For a tech start-up, choosing an outsourced finance function is a lot like choosing a mattress. It should be supportive, not too soft, not too hard and always there when you need it.
A key question for any CFO joining a tech start-up is the ’buy it or build it’ question. Should he or she recruit an in-house team or use one of the many cloud-based, remote accounting firms? Get it wrong and their career at the start-up may be remarkably short lived. Get it right and they could become a hero/heroine.
If it is decided to bring everything in-house from Day 1, this may be more expensive. There are considerations around recruitment, training, absence cover, motivation, pay levels, career progression and all the other issues that can come with an in-house team.
That’s not to say that this option is always the worst – just that it tends to be more expensive and needs more managing.
The outsourced option can be a good interim measure for the CFO. They can get on with doing deals, stopping the CEO spending money and making sure customers pay while the outsourced accounting firm deals with the less sexy back-office functions.
The problem is how do you chose an outsourced accounting firm? It’s a bit harsh to say it’s like the Wild West out there, but there are one or two cowboys touting for business and these are best avoided.
Here’s a few guidelines that I have found useful in choosing the right firm:
Does someone in my network think they are good?
Do they have other clients in my industry?
Do they sound like they know what they are talking about?
Are they over-promising or suggesting a fee that appears to be too low for the work involved? (in which case it probably is!)
Have they got enough senior staff?
Once you have chosen, it’s all about developing a relationship. One of my previous bosses described the outsourced accountant as an engineer looking after the ‘black box’ that is the back-office finance function. The CFO’s role is to take the data out of the black box and work their magic on it, analysing and interpreting the results and guiding a company’s progress accordingly.
So in summary, choosing the right outsourced accounting partner is not a task to be taken lightly. Get it right, and you will have many restful nights. Get it wrong and you’ll be lying awake tossing and turning all night (let me know if I’m taking mattress simile too far!).
