The More The Merrier

Cloud-based accounting and financial management software maker Intacct, through its alliance with the AICPA and CPA2Biz, has been hard at work developing its CPA firm channel by teaching firms how to start outsourced accounting practices. As part of this initiative, Intacct is running workshops to help CPA firms develop business plans for what Intacct calls “client accounting services.” As a result of my firm’s BPO partnership with Intacct, I had the privilege of attending one such workshop a couple of weeks ago in New York City.

At first, I must admit that I was not thrilled with the idea that Intacct is encouraging new competitors to enter the finance and accounting outsourcing arena. But I soon realized that Intacct is helping further my vision of a day when outsourcing the finance function is the automatic, default choice for early-stage, emerging growth and middle market businesses – much the same as outsourcing payroll is now standard practice.

So I welcome all of my potential new competitors, and am happy to consider them allies in educating and developing the market for finance and accounting outsourcing, which is still in the nascent stages of adoption among small-to-medium size enterprises. And I appreciate Intacct’s role in creating a critical mass of outsourcing firms catering to these companies, as it can only help validate the concept!

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Don’t Allow the Credibility of Your Financial Information to be Questioned

Arleen Thomas yesterday posted “CPAs: The Startup Community Needs You” on the AICPA Insights blog. The post discusses the value a CPA can bring to startup companies. To illustrate her point, Ms. Thomas points to the accounting troubles encountered by Groupon when it tried to file for its IPO, noting that it wasn’t until recently that Groupon finally added accounting and finance expertise to the audit committee of its board of directors. If accounting issues could escape unnoticed at Groupon with, presumably, significant financial expertise both inside the company and among its advisors, as well as some corporate heavy-hitters on its board, then how much more at risk is the start-up or early-stage company that has NO accounting or finance resources whatsoever?

A start-up’s financial information – both historical and projected – is, by default, viewed with skepticism by the venture capitalists or angel investors that are being asked to fund the start-up. Having a CPA firm involved is invaluable in countering this perception and establishing credibility. This does not mean that the historical or prospective financial statements have to be audited, or even reviewed; it is a significant advantage just having a CPA firm involved in preparing the information and providing financial decision support to management. It also makes a good impression on potential lenders and investors to see that the start-up’s founders and management team have surrounded themselves with solid advisors, including accounting and financial professionals. A CPA firm with a financial management outsourcing practice – bringing CFO-type operational and transactional skills – is of even more value to a start-up than traditional CPA firms that are entirely audit and tax focused.

Ms. Thomas writes:

“Andrew Mason, CEO of Groupon, could have saved a lot of time and money though if he brought a CPA into his circle of advisers a lot earlier. The truth is that startups are focused on developing and launching their service or product, and rightly so. It’s not until someone, whether an investor or bank or stock exchange, requires a CPA to be involved that most startups pay attention to their financials. But that doesn’t have to be the case.”

I couldn’t agree more! Many startups fail to see the value of accounting and finance, and resist putting scarce resources toward the necessary expertise. Like going to a doctor only when sick, they wait until the pain of NOT having solid financial statements or projections becomes unbearable, typically due to some external impetus. By then, it may be too late to take advantage of an opportunity to raise capital, or to avoid a liquidity crisis. The ultimate cost – not only in real dollars to fix the accounting problems, but also in lost opportunities and lost credibility – is likely to be far greater than the earlier savings on accounting and financial expertise.