develop the best practices for the function, to maximise productivity. They would also be using the latest technology and software. Moreover, with plenty of resources they can manage any sudden increase in work easily. Start-ups can magnify their productivity and ensure that all the financial and accounting work are completed on time in an accurate manner.

Empowerment: With an expert team and an efficient process, the leadership team of start-ups can leverage the analytical skills to learn more about the financial data, get better valuations for their companies, understand pricing decisions better, identify their core market segments and do a competitor benchmarking to understand and close gaps. This type of analytical expertise empowers the management team to become more dynamic and responsive to market variables and ensuring they become a successful start-up.