Outsourced Accounting – Absolute Financial Management

for the Construction Industry How Outsourced Accounting Services are creating new

opportunities to reduce costs, increase efficiency, and secure a current and clear picture of your financial status

 

By Charlie Jones, CPA Managing Partner

OnDemand Accountant™

A service of Marshall Jones & Company - Certified Public Accountants & Advisors

     

Table of Contents    

Introduction  ......................................................................................................................  3  

What is Outsourced Accounting?  ................................................................  3  

Key Issues Facing the Construction Industry  ...............................  4  Cost  .......................................................................................................................................................  5  Confidentiality of Financial Information  .................................................................................  5  

The Value of Outsourced Accounting to the Construction Industry  .................................................................................................................................  5  

What’s Right For Your Business?  ................................................................  6  A  Few  Other  Items  to  Consider…  ....................................................................................................  6  

In Conclusion…  ..............................................................................................................  7  

     

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Introduction

Construction companies face many challenges—from properly managing work in progress versus revenue recognition to inefficient “back office” processes. In relation to managing cash flow, one of the most often misunderstood aspects of construction accounting is the relationship between work in progress (WIP) and the recognition of revenue. This, then, often leads to insufficient cash flow. Accounting expertise is required to ensure this doesn’t happen and that owners always have an accurate view of their financial standing. The bottom line is that construction accounting is complex and requires year round focus. The daily back office accounting work also tends to present issues for business owners. Work such as accounting, bookkeeping, payroll, and other tedious administrative functions are time-consuming. The fact is that most construction company owners simply don’t have the resources or time to dedicate to this work, and what this typically means is that the financial information being produced in-house is less than adequate. Outsourced accounting services is the ideal solution to handle day-to-day accounting while also gaining valuable insight into financials that can lead to better and more sound business decisions. Outsourced accounting services offer both a cost-effective strategy (typically the cost is less than a full-time bookkeeper) and provide owners with a seasoned accounting professional that can guide them toward financial success over the long term.

What is Outsourced Accounting?

Outsourced accounting is the ideal solution for owners that wish to hand over complex back office work while also saving money. A new and effective trend within the construction industry is to move accounting outside the four walls of the business and into the hands of an accounting expert. Essentially, the accounting firm becomes the ‘internal’ accounting department, handling all complex accounting tasks and delivering timely, accurate financials that enable the company to prosper. Leading outsourced services support the full spectrum of accounting needs, including:

• Accounting—including preparing and delivering financial statements and reports based on the organization’s custom requirements.

     

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• Bookkeeping—including processing of invoices, paying bills, preparing W-2s and 1099s, reconciling bank accounts, and complete oversight of the entity’s books.

• Full-service Payroll—including preparing and processing payroll from time entry to direct deposit.

• Tax Planning and Preparation—including preparing tax returns and planning throughout the year to mitigate tax burden.

• Sound Review and Coaching (throughout the year)—to ensure your financial goals are met. Includes review and coaching on such items as:

o Staffing efficiency analysis and compensation structure to ensure optimal head count and staff costs.

o Annual budget, including reviewing previous years’ financial data and using key benchmarks to set goals for the current year.

o Fee schedule to identify needed fee changes to routine procedures, improving the business’ bottom line.

o Internal controls over cash and receivables adjustments to help create adequate payment policies to keep cash flowing into the business.

o And general financial guidance to ensure your business stays on a healthy financial course.

Even better, premium outsourced accounting services are delivered online, supported by an advanced technology platform that offers immediate access to real-time data and information. This means that all accounting tasks are handled by seasoned professionals without the need to house them onsite. Online services also enables you to work collaboratively with an accounting professional via the internet—and typically for less than the cost of a full-time onsite bookkeeper!

Key Issues Facing the Construction Industry

Understanding “outsourced accounting” is only the first step in resolving some of the issues that face the construction industry. First and foremost, there must be a collective understanding and acknowledgement of the challenges these businesses face on a daily basis before a remedy can be applied.

     

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Cost

Controlling costs is likely one of the most commonly reported issues. The economic downturn hit many construction businesses hard—cutting into profits and delaying retirement. As such, owners have made controlling costs a primary objective, and staffing is one area where cuts are being made. This is especially true of in relation to back office (accounting/bookkeeping) work. The cost of a full-time accounting person can be quite high once salary, benefits, and other considerations of a full-time employee are combined. In consideration of staffing costs, outsourcing accounting work is a good alternative for reducing overhead costs.

Confidentiality of Financial Information

Confidentiality and privacy of financial information, such as employee compensation and benefits, continues to rank high in importance as well. Owners find it difficult to maintain privacy of information when a full-time employee maintains accounting tasks onsite. Again, outsourcing accounting functions is an ideal alternative to resolve this issue.  

The Value of Outsourced Accounting to the Construction Industry

The key advantage of outsourced accounting services to the construction industry is that it offers an easy solution to back office headaches. This type of service enables owners to simply hand over accounting work to a professional accounting team. Experienced outsourced accounting firms have mastered this transition in order to eliminate interruption of internal operations—taking the fear out of making the change. Of course, as mentioned earlier, there are other issues as well—including controlling costs (primarily mastering WIP versus revenue recognition) and confidentiality of financial information. Accounting firms that have extensive experience working with construction professionals are well aware of these issues and offer services packages to resolve them.

Consider all the value outsourced accounting offers:

• Accurate and timely financial statements, for a consistently clear view of financial health.

• A simple and highly effective accounting alternative, alleviating owners of employing full-time staff to handle accounting and bookkeeping work.

     

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• Significant reduction in operating costs in relation to staffing a full-time employee to handle accounting duties—most often as much as a 50% reduction!

• Significant increase in efficiency, offering a convenient 24/7 platform to work collaboratively with accounting professionals and receive timely financial statements, reports and other required documentation on-demand.

• The assurance of working with expert accounting professionals who know the construction niche, offering the peace of mind that work will be handled by accounting experts that have extensive knowledge of highly specialized construction industry requirements.

What’s Right For Your Business?

Owners must first take the time to evaluate their current back office processes. Only after an honest review can they determine what is the right accounting solution. A few questions to consider:

• Are you adequately managing WIP versus recognized revenue?

• Are your staffing costs in line with financial goals?

• Are you assured that financial data is kept confidential and private?

• Does your bookkeeping staff have extended accounting expertise to handle producing complex financial statements and reports, and are you getting financial reporting in a timely manner?

• Can your bookkeeping staff explain what the numbers mean in terms of your financial health?

• Does your technology support 24/7 access to information and the ability to input data any time and anywhere?

If your answer was “no” to even one of these questions, it may be time to look at other alternatives—like outsourced accounting. By outsourcing accounting tasks, be assured that financial information remains private because it is taken off-site and controlled by a third-party service provider. Industry professionals will also see a reduction in overhead costs because outsourced accounting fees are historically less than the cost of a full-time bookkeeper.

A  Few  Other  Items  to  Consider…  

“Losing control of the business’ finances” is often a fear among those considering outsourced accounting. In fact, the opposite is true. With outsourced accounting, all documents are stored and available on a 24/7-basis from within a private and secure

     

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online portal. This means that the business is ALWAYS in control of finances and has access to online financial data anytime, anywhere. “Lack of security and personal support” are other common fears. First, online platforms offer the most secure environment, where data is encrypted and access to documents requires a unique user ID and password. Online storage is far more secure than email. Second, 24/7 web access permits virtual bookkeepers and financial controllers to offer highly personalized services because clients always have a direct line to the firm’s staff. Supporting an “always-on” status, communication is immediate and requests met in real-time…as if the firm was onsite.

In Conclusion…

There’s a big opportunity for construction company owners just waiting to be discovered—outsourced accounting. Partnering with the right firm opens up a whole new world of efficiency gains and cost-savings in relation to back office work, as well as provides you with a trusted business partner to guide you toward financial health. Advanced online platforms offer 24/7 access to financial information and support a collaborative workflow process between owners and expert accounting staff—and all at an affordable fee. It’s a winning situation across the board. It’s time to consider outsourced accounting. When you do, you will find the key to reducing costs, increasing efficiency, and securing a current and clear picture of your financial status throughout the year.

About the Author

Charlie Jones, CPA, is managing partner of Marshall, Jones & Co., a 29-year-old Atlanta-based CPA firm. OnDemand Accountant is a separately branded service of the firm, offering a complete line of outsourced accounting services for the construction industry. Charlie has more than 30 years of experience serving clients with professional tax and accounting expertise. Reach Charlie at Charlie@marshalljones.com.