Outsourced Accounting: A Strategic Guide for Startups

Many startups don’t have the capital or resources to hire full-time accounting professionals to serve as CFOs, bookkeepers or controllers. Noting this, it often makes sense for startups to outsource these critical duties to a third-party specialist, such as Graphite Financial.

Outsourced accounting for startups is essentially the practice of working with an external partner on critical financial processes like bookkeeping, payroll management, prep for tax regulations, financial reporting and forecasting, and more. Graphite has provided high-level outsourced accounting services since 2016 and specializes in providing such services for startups. Yet, outsourcing accounting services is more than just a cost-savings measure — it’s a strategic decision that can set any startup up for long-term success.

The Evolution of Outsourced Accounting for Modern Startups

Outsourced accounting has evolved from more than just basic bookkeeping and financial services. Today, when you work with a qualified partner like Graphite, you’re entering into a strategic financial partnership designed to serve your startup through all phases of its growth. Here’s a look at the financial expertise Graphite offers to early-stage startups:

• Fractional CFO services
• Bookkeeping
• Tax preparation and filing
• Fundraising support
• Financial forecasting and planning
• Bill pay and invoicing

Comprehensive Outsourced Accounting Services Explained

From basic bookkeeping to fractional CFO services, there’s a lot to gain by working with an outsourced accounting partner — and startups can scale services accordingly to best serve where they are in their evolution. Graphite works to serve as an extension of the startups it partners with, which enables us to provide multiple levels of expertise simultaneously according to unique startup needs.

Foundational Bookkeeping and Transaction Management

From bookkeeping to reconciliation to bill pay and invoicing, startups can outsource several routine financial tasks to their partners. What’s more, modern technology allows Graphite’s professionals to serve startups remotely without sacrificing the quality of service. These outsourced accounting tasks free up valuable time for founders to focus on strategy and growth, while ensuring financial accuracy and consistency.

Financial Reporting and Compliance Management

From financial statements to forecasting, Graphite professionals can prepare many types of reporting for startups to help leaders make better, smarter decisions about how to run their operations. Startups can also ensure that all reporting and financial activities comply with industry and legal requirements and best practices. Achieving GAAP compliance reduces the risk of financial data misinterpretation and fraud and ensures transparent and accurate financial reporting, which is especially important for investors and stakeholders.

Strategic Financial Advisory and CFO Services

Outsourced, or fractional, CFOs do everything that an in-house CFO would do, except on a part-time and external basis. Graphite’s fractional CFOs are experienced professionals, and we make it a point to align professionals who have experience in your startup’s industry. Our fractional CFOs are designed to serve as an extension of your startup and provide high-level service and strategic financial advice to help your startup make critical financial decisions. Graphite offers various levels of fractional CFO services to support the evolution of startups and strengthen overall financial management.

The Strategic Benefits of Outsourcing Your Accounting Function

Outsourcing accounting offers startups a lot more value than just cost savings. When you work with Graphite, you’ll have access to high-level expertise — and expertise that can also scale with your startup as it grows. Additionally, outsourcing financial and accounting practices allows founders to focus on core business growth while building a foundation for long-term financial stability.

Financial Expertise Without the Full-Time Expense

Outsourcing financial services comes at a fraction of the cost of what it would be to bring a professional in-house, which can represent a significant savings for startups with already limited resources and capital. Outsourcing also permits access to professionals with different skill sets and expertise through one team, allowing for more comprehensive services than what your startup may be able to attain from one in-house professional.

Scalable Financial Operations That Grow With Your Startup

Another key benefit of outsourced accounting is its ability to scale up or down based on your startup’s needs. For example, startups may need more support during growth periods or funding rounds than they do during other phases in their evolution. Graphite offers various plans and fixed monthly pricing to offer cost certainty for its startup partners, while also allowing flexibility during periods of growth.

When Startups Should Consider Outsourced Accounting

There’s no bad time for a startup to consider outsourced accounting, but certain situations — such as rapid growth, fundraising periods and advanced financial complexities — are key scenarios when it truly becomes advantageous. Generally, founders should seek assistance when it gets to the point where they can no longer sufficiently manage their finances on their own.

Pre-Funding and Seed Stage Considerations

A good time to outsource financial operations is when your startup is readying for fundraising rounds. Working with an outsourced professional can add credibility to your startup and also ensure that your finances are being managed properly as a means of transparency with potential investors. Graphite can also assist with preparing presentations for investors before fundraising rounds.

Series A and Beyond: Scaling Your Financial Operations

Following Series A funding, focus often shifts from early-stage development to scaling and penetrating markets. This translates to a requirement for more robust financial planning and forecasting. A fractional CFO can help support startups at this stage and ensure that increased reporting and compliance requirements are properly met. They can also help your startup manage cash flow more effectively, ensuring you have the resources needed to support growth.

Selecting the Right Outsourced Accounting Partner

Selecting the right outsourced accounting firm should be done in the same way your startup selects any partner — by weighing expertise and various intangibles.

Essential Questions to Ask Potential Accounting Partners

Beyond experience and expertise, some inquiries you’ll want to pose to potential accounting partners include:

• The scope of services offered
• Accounting experience in the industry of your startup
• Pricing tiers and ability to scale
• How to best communicate with them
• How responsive and accessible they are
• How they handle onboarding and collaboration

Evaluating Technology Stack and Integration Capabilities

The best accounting partners also use the best accounting software to support their partners. Good accounting software is flexible, can automate certain activities and also integrate with other systems and programs. It should also support strong data security measures to protect sensitive financial records. Some of the solutions we use at Graphite include QuickBooks, Rillet, Xero and NetSuite, among others.

The Onboarding Process: What to Expect

Transitioning to Graphite as your outsourced financial partner is seamless and easy. We assign an onboarding manager to all of our clients to ensure the process is as smooth as possible.

Setting Up for Success: Establishing Financial Systems

In many cases, startups either transition to Graphite for their financial services after working with another partner who did not meet expectations or are hiring professional accounting services for the first time. In either situation, we aim to make the process as easy as possible for clients. We’ll work to establish your financial foundation, set up your chart of accounts and get all the proper measures in place.

Working Effectively With Your Outsourced Accounting Team

To get the most out of your outsourced accounting relationship, there are various best practices to follow. These include:

• Clearly defining responsibilities
• Establishing clear lines of communication
• Setting performance metrics and regularly reviewing them
• Encouraging teamwork and collaboration between external and internal teams
• Establishing long-term goals

Establishing Effective Communication Protocols

To get the most out of your partnership with outsourced accountants, and ensure it’s more than just a transactional relationship, it’s important to establish open lines of communication. Some tips for achieving this include:

• Providing access to your startup’s financial information
• Establishing regular communication protocol and the tools to share info and track progress
• Scheduling regular meetings to review information and encourage collaboration

Measuring the ROI of Outsourced Accounting

How can you measure the return on investment from working with an outsourced financial partner? There are a few ways to measure ROI.

One is by outlining metrics that you want to meet in the short and long term and then outlining the strategies to achieve these goals. Regularly review progress and adjust goals accordingly to ensure you’re maximizing the value of the partnership and improving your startup’s overall financial health.

Another way to track ROI is by the cost savings that can be realized by outsourcing financial services rather than hiring in-house. The savings of working with a partner have the potential to be significant, allowing founders to put more capital into growing their startup.

Strategic Accounting Support for Growing Startups

For more information on the benefits of working with an outsourced accounting partner, contact Graphite today. Graphite’s team consists of high-level professionals with specialized expertise working with venture-backed startups. Contact us today for more information and to schedule a consultation about our accounting and bookkeeping services.

FAQs

What exactly does outsourced accounting include for startups?

Outsourced accounting services for startups can largely be customized to reflect any service the startup needs at a specific point in time. For instance, in the early days of the startup, basic bookkeeping may be all that’s needed. However, as the startup grows and evolves, CFO-like services are often required.

How does the cost of outsourced accounting compare to hiring in-house?

Outsourcing financial services is a fraction of the cost of what it would be to hire a professional in-house. For instance, Graphite’s fractional CFO packages start at $1,250 per month.

Will outsourced accounting work with my existing financial systems?

Yes, we aim to make the transition as easy as possible for clients. We’ll work to establish your financial foundation, set up your chart of accounts and migrate existing systems.

How do I transition from DIY accounting to outsourced services?

At Graphite, we’ll assign your startup an onboarding manager to ensure the transition process is as easy and streamlined as possible.

What level of financial expertise can I expect from an outsourced team?

When you work with a qualified partner, you’ll have access to high-level expertise — and expertise that can also scale with your startup as it grows.

How does outsourced accounting support fundraising efforts?

An outsourced partner can assist with preparing presentations for investors before fundraising rounds. Fractional CFOs can help support startups at later fundraising stages and ensure that increased reporting and compliance requirements are properly met.

Can outsourced accounting scale as my startup grows?

Yes, that’s one of the biggest benefits of working with a qualified partner like Graphite. Our service plans are designed for evolving startups.