As your company evolves and matures, your resource needs will vary. That’s true across every function in your organization, including your financial operations.
So when it comes to determining which resources you need to handle every aspect of your financial operations effectively, a question typically comes up: Should you hire a bookkeeper or an accountant? The answer depends in part on your current stage in your business life cycle.
First, Some Definitions
Before you can assess whether a bookkeeper or an accountant is the right fit at this stage in your company’s life, it’s important to understand the difference between the two. You’ll find many job descriptions to choose from, but the following is a good representation of how most organizations view these functions.
A bookkeeper focuses on maintaining accurate records of a business’s financial activity, handling tasks like recording or tracking financial transactions, reconciling bank accounts, recording customer invoices as accounts receivable and vendor invoices as accounts payable, running reports, and possibly handling payroll (in smaller companies).
An accountant is likely to oversee a bookkeeper’s work and focuses on tasks like billing and bill payment, making general ledger entries, performing month-end and quarter-end closing activities, and reviewing the company’s various financial statements to ensure they’re accurate, complete, and generated on time. The latter responsibility is especially important, since sound financial statements help company owners and senior managers make informed operational decisions.
How Financial operations Vary at Each Stage
Throughout your company’s evolution, the needs of the business will dictate where your financial operations team focuses its time and attention, as well as the information company owners or managers expect your team to provide to support their decision-making.
Early-stage companies tend to focus primarily on tracking income and expenses and ensuring they stay in compliance with finance-related laws or regulations—for instance, paying and filing taxes on time. There’s little need for sophisticated accounting processes or procedures at this stage; in fact, much of the work can be accomplished using Microsoft Excel. A profit and loss statement and knowledge of the company’s cash balance are typically enough to support the business owner’s decision making.
Companies in high-growth or expansion mode need to go beyond those basics and begin to assess whether they have the financial systems and processes in place to support their growth. For instance, as your transaction volume increases, your transactions become more complex, and your chart of accounts expands, you’re likely to need a more robust accounting system. If you find your processes or technology aren’t sufficient to support the operation today and where you’re headed tomorrow, you’ll need to move fast to shore up these foundational components. To make informed decisions, your leaders will need a broader set of reports and financial statements than they did during your start-up days. For instance, as the business becomes more complex, they’ll need reports that provide visibility into the operation across various dimensions, like locations, departments, or product lines.
Mature-stage companies typically find their financial operations efforts shifting, with a greater emphasis on strengthening the internal finance controls needed to secure their assets. This is the time when you’ll begin to focus more on continuous improvement projects that enhance and fine-tune your financial operations and ensure business continuity. While the profit and loss statement and reports by area or function remain critical, you’re also likely to pay more attention to your cash flow statement and reports on your investments.
Which Resource Do You Need?
As the focus of your financial operation evolves in sync with your business’s growth and maturation, the resources you need to fulfill the financial operations function will evolve, too.
Early-stage companies tend to need more bookkeeping support and less attention from an accountant. At this point in your life cycle, you may do best outsourcing the accounting function to a third-party firm, since you’re not likely to need a full-time staff accountant. An outsourced accountant can help ensure your financial reporting is compliant and provide guidance on any payroll or tax complexities, for example. For specialized industries, our biotech accounting services offer customized expertise to address the unique financial and regulatory needs of biotech startups and growing companies.
Growth-stage companies have a greater need for the skills and expertise of an accountant, especially to develop operating procedures and select financial technology to support the business as it grows in complexity. But with many priorities competing for your budget, even if you hire internal accounting staff it may help to partner with an outsourced firm to handle overflow work during peak times or take on specialized tasks your team doesn’t have the capabilities to tackle. Outsourced firms like Scrubbed also can help you hire full-time staff, which can be a challenge in today’s tight labor market.
Mature companies are likely to employ an in-house accountant, in addition to higher level positions like a controller or CFO, depending on the size of the business. But while your financial operation may be in more of a maintenance mode than it was during your high-growth days, you might find value in partnering with an outsourced accounting firm for help with financial planning, forecasting, audit support, or even specialized solutions like fractional CFO services. And if you experience turnover on your accounting and finance team—which is common in the current labor market—an outsourced partner can fill those gaps temporarily or longer term.
