The case for advisory services

It is sometimes difficult for business owners to justify outsourcing certain services and moreover justifying high-end fees. Accounting, tax and advisory services are no exception-a lot of entrepreneurs start off doing these things on their own but as their business grows and expands they usually find themselves unable to cope with the time it takes to properly in-house these services or lacking the expertise. 

We talk about the value of our services all the time, but what better way to highlight it than to talk about one of the client journeys! This blog is a discussion of how accounting services for one client have evolved into a full outsourced controller engagement and the evolution of the services provided. 

This client came to us two years ago, and was looking for someone who could step up their regular bookkeeping beyond just categorization and reconciliation at month-end. It is worth mentioning that this particular client was already fairly large in terms of revenues, had an established employee base of about 30 people and the founders of the business all have advanced business degrees and prior business experience so they were more sophisticated than most in terms of analyzing their performance and running certain financial planning and analysis calculations. 

The goal for this client all along has been to eventually be able to have the books closely match their financial model that was kept in Excel, as they were planning to find investors for their business. 

The first thing we did was isolate all of their income and expenses by revenue stream and in 2022 we started tracking income and expenses according to the streams. We also modified the chart of accounts to properly track cost of sales so that some of the expenses can be isolated to track gross margin appropriately. 

By the end of 2022, we decided that we need to switch to an accrual method of accounting so that we can properly recognize revenues when earned and recognize expenses when incurred. This change meant accruing all vendor payments, creating appropriate prepaid expense accounts as well as properly recording and recognizing deferred revenue since this client had quite a few customers that paid months in advance. 

In 2023, we continued to refine and build out our processes for proper revenue and expense recognition. By mid-2023, this client was actively submitting proposals to various investment firms and by summertime they were in due diligence meetings with an investment firm looking to successfully complete this brief but arduous process and close the deal. 

We were able to help gather necessary information, such as payroll reports and financial statements and were present during due diligence meetings for any specific accounting and financial statement questions. 

In the second half of 2023, we continued to update client’s internal processes to further streamline operations. One was an integration with Melio to streamline the payment to numerous subcontractors which made executing and tracking upward of 40 payments a week much easier and faster. 

In Q4 of 2023, it was decided that the company needed a better platform for credit card expense tracking as well as expense reimbursement and bill payment platform. It was our job to vet various vendors and perform vendor selection for the client. We settled on Ramp which allows seamless integration with the accounting system and granular level of expense tracking since this client needs to track both income and expenses by project. The remainder of 2023 was spent helping the client to transition to Ramp, to ensure that the chart of accounts and the processes we set up in late 2023 would position the company well for project level tracking of income and expenses, and full accrual method of accounting. 

The end goal for the company and by extension us as the accounting team is to ensure that all of the granular level reporting is done right out of Quickbooks rather than having the team rebuild their own metrics in parallel excel files and spreadsheets. Instead, they can use the accounting system data to do further analysis but the two are going to be fully integrated processes rather than two disjointed ones. We are also well-positioned for the upcoming audit that’s now mandated by the investment firm and will continue to document and hone the internal processes and procedures as the company grows and evolves. 

The above story is a typical way in which your external accountant can serve as a partner to the business. The accounting system and the back office procedures are never divorced from running the business and this case study is a perfect illustration of that. 

If you are interested in learning more about how we can assist in helping you grow your business, schedule your complimentary consultation today!