Why should you use an outsourced accounting service?

Throughout an organization’s life cycle, many major events take place that encourage an organization to make changes so they can be taken more seriously by having better and more accurate financial records. An organization may need cleaner books and records for one or more of the following reasons: Investments A startup getting their first round of investors beyond family and friends Applying for a new loan from the bank They’re hoping to be acquired Complex equity structure with multiple investment classes Accounting methods Generally Accepted Accounting Principles (GAAP) compliance is required A need to switch from cash/tax basis to accrual basis Growth or succession A prior accountant has left the company and left account balances that cannot easily be tied out An expanding company looking to hire first official employees Financial records Financial records weren’t regularly maintained and there’s a deadline quickly approaching They’ve been keeping financial records for tax return purposes only and are looking for more sophisticated and frequent reporting packages Specific accounting issues Accounts receivable or accounts payable with large, inaccurate outstanding balances Payroll reconciliations, including payroll liability balance sheet accounts that are negative and may not be used correctly, such as when account balances continue to grow Technology They’re looking to switch to a bigger enterprise resource planning (ERP) system — currently have Quick Books and want to switch to NetSuite — and they want to bring reliable data to the new system.

What are common pitfalls your accounting department may encounter?

Your organization may lack the adequate resources and expertise to conduct an accurate historical clean up. Time. The historical cleanup process takes a lot of time and would take time away from the existing workload as day-to-day tasks don’t stop during the cleanup process. Lack of expertise. Your accounting team may not have the knowledge or technical accounting expertise needed to clean up the books. Third-party outsourced accounting services often have industry-specific knowledge. They can provide insights and recommendations based on their experience with similar projects and help facilitate a cleanup that’s done correctly and efficiently. Objectivity. An outside service provider can provide an objective perspective on the cleanup process, which can be particularly valuable in situations where there may be internal conflicts or disagreements about the best approach. They can provide an independent assessment of the situation and help ensure that the cleanup is done in a fair and unbiased manner.

What recommendations can an outsourced accounting service provide?

During a cleanup, or after it’s completed, the service provider may recommend reassessing a few aspects of your books or finance processes. What’s showing as outstanding in accounts receivable or accounts payable, such as an account that could be written off because it’s more than 120 days old Accuracy of lease agreements Deferred revenue and revenue recognition policies Fixed asset recognition and depreciation policies Business process and policies, such as, order to cash, procure to pay, production cycle, cash management, and month end close and reporting

Article

Benefits of using outsourced accounting services for historical cleanups

June 4, 2024 · Authored by Jessy Kubal

Outsourced accounting services have become increasingly popular for businesses looking to streamline their financial operations. This practice involves hiring external CPA firms or individuals to manage various accounting functions, including bookkeeping, payroll processing, tax preparation, and financial reporting.

One specific area where outsourced accounting services can be particularly beneficial is performing historical cleanups, which involve rectifying and organizing past financial records.

This article explores the following:

What are outsourced accounting services?
Why should you use an outsourced accounting service?
Common pitfalls your accounting department may encounter
Benefits of an outsourced accounting service for historical cleanups
Timing of a historical cleanup
What recommendations can an outsourced accounting service provide?
Methods of conducting a historical cleanup

By leveraging third-party expertise in accounting and financial reporting, organizations can achieve a clean and accurate financial picture and mitigate the risk of non-compliance or financial misstatements.

What are outsourced accounting services?

Outsourced accounting is the practice of hiring an external CPA firm or individual to manage and perform your business' accounting functions.

This can include tasks such as:

Bookkeeping
Payroll processing

Jessy Kubal

Managing Director

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Benefits of using outsourced accounting services for historical cleanups

What are outsourced accounting services?

Jessy Kubal

Why should you use an outsourced accounting service?

Investments

Accounting methods

Growth or succession

Financial records

Specific accounting issues

Technology

Investments

Accounting methods

Growth or succession

Financial records

Specific accounting issues

Technology

What are common pitfalls your accounting department may encounter?

Benefits of an outsourced accounting service for historical cleanups

Maintain accuracy

Establish processes

Provides a backup team

Timing of a historical cleanup

What recommendations can an outsourced accounting service provide?

Methods of conducting an effective historical cleanup

Balance sheet

Income statement

Have questions? Baker Tilly can help.