As a budding business or ambitious startup, you will no doubt have a groundbreaking product, service or idea, a fully-developed business plan and all of your promotional assets firmly in place.

But, what are your plans concerning the management of your various financial activities? At present, the lack of capital and poor cash flow is responsible for up to 90% of small business failures. Moreover, an almost equally sizable 60% of small-business owners feel they are not very knowledgeable about accounting and finance.

Outsourcing accounting to an accounting firm can be one of the most effective ways to ensure your finances remain fluent, efficient and compliant. Here, we explore the potential benefits and pitfalls of choosing to manage your accounts externally and help you decide if it makes sense to outsource accounting for your startup.

Startup accounting insights you should know

Before we delve any deeper into why you should outsource your accounting as a startup, let’s explore the current state of accounting on a business level through these essential insights:

64.4% of small-business owners utilize accounting software to manage their finances.

30% of small businesses place accountants at the very top of their list of most trusted advisors.

58% of small businesses don’t expect or require to meet with their accountants in person.

Companies that use 100% cloud-based accounting enjoyed a 15% year-over-year revenue growth.

Back in 2016 alone, businesses in the UK invested around £17.1 billion in accounting services. And this number is set to rise exponentially by the end of this year.

From these insights alone, it’s clear that not only does accounting play a pivotal role in the ongoing health and success of any startup, but a wealth of small businesses trust outsourced or cloud-based accountants to manage their finances.

The disadvantages of outsourcing accounting

Communication Barriers:
Some business owners feel that by outsourcing accounting, they may experience communication barriers that can lead to inefficiencies and lost productivity.

For this reason, it’s important to discuss things with the prospective accounting firm beforehand. Don’t forget to address all issues that you feel may come up and set clear expectations for the engagement.

Security Risks:
While many trust their outsourced accounting partners, some feel nervous about sharing their company’s financial data externally.

Before handing over your data, discuss what processes are in place to protect your information and privacy. Ask what is being done to mitigate data loss and security risks.

Loss of Control:
If as a startup you’ve been doing your own accounting so far, outsourcing can feel like you will be losing sight of your financial performance. The purpose of outsourcing is to relieve you of the manual data entry and reporting so you can focus on growth instead.

With the help of a small business accountant, you will actually have more insights about your business performance and ways in which you can improve. Just make sure to set up regular meetings with your accountant.

The advantages of outsourcing accounting

You will save time
By outsourcing accounting for your startup to a trusted accountant, you stand to save yourself a great deal of time – which to any startup founder is incredibly precious.

Outsourcing your accounting is operationally efficient as doing so will free you up to focus on other more strategic elements of running your business. That said, if you’re spending too much balancing your books rather than developing the business, it might be time to consider outsourcing your accounts.

While you’re generating revenue for your business, you will need a financial expert to ensure everything safe, secure and in order. By eliminating the concern of managing your various financial activities, you can streamline your agenda safe in the knowledge that your accounts are being looked after.

You will save money
In addition to saving time, by outsourcing accounting, you will also save money. And let’s face it, the two are directly related.The overhead costs associated with hiring and hosting an in-house accountancy team are typically steep, especially when you consider elements including salaries, benefits, payroll taxes, tools and relevant supplies.

By taking the route of to outsource your accounting, you will save on a host of overheads while benefiting from the experience and expertise of a certified financial specialist that will ensure all of your accounts are in order.

You will receive objective financial consultancy
Having an outsourced accountancy firm overseeing your bookkeeping and finances will provide you with an impartial insight into your most critical financial data, information and transactions.

A third-party accountant also offers the perk of an additional set of eyes on your records, which will keep everything organized, fluent and most importantly, accurate.

Moreover, an outsourced accountancy specialist boasts a superior level of experience and knowledge as a result of working with a host of small businesses and startups in a variety of sectors and industries.

You will gain access to invaluable strategic accounting insights
The vast majority of outsourced accounting specialists not only boast years of specialised financial experience but they also work with the right accounting software. This allows them to manage your company’s finances in the most efficient way possible, tailored to your specific commercial aims, goals and needs.

As you build a relationship with your outsourced accountancy partner, you will benefit from a deeper level of financial insights related to your business.

In turn, this will help you refine your internal strategies and accelerate the overall success of your business over time. As your accountant will be accountable for your finances, you will reduce the risk of human error or compliance issues significantly.

In summary

As a growing venture with a wealth of different areas to consider, outsourcing your accounting will offer far more pros than cons.

As such, you’ll be able to focus on the most critical areas relating to the growth of your business while an accounting specialist keeps your finances in order.

If you’re a startup having trouble keeping the books or making sense of your finances, BrooksCity can help.

Our team of London startup accountants will show you how you can save time and money while accelerating your business growth. For more information, you can contact us or request a quote right here.