What makes you stronger?18th March 2020
It’s one of the most frequent questions I get.
“Garry, why should we outsource our finance function, rather than keeping it in-house?”
The truth is that there are many reasons, but let’s just focus on one.
Which of those two options makes your business more resilient?
I’ve been talking about this a lot in my posts over the past couple of weeks, because all around us, businesses are subject to a dizzying pace of change.
Whether it’s the impact of the Coronavirus, Brexit, the budget, advances in technology, or changes in your industry, the external conditions under which you operate are shifting the whole time.
And there are frequently internal pressures, too, like staff who leave, human error, and even the stress of fast growth.
All of these put your business under strain, and could even lead you to breaking point.
This is a lot more common that you might think, given that businesses go into administration every day!
Grown up businesses do everything they can to inoculate themselves against such eventualities – putting together risk registers to predict potential adverse events, and plan how they would deal with them.
And they build their businesses carefully, so they can withstand difficult events.
One of the most important steps you can take is to ensure that your finances are always run smoothly.
That’s because if your money isn’t managed well, your business is extremely vulnerable. But when your finances are secure, you have a safety net.
Now, to get back to my original question: “What makes your business more resilient – handling your finances in-house or outsourcing this service?
You might think that your finances will always be safer handled by people sitting in your own office, where you can keep a close eye on them.
But it’s simply not true.
Doing your own accounting does not, by itself, give you any control over your finances. After all, if they’re producing shoddy figures, or give you no help interpreting your numbers, then any control you feel is an illusion.
You’re much more likely to find your finances going haywire, than if you allowed someone to manage your money really well, on an outsourced basis….
…and you will certainly find it much harder to survive a financial crisis.
But I’d go further. When it comes to resilience, keeping things in-house is often a real disadvantage…
Here are 3 examples:
- Your bookkeeper or accountant is under-performing. You really need to replace them before they do any damage!
If they work for you in-house, you could still be stuck with them and their shoddy work for months….
Dismissing a member of staff can be fraught with difficulty. But if you have outsourced your finance function? You will have a clear commercial contract with them that will enable you to take immediate action, and if you wish to change your arrangements you will be able to give them notice in accordance with the terms of that contract.
- A member of your accounting team has committed fraud or made an enormous error.
For example, your accountant has dipped their hand into your company bank account – it happens! Or perhaps they sent a £50,000 payment to the wrong people.
If that member of staff is in-house, chances are that you will have to swallow that cost. You could be ruined, or thrown into immense financial difficulty.
But an outsourced finance department (like ours) will usually have a fidelity guarantee – that’s insurance against fraud. They’ll have indemnity insurance too, to protect against human error.
So you’re covered. Phew!
- Your accountant quits suddenly. You were completely reliant on this in-house member of your team because they were so fantastic.
All in all, their departure hampers your accounting department’s performance for a good 6 months.
But if you outsource your financial management, you will never rely on any one individual. You will have a finance team at your service, so everyone is easily replaced (whether they are simply on holiday… or moving on).
And finding new members of the team is no longer your headache!
Your accounting department will not only survive the departure of any key member, but you’ll barely notice the difference – at least not when it comes to levels of service.
Are you starting to see how outsourcing your finance function can be a real advantage?
It allows your business far more protection and flexibility, and puts you in a much stronger position to handle challenges and change.
So if you would like to upgrade your financial management to world-class standards, get in touch now.
I’m looking forward to speaking to you.