Are you considering outsourced accounting for your manufacturing business? For many growing businesses, it can be hard to determine when it’s time to outsource your finance and accounting. After all, you’ve probably been handling a majority of the workload yourself, and it can be hard to let go of the reigns. In this introductory guide, we’ll cover the benefits of outsourcing manufacturing finance and accounting, including how to determine if it’s time to outsource and what you need to know about selecting the right company.
Understanding Finance and Accounting Outsourcing in Manufacturing
Although finance and accounting cover many of the same tasks in your organization, there are some key differences to understand. Let’s cover the primary differences between an outsourced accountant and an outsourced finance professional.
Outsourced Manufacturing Accountant
An outsourced manufacturing accountant manages your company’s financial records and reports. This includes conducting financial audits, reconciling bank accounts, making adjusting entries, and ensuring accuracy. Some accountants also take on the role of tax accountant, helping your business prepare tax filings and project upcoming payments.
Outsourced Manufacturing Finance Professional
Outsourced manufacturing finance professionals manage your organization’s money, including investments and assets. Their primary roles include evaluating and allocating your monetary resources, such as overseeing your payables and receivables departments and preparing for upcoming purchases.
Manufacturing Accountant vs. Finance Professional Outsourcing
In many situations, accounting and finance have overlapping roles. Accountants can help your company allocate monetary resources, while finance professionals can complete bank reconciliation and prepare internal financial statements. However, if you are looking for a specialized task, such as an independent audit or a detailed financial forecast, you may need to look for a professional who specializes in accounting or finance.
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To choose the right professional, you also need to understand where your business is at. If you are just starting to grow, you might not need to have an outsourced accountant who can provide an audit or a financial professional who offers extremely detailed financial forecasts. In this situation, you can benefit from an outsourced professional who handles the tasks of both an accountant and a finance professional.
The Benefits of Outsourcing Manufacturing Accounting and Financing
Outsourced accounting for manufacturing businesses yields powerful benefits. Let’s explore some of these advantages in more detail.
Cost Savings
Contrary to what you might believe, outsourced manufacturing accounting and finance does save your business money. For one, many outsourced professionals work as independent contractors, meaning you aren’t required to withhold or pay payroll taxes on the funds paid. Additionally, outsourced accountants only work on an as-needed basis. This means you aren’t paying an in-house employee to sit around during slow times.
Cost savings also come in the form of effective oversight. When you have a professional with a deep understanding of accounting and finance managing your books, you open the door to new insights. Maybe your outsourced accountant finds that placing one large material order each month saves you hundreds in delivery fees or that using contract labor in a specific department reduces costs by 10%.
Improved Compliance
Compliance is critical for all businesses, especially those in the manufacturing industry. From submitting timely tax reports to maintaining state licensing and following safety standards, poor compliance oversight can be costly. Outsourced accounting and finance professionals can track upcoming deadlines, ensure your reporting is compliant with guiding regulations, and monitor legislation changes that will impact your business.
Risk Reduction
Every organization faces risks. One risk is market risk. Over the past few years, interest rates have skyrocketed, making it more difficult to secure financing. What happens if your business needs a new piece of machinery but doesn’t have the cash on hand? Outsourced accounting and finance professionals understand how the changing market landscape impacts your business, offering new solutions and strategies to avoid financial losses and business disruptions.
Other risks that outsourced manufacturing accountants tackle include legislation changes, shifting customer demand, and inflation risks. By having a strong tone at the top that can guide your business in making informed decisions, you can reduce your risk and safeguard your profitability.
Maximizing the Benefits: Simple Scalability with Manufacturing Outsourcing
Accountants and finance professionals are immersed in business decisions on a day-to-day basis. This gives them the expertise to guide your business on the path toward scalability and growth. For one, outsourced manufacturing professionals can put together projections that outline where your business currently stands and what needs to be done to reach your growth goals.
In addition, outsourced accountants are always available to help make informed decisions. For example, if your manufacturing business needs to grow through equipment reinvestment, your outsourced professional can help you determine if you should finance equipment, purchase equipment for cash, customize the equipment, or purchase used. Strategic decisions are an integral part of growing your company.
Understanding When It’s Time to Outsource Accounting
Knowing when it’s time to outsource your accounting and finance can be difficult. However, there are some indicators to watch out for, including:
Behind Accounting Records
The first indicator is if you are constantly falling behind on your accounting records. Having current accounting records is essential to make decisions backed by data. For example, if you wrote a large check that never gets entered into your accounting system, you could believe you have more cash on hand than you actually do, causing you to overdraft your account.
Accurate and up-to-date accounting records also help you manage your cash flow. How will you know which customers still owe you money or what vendors you owe money to? By prioritizing accurate ledgers, you have full control over your finances, allowing you to make decisions that support growth and improve profit.
Missed Deadlines
The IRS and state agencies establish filing deadlines throughout the year. For one, quarterly estimated payments are due in January, April, September, and December. Additionally, payroll tax forms are due in January, while business tax returns are due in March or April. This doesn’t even start to factor in payroll tax deadlines and sales tax reporting throughout the year.
A survey by E2Open, revealed that 25% of manufacturing companies are turning to outsourcing to address operational challenges. By partnering with an outsourced accountant, you can alleviate the burden of managing these deadlines and ensure compliance.
Stagnant Growth
Growing a business can be hard, especially if you don’t have time to devote to securing new customers or expanding your product lines. If you notice that you’re constantly short on time, an outsourced accountant can be your saving grace. Your accountant or finance professional will take over many of the tasks that drain your time, like entering data and verifying report accuracy.
This allows you to focus on scaling your company. Maybe you can now attend an extra marketing event each week or have more time to call back potential customers. Whatever the case, having more time in your schedule and an expert to run ideas by helps you break out of stagnant growth.
Mastering Manufacturing Outsourcing: Selecting the Right Partner
So, you decide you need to outsource your accounting and finance roles. Where do you start? How can you find the right outsourced professional or individual? There are a few different criteria you can use to evaluate prospective outsourced manufacturing accountants and finance professionals. Let’s explore some of these areas in more detail.
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Industry Focus
Manufacturing businesses have unique accounting and finance practices, such as percentage of completion for recognizing revenue and work in process adjustments. This makes it important to find an outsourced professional who understands the specific reporting and recording details necessary for your manufacturing business.
Culture Fit
Your outsourced company or individual will communicate with other departments in your organization, from payables and receivables to your managers and supervisors. As a result, you want to find a professional that fits well with your culture. The wrong fit can lead to operational silos, which are determinantal to your scalability initiatives. Look for a professional who is outgoing and has great communication skills.
Credentials
Accountants and finance professionals are generally credentialed. Your accountant might hold a Certified Public Accountant (CPA) license, while your finance pro might hold a Chartered Financial Analyst (CFA) designation. Even if your tentative outsourced professional doesn’t hold these credentials, they should have some formal education background. This could be a bachelor’s degree or a master’s degree in accounting or finance.
Availability
Your organization might have specific needs for an outsourced professional. For example, maybe you need the most help around month-end or when a new project kicks off. Your ideal outsourced manufacturing accountant should have the necessary availability around these times. You don’t want to be scrambling to update your accounting system. Look for a professional who has availability that matches your needs.
Experience
While education is important, experience is equally valuable. How many years of experience does your tentative outsourced manufacturing professional have? Is this experience in the manufacturing industry? Understand the past roles your outsourced professional has held and how they translate into value for your company.
Cost
Even though the benefits of outsourcing manufacturing accounting far outweigh the cost, you do want to evaluate how much your outsourced professional charges. Some will charge by the hour, while others will have a flat monthly fee. Be sure you are receiving the proper value in return for the cost. An outsourced accountant who charges $200 an hour but only provides bank reconciliations would probably not be worth it.
Getting Started
If you’re ready to leverage the benefits of outsourcing manufacturing accounting and finance, it’s important to start the process right away. You don’t want to fall behind on your filings and records. Our team at Personiv can handle all of your outsourced needs and more. Reach out today to schedule your free consultation and see how your business can benefit from outsourced accounting and finance.
