Smart small and medium business (SMBs) owners know the benefits of outsourcing business functions to a third-party. Since SMBs have limited time and manpower to do everything themselves, they turn to companies like us to handle their accounting needs.
At Harvest Accounting, we take on the end-to-end of the accounting spectrum, from day-to-day financial operations to financial reporting for our clients. We use cloud-based software solutions like Xero and Receipt Bank to fully digitalise the process and streamline operations for our clients.
Based on our experience, this has been helpful for them. We love working with creatives, and taking the accounting burden off their hands allows them to do more of what they would rather be doing. Other businesses such as e-commerce struggle to keep up with high transaction volumes. We enjoy coming in to see how they are working and to automate and consolidate their systems.
The common denominator for our clients is the desire to make their business less stressful. Pretty obvious, right?
The reality is there are still a lot of doubts when it comes to digitalising and outsourcing bookkeeping. A lot of businesses find it difficult to shell out the money when they could cut on costs by doing the accounting themselves, since “it isn’t rocket science.”
This perspective is a myth that a lot of companies buy into, usually due to a lack of education on the benefits of outsourcing business functions and digitalisation, and a general resistance to change. We’re here to show you why outsourcing your bookkeeping to a digital-first accounting firm will lessen the stress of running a business.
Peace of mind when you leave it to the professionals
Most small business owners are not trained in accounting. They start a business out of passion, and they’d much rather be spending more time on what they’re good at rather than trying to balance the books. They also tend to operate on very small, agile teams— focusing on product market fit, sales, and scaling, which often means the accounting function gets left behind.
Creative Hearts Singapore, a boutique music and performing arts school in Singapore, was founded by music educator Natalie Hiong. Natalie is passionate about sharing her love for music with her students—from giving singing lessons to hosting classes on music theory. The last thing she wants to do is send out invoices. But someone’s gotta do it, right?
What usually ends up happening in these cases is the business owner decides to hold on to the accounting themselves for too long. Not only does this take up the founder’s valuable time, it ends in a big mess of non-compliance and panic mode at tax filing time. In fact, we see this happen so often we offer rescue services specifically for these types of scenarios.
While accounting isn’t rocket science, it’s not as simple as it may seem either. So between the founder or a non-accountant within the team taking on the bookkeeping and potentially making a mess and hiring a full-time accountant when your current revenue can’t justify the costs, what choice do you have?
When you outsource your accounting to experts, you get your monies’ worth in peace of mind. You won’t have to stress about filing your team’s Central Provident Fund (CPF) contributions on time or making sure you still have the cash flow to sustain next months’ business. Outsourcing earns you an entire team dedicated to your finances—one much larger and more proficient than any you could bootstrap on your own.
Getting expert insights
Another benefit of outsourcing to experts is that SMBs can tap these experts for advice. Seasoned accountants have the knowledge and experience on business cash flow to give insights on your financial health. Those that utilise technology can spot financial trends in your books far more quickly.
Take note that not every accounting firm will provide such a service—some firms will take on the compliance work and nothing else. SMBs need to be very particular when selecting a firm, and to look for one that offers more value adding services.
At Harvest, we prefer to do monthly reporting for our clients along with regular check-ins to discuss the numbers and results and gain insights with business owners on where their business is headed. It’s also a chance for us to raise red flags and offer some options. This has proven to be even more valuable during the pandemic as SMB founders look for ways to sustain their cash flow throughout the economic downturn. In this period, due to the frequency of reporting, Harvest has been able to help clients identify early on when a cash flow crunch was looking imminent, and helped arrange financing to tide them over.
SMBs and even full-time trained accountants might not don’t have access to this insight. Accounting firms that work with a lot of many different SMBs are able to pool their knowledge and experience, putting them in a great position to offer practical advice.
Easier business with the best technology
In the past, enterprise accounting software was the only bookkeeping tech in the market. If you wanted to implement a tech solution, you would have had to pay thousands of dollars upfront just to use it. NetSuite, for example, has a base license that costs US$999 per month, with an additional $99 per user, per month.
This obviously isn’t feasible for SMBs with limited resources. Many of the modules featured in enterprise software aren’t applicable to SMBs either. Thankfully, new solutions have cropped up in the market that have made that same processing power available to SMBs at a fraction of the cost.
Our software of choice is Xero, a cloud-based accounting solution specifically made for SMBs. It automates everyday business tasks, consolidates information on one platform, and offers a real-time view of cash flow among its many benefits. Because it’s cloud-based, it offers a very low cost outlay on a monthly basis so SMEs don’t have to spend years making software payments when it’s no longer needed.
There are a number of reasons why cloud-solutions like Xero make business less stressful.
Bespoke systems capabilities
Similar to enterprise software, Xero offers the option to create a “bespoke” system for SMBs. But unlike the prior, which requires teams of consultants and developers to create bespoke systems, Xero does so through integrations.
With over 800 technology partners, SMBs can mix and match tech solutions to create an ecosystem that works for them. For our e-commerce clients, we always recommend compatible inventory management systems like Stock and Buy so we can get a real-time view of their stock-keeping units (SKUs), and data reporting tools like Futrli to get an overview of their business financial health.
It also works for SMBs with existing tech solutions. A lot of our clients use different payment methods for their business, like Stripe, PayPal, and CardUp. When they partnered with us, it was very easy to integrate these directly with Xero and streamline data entry. There were no changes or additional steps on their part. Others even started using the “pay now” link straight from the Xero Invoicing feature.
Xero is simple enough that SMBs can use it by themselves, but its learning curve remains. If SMBs have been using Excel or another legacy system, they will need to migrate their data, which can be extra challenging. They will also need to set it up and integrate it with their existing systems.
Fortunately, Xero provides support and education for SMBs that are new to technology and need some help in the initial stages.
The other simpler option for SMBs to get access to this technology is via the accounting firm they hire. Since we exclusively use Xero for all of our accounting—both our clients’ and our own—it comes free in all our client packages, alongside pre-accounting tool Receipt Bank. We help our clients export their data into Xero as well.
A lot of our clients were introduced to digitalisation when they partnered with us. Creative Hearts, Ripple Root, Our Bare Hands, and With Content are just a few of our clients that were using spreadsheets before we introduced them to Xero. Needless to say, they’re never going back.
Another thing that SMBs tend to stress about is the safety and security of their business information. A survey by Chubb Insurance revealed that 53% of cyber incidents experienced by SMBs were caused by employees. These incidents were either caused by administrative or clerical errors or the loss or theft of a company device, such as a laptop or USB drive.
Our clients get peace of mind knowing that Xero uses the best in class security systems. It’s fully built on the cloud, hosted on Amazon Web Services (AWS), and adheres to the security standards of all its partner banks.
Anyone who’s been hosting their business information on their desktops will find that this is a much more secure option for their data.
No mysteries, no surprises with real-time visibility of your finances
Businesses that use highly manual systems to manage their finances get insights into their cash flow a little too late. It becomes difficult then to pinpoint problems or make decisions fast enough to mitigate risks.
One big issue for SMBs in Singapore is late payments. According to a 2018 Xero study, 90% of SMBs reported that they have customers that don’t pay on time and that they spend five weeks each year chasing overdue payments.
In a podcast featuring Kevin Fitzgerald, Regional Director for Asia at Xero, one of the likely causes of this phenomenon is the lack of understanding of cash flow. Especially for businesses using legacy systems, many are relying on “yesterday’s information” that they don’t even realise they’re being paid late. Otherwise, they’re just checking their bank accounts without seeing the payments they need to make or collect.
This is one of the main reasons SMBs need to update their systems—instead of stressing out about whether or not their company is already in the red, SMBs can use real-time information consolidated on a dashboard to make better decisions.
Xero’s invoicing feature also makes it easier to send online invoices to your customers and get updated when they’ve been viewed. Using manual templates can take days to prepare and send out, which can result in even further delays in payments.
Many of our clients find the reporting feature to be one of the most useful to their business. HipVan CTO Shobhit Datta, for example, told us that he uses Xero’s reporting tools to make financial decisions more frequently. As an e-commerce company, HipVan experienced an increase in transactions during the pandemic and Datta needed the financial insights to manage their situation.
Focusing on what you do best
One of the biggest mistakes an SMB can make is to do everything themselves. People are not wired to multitask. Studies have shown that people who are heavier media multitaskers have lower sustained attention ability than those who aren’t.
When people multitask, they distract themselves from the task at hand. And the most important task for any team member is growing the business—this is the ultimate goal of everyone, from management to marketing to sales. So when you dilute their core business functions with menial, repetitive tasks, you also impede the ability for your business to grow.
At the same time, businesses also drive growth when they are able to step out of their job descriptions and are given the space to be creative or innovate. In fact, the highly competitive, global environment that SMBs are operating in makes creativity even more important in establishing differentiation. One of the major prerequisites to fostering creativity is giving members time to take a breather.
This is really where outsourcing and digitalising shine.
Unless it’s their core function, there’s no reason for business members to do the accounting themselves. All this does is split their focus and distract them from the main goal. By outsourcing all the bookkeeping duties to the experts, you give them the freedom to do their best work—as we do ours.
Is there a good time to start outsourcing your accounting?
All this is not to say that all SMBs should outsource their accounting at all costs. A lot of it depends on the context. We find that some of the best times to consider outsourcing your accounting is when you’re:
- Forming your business
- Fast approaching financial year end or tax season
- Rapidly growing and deciding on the next hires (what does your ideal org chart look like?)
- Feeling burnt out, overworked, or overwhelmed
- Experiencing bottlenecks or finding it hard to keep up with making payments
If you’re in any of these situations, our best recommendation is to outsource your accounting right now. To lessen your stress-levels, get in touch with us here.