No matter what business you’re in, you need accounting services. Whether you are talking to investors, preparing to go public, filing a tax return or just need an income statement, you need an accountant to crunch the numbers and report them the proper way.
In the old days, companies kept all their financial information on paper in one location. The checkbook and the bank statements generally resided in the chief financial officer’s file cabinet.
The Internet has radically altered how accountants interact with clients. Now clients can go online anywhere in the world, log into a secure section of their accountant’s Web site and retrieve the information they need. Or their accountant can e-mail the data. For the first time, accountants can retrieve information offsite and process it effectively. “That is the essence of outsourcing,” says Steve Bibas, partner at Rosen Seymour Shapss Martin & Company LLP, (RSSM), a CPA firm in New York City that specializes in accounting outsourcing.
The firm even has a department which “edgarizes” info. Public companies generally must edgarize their financial information to present it to the Securities and Exchange Commission. RSSM can send the requisite data to the SEC online. This is a very narrow niche, but the firm is including it in its list of offerings because it considers itself “a retailer of professional accounting services.”
Accounting outsourcing is a trend that’s accelerating, says Bibas. The dot.com explosion has contributed to the trend. The CPA says new companies don’t always have the time or the financial resources to create their own accounting departments in-house.
A Variety Of Specialists Under One Roof
And it probably wouldn’t be possible to staff it properly; today’s booming economy makes seasoned CPAs in short supply. Bibas says it’s difficult to assemble the various financial specialties under one roof. Even if a new company found a good tax person, it would still have to search for someone with accounting and audit experience and/or someone with a background in SEC requirements if they were about to float an initial public offering. “When you outsource, the provider should have all the expertise you need,” says Bibas.
Uncle Sam is aiding and abetting the trend, too. Federal regulations keep changing. Accounting is becoming increasingly complex. “There’s too much to know. You have to go outside,” says the partner.
Accounting outsourcing makes sense. In addition to the cost savings, Bibas says outsourcing the process of financial information assures a client more accurate financial reporting. Companies who hire a CFO can’t expect this person to be familiar with every financial specialty. Bibas says he’s dealt with some CFOs who didn’t even know how much money the company had in the bank. Hiring an outsourcing provider, however, gives the buyer access to all the talent at a big firm. “We’ve encountered just about every possible situation that exists out there,” reports the partner.
Turnaround time is faster when an outsourcing provider is crunching the numbers. An in- house accounting department can sometimes take as long as 90 days to prepare a simple quarterly report. If the accounting firm has all the information on line, it can prepare a report with footnotes in two to three weeks after the quarter is over.
The Internet is Making Outsourcing Easier
The continued fine-tuning of the Internet is aiding the growth of accounting outsourcing. Increased bandwidth makes communication both easier and faster. Bibas bets teleconferencing is in the cards for the near future, which will further accelerate the trend as people can exchange information and work on documents together while actually seeing each other.
In fact, Bibas says buyers should check out an accounting firm’s technology as well as its reputation before selecting a provider. And it must have the manpower to be able to set you up online at your office. Someone should walk you through the various programs you’ll have to use if you choose to retrieve the information yourself, Bibas points out.
For these reasons, it’s getting easier to sell accounting outsourcing services. The big obstacle is allowing an outsider access to the most sensitive areas of a company’s business. “People naturally worry if they decide to have our firm manage their bank accounts as one of their outsourcing services,” says Bibas.
“They should be worried about that,” he continues. But he points out that an outsourcing firm, which should have liability insurance, is handcuffed by layers of authorization. No checks can be cut unless the customer gives its OK.
Buyers shopping for an accounting outsourcing provider should know what they want before beginning their quest. Bibas says his firm needs to know what you want, how you want it and when you want it. The more specific buyers are, the better it is for the supplier. Once the desires are clear, RSSM assembles the appropriate specialists in its conference room and goes over the prospect’s wish list from A to Z.
New Clients From The Web Site
Then he advises to put these discussions in writing. “If you do this in advance, your outsourcing relationship will go smoothly,” says the accountant.
Currently, most of RSSM’s clients are headquartered in New York City. But it’s beginning to get out-of-town referrals from its Web site. The firm is currently working with one company in California. Bibas doesn’t expect the principals of the transaction to ever meet face to face. He plans on using FedEx to ship any documents if the firm needs notarized hard copies.
The firm dramatically expanded its outsourcing division two years ago. One of its clients, Lehman Brothers, asked it to do a special project for it. The investment banking firm wanted to outsource the entire accounting process for 18 public and 35 private partnerships. “We provide the general accounting and administrative services for this group. We also to handle all the headaches in dealing with the outside auditors,” he says.
The firm invested in technology to make this work. The partners realized the law of economies of scale meant they could lower costs if they increased their volume. So they began to look for new outsourcing clients.
Today the firm has 100 professionals. Ten are devoted exclusively to outsourcing.
Lessons from the Outsourcing Primer:
- The Internet has accelerated the trend for companies to outsource their financial and accounting departments.
- Outsourcing gives buyers access to a wider variety of expertise. Instead of having one CFO, they have access to 100 professionals, each with a specialty.
- Outsourcing provides one stop shopping, from simple balance sheets to SEC edgarizing.
- Check out the technology of your financial outsourcing provider. It must be first rate.
- Outsourcing speeds up response time. An outsourcing provider, for example, can produce a quarterly report in three weeks or less, much faster than most in-house accounting departments.