Did you know that the tech sector is expected to see a 14.2% growth rate by 2032? Whether you’re a startup or an established business, leveraging these growth trends means more revenue, transactions, and important decisions. Can you or your current employees handle this influx in demand? If not, now might be the perfect time to explore accounting outsourcing for tech companies. Establishing a relationship with a qualified outsourced accountant gives you access to expertise surrounding financial reporting, taxes, and business growth.
In this introductory guide, we’ll cover everything you need to know about accounting outsourcing for tech companies, including which roles you can outsource, the benefits of having outsourced back office support, and how to find the right professional.
What Is Accounting Outsourcing?
Accounting outsourcing is the process of hiring an independent contractor to manage your accounting records, prepare remittances to regulatory agencies, and consult you on business growth. Instead of hiring an in-house worker, an outsourced accountant may work remotely and for a different organization. This saves your business money on payroll taxes and gives you flexibility in the hours you utilize an outsourced accountant.
Discover Outsourced Accounting: Finance & Accounting Outsourcing (FAO) 101
What Accounting Roles Can Tech Companies Outsource?
Outsourced accountants for tech companies take on a versatile role in your organization, from handling a few specific tasks to overhauling your entire accounting function. Here are some of the roles and responsibilities an outsourced accountant can manage:
Accounts Receivable
Accounts receivable is a vital function in your company, controlling your cash flow, revenue generation, and client relationships. Back office outsourcing for tech companies commonly includes accounts receivable management.
For example, your outsourced accountant will record customer payments, follow up on past-due invoices, and add efficiency to your collection procedures. Having more control over your cash inflows allows you to unlock added business growth and implement effective cash flow management policies.
Accounts Payable
Contrary to accounts receivable is accounts payable, which deals with payments to employees, vendors, and other third parties. Utilizing an outsourced accountant for accounts payable management allows you to time vendor payments according to your cash flow needs, improve vendor relationships with on-time payments, and build transparency into upcoming payments.
In addition, outsourced accountants have expertise in recording prepaid invoices and capitalizing assets, helping you properly report your payables on the balance sheet and income statement. Not to mention, there is a reduced risk of vendor fraud when you have a professional managing your payments.
General Ledger Management
If you onboard an outsourced tech accountant for accounts payable and accounts receivable management, they will most likely already be maintaining your general ledger. General ledger management involves categorizing all transactions. For example, classifying bank downloaded transactions into the proper categories.
General ledger management might also involve monitoring inventory levels and looking for anomalies or duplicate payments. Having oversight in your general ledger ensures everything is categorized correctly to maximize insights and compliance with financial reporting standards.
Monthly Reporting
Accountants aren’t regular bookkeepers. Instead, they possess the knowledge to make adjusting journal entries, help you generate growth projections, and develop accurate internal reports. In many cases, your tech accounting records will need adjustments, especially in revenue recognition.
An outsourced tech accountant can help you with this, giving you accurate financial statements to base your business decisions on. Monthly reporting might also include reconciling bank and credit card accounts, evaluating loan statements, and reviewing ledgers.
Financial Statement Generation
Accountants who are CPAs can provide your tech company with compilations, reviews, and audits. Many third parties, like lenders and prospective investors, require an independent evaluation of your financial statements. Outsourced CPAs can issue these reports, helping you secure funding for growth.
Tax Return Preparation and Planning
Some outsourced tech accountants will provide tax return preparation and planning services in conjunction with the above items. Tax return preparation is very complex, especially as legislation is constantly changing. Outsourcing this task to a qualified accountant saves you a headache and reduces your likelihood of receiving letters from regulatory agencies.
Similarly, tax planning is a crucial component of minimizing your tax bill. An outsourced accountant can project your income before year-end to uncover strategies to lower your taxable income. For example, maybe you purchase a new business vehicle or piece of machinery or find that switching accounting methods is beneficial. These insights might not be possible without an outsourced tech accountant.
Payroll Processing
Some accountants will also offer payroll processing services. Having an independent accountant process your tech payroll reduces your risk of employee fraud, ensures your employees are paid on time, and infuses accuracy into payments.
For example, calculating pre-tax and post-tax benefits can be confusing. An outsourced tech accountant understands these intricacies, issuing accurate paychecks to your employees.
The Benefits of Back Office Outsourcing for Tech Companies
Having back office support in your accounting function provides indispensable benefits. Let’s cover some of these benefits in more detail.
Accurate Financial Statements
Financial statements are a key resource when making important business decisions. Which revenue stream is underperforming? Where can you cut costs? Without accurate financial statements, you might make the wrong choice. For example, if your financial statements are missing a dozen revenue transactions, you might cut a revenue stream that is actually profitable.
Accurate financial statements from an outsourced tech accountant also help you manage your cash flow. Bank balances do not account for deposits in transit or uncleared checks, while an up-to-date accounting system does. Accounting outsourcing for tech companies gives you access to reliable data to improve your cash flow management and avoid overdrafting your account.
Access to New Growth Opportunities
Another benefit of back office outsourcing for tech businesses is access to new growth opportunities. Both lenders and investors will request financial reports before making the decision to give your tech company money. With an outsourced accountant working in the background and maintaining your system, you can quickly furnish the necessary reports with confidence.
Furthermore, outsourced accountants have the expertise to help your expansion efforts. They can project upcoming growth to better plan resources, find the best way to reinvest profits into the business or lower your tax bill to save money each year. New growth opportunities don’t always happen by chance, which is why you want to maximize your opportunities with the right outsourced accountant on your team.
Improved Regulatory Compliance
Compliance can be difficult for many tech companies. From determining when to report revenue to staying on track with deadlines throughout the year, handling this burden yourself can open the door to inquiries, audits, and letters from regulatory agencies. Not to mention the stiff fines and penalties that come with noncompliance.
Accountants are well-versed in monitoring filing deadlines and letting you know what your business needs to do and when. An extra reminder could be the difference between a compliant sales tax return and a late filing. In many cases, your outsourced tech accountant will handle the filings for you altogether, completely removing the burden from your plate.
Using Accounting Outsourcing Services: What to Expect
Three Steps to Find the Right Accounting Outsourcing Partner for Your Tech Business
Starting your search for the right outsourced accountant can feel daunting. Here are three steps to find the perfect outsourced accountant for your tech company.
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Understand Your Business Needs
The first step in locating the right outsourced accountant is to understand the needs of your business. Go back and review the common tasks that outsourced tech accountants handle. Which of these services could your business benefit from?
For example, not all accountants offer tax preparation or payroll services. If these are fundamental services your tech company wants to outsource, you would need to find an accountant with the necessary expertise.
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Interview Prospective Outsourced Accountants
Next, you need to interview prospective accountants. Throughout the interview process, you should learn more about the candidate, including their educational background, applicable credentials, and availability.
In this step, it’s also important to evaluate the experience of the back office outsourced professional. Do they have experience working with other tech companies? Are there references you can contact or reviews you can read?
When interviewing outsourced accountants, you also want to ensure they are a good fit for your company culture. In many cases, your outsourced accountant will take on a leadership role in your organization. This means you want to verify that their work ethic and personality merge well with existing staff.
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Integrate and Leverage Their Expertise
The final step is to integrate your accountant into your tech company and leverage their expertise. This step involves understanding who your outsourced accountant will be working with and reporting to. In addition, take the time to figure out how often your outsourced accountant will work and your expectations.
For example, if you want to review the prior month’s financial statements in the first week of the next month, your outsourced accountant needs to be aware of this preference. Failure to communicate your needs and expectations will lead to a poor working relationship.
Also, understand how you can leverage your outsourced accountant to grow your business, maximize compliance, and lower costs. Can you add tax planning services? How about implementing an in-depth quarterly review of expenses? Finding ways to leverage the expertise of your outsourced accountant is crucial.
Getting Started
Does it sound like your tech company could benefit from back office outsourcing? This introductory accounting outsourcing tech company guide is meant to get you started on your outsourcing journey. If you’re looking for more insights into how an outsourced accountant can benefit your company, reach out to a team member today to schedule your free consultation.
