For startups, the early years are not a smooth ride, and they are filled with many challenges. If you are a startup business, you may need some help from an outside controller to manage your bookkeeping. Reporting and financial record-keeping are crucial for creating a solid base for your startup’s future success. If you are a startup with limited resources, you may be doing the basics: tracking financial data like invoices, expenses, revenue, and payments to ensure that bills and taxes are paid. It can work fine for small companies but when you grow your company, seek investors, hire more employees and deal with larger clients, these basics might not be enough at that time. 

It may be the case that we don’t need or have the resources for a full-fledged accounting or finance department in-house, you can go past the basics. We can do this by outsourcing our accounting and finance functions, tapping into various other resources and expertise in addition to accounting, bookkeeping, and tax planning.

Following are the scenarios where a startup could consider outsourcing financial services:

Scenario 1: When a startup is scaling up, and it is not getting the insight it requires from its current financial data.

Accurate, timely, and in-depth financial information can help a startup make better business decisions. For example, having a deeper understanding of costs, margins, and revenue-generating activities, could help a startup getting better allocate intellectual and operational resources. A better understanding of profitable product or services lines could help a startup make better decisions about which parts of the business to invest in and which to abandon.

If a startup wants to get easy access to actionable insights with real-time trends in its business instead of looking back at its performance, then it may be the right time to consider outsourcing.

Scenario 2: When a startup is seeking investors or applying for a loan.

If a startup has applied for a loan program like Payroll Protection Program (PPP), then it already knows how much it takes to gather the company’s financial data and how challenging it can be to report on transactional data.

A significant amount of financial information is needed by any potential investor or lender before making any commitment, they also need regular updates, if they provide funding to a startup. They expect clear and up-to-date financial reporting in line with industry norms from startups.

If a startup thinking about an acquisition or a merger in the future, having complete, accurate, and up-to-date financial data quickly accessible can put the startup in a better position to approach that process.

Scenario 3: When the customer base is growing.

With an increase in the customer base, tracking inventory, payments, and invoices becomes more complex as the customer base grows. Improper applications of payments, inaccurate invoices, or the inability to provide accurate and up-to-date statements to clients could drive them to the competitors.

As opposed to this, easy-to-navigate and well-organized invoicing and payment tracking systems instil confidence in customers and potential customers, who came directly into contact with these functions during the sales process. Accurate tracking of orders, sales, inventory and payments empower the startup to better forecast demand, budget and expenses and provide the insight a startup need to optimize operational efficiency.