Tuesday, June 18, 2013

Best Practices: Accounting Part III

Small business owners wear many hats which often includes the accountant's.  Sometimes they wear that hat because they can't afford to hire someone to handle the accounting.  Sometimes they do the accounting because they feel it gives them more control.  No matter what the reason, the accounting has to be done so if the owner isn't finding the time or isn't doing it correctly, then delegating the job is a must.

We recommend all entrepreneurs start out doing their own accounting so they fully understand what is needed for their business.  If the owner doesn't have training in accounting, getting help setting up the accounting program is always a good idea.  Once the program is set up and the owner is trained on how to use it, it does make sense to have the owner doing the work during the start-up phase of the business.  It saves money and it really lets the owner understand how it should be done. 

As the business grows, the cash flow should improve which may allow for the hiring of an employee or a contractor to handle the accounting.  The decision on whether to use an employee or sign a contractor to handle the process depends on several factors.  If the business only needs someone part-time and the work isn't complicated, hiring an outside service is usually practical.  As the business grows, there may come a time where a full time accountant is needed.  At this point, bringing someone in house is a good idea. 

The next stage of accounting growth occurs when the business has reached a point where a CFO is needed.  This often occurs before the company has the cash flow to hire a full time CFO.  Fortunately, the development of outsourced CFOs allows small business owners to fill the gap by hiring an outsourced CFO until they grow the business to the point where the can have their own CFO.

So in the best scenario, a business begins with the owner handling the accounting, grows to where an part-time accountant comes in to handle the work, then the company hires a full time accountant.  Next, the business adds to its roster an outsourced CFO and finally grows to where a full time CFO is hired.  The additional knowledge and sophistication each step gets is what allows the business to grow to the next stage.

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