Most Startup and SMB Founders and CEOs decide to engage an accountant in the early stages of their business. This is sound practice given the complexities of tax and corporate regulations. But like most professions, the world of accounting is full of jargon which can make it difficult for you to understand what your accountant is actually doing for your business. Accountants also use many different titles, that can make it confusing to know who is right for your business.
The reality is that most small businesses, regardless of size or industry, will need some similar accounting, administrative and business tasks. These are done at startup (i.e. in the first stage of operations), routinely (i.e. the process of gathering, recording and analysing financial activities on a day to day or periodic basis), and on an ongoing and ad-hoc basis (i.e. as required or demanded).
The table below outlines the different accounting, administration and business tasks at each stage of a business. Some of these can be outsourced to a bookkeeper, tax or compliance accountant or a CFO. But there are some tasks I wouldn’t recommend outsourcing, these are highlighted as being tasks for the Founder or CEO.
|Accounting / Administration / Business Task||Bookkeeper||Accountant||Chief Financial Officer||Founder / CEO|
|Business/strategic recommendations & plans|
|Budgets and forecasts|
|Funding (debt/equity) and banking infrastructure|
|ATO & ASIC Registrations & Forms|
|Accounting system selection|
|Chart of accounts design|
|Monthly reporting package template|
|Accounting and administration policy/procedures|
|ROUTINE - DAILY, WEEKLY OR MONTHLY|
|Initiate/authorise/raise purchase orders|
|Initiate/raise customer invoices|
|Processing purchases, sales, receipts, payments|
|Workers compensation insurance administration|
|Payroll returns and reporting|
|Superannuation guarantee compliance|
|Employee leave approvals|
|Payroll approvals and associated payments|
|File source documents|
|Prepare lists of supplier invoices due for payment|
|Pay supplier invoices|
|Asset register and depreciation entries|
|Tax depreciation rates|
|Monthly reporting package|
|Analysis & commentary on monthly results|
|Chase overdue customer invoices|
|Liaison with Tax/Compliance Accountant|
|Instalment Activity Statement (IAS)|
|ROUTINE - QUARTERLY|
|Balance sheet review|
|Cash flow reports and forecasts|
|Liaison with Tax/Compliance Accountant|
|Business Activity Statement|
|ROUTINE - ANNUALLY|
|PAYG Payment Summaries|
|LiaIson with Tax/Compliance Accountant|
|Annual income tax return|
|Fringe Benefits Tax (FBT) return|
|Budget & Plan|
|ONGOING & AD-HOC|
|Due diligence (acquisitions & disposals)|
|Growth funding - debt/equity raising|
|Leadership, financial & governance support|
|Business & commercial advice/support|
|Accounting processes and internal control reviews|
This is not a comprehensive list – your business may need more things or less. Generally, the routine and compliance tasks are completed by bookkeepers and accountants. Some of these tasks are best suited to a bookkeeper while others fall within the expertise of a tax or compliance accountant or CFO. The CFO also has an important role collaborating with the Founders and CEO.
But not every business needs (or can afford) a full-time bookkeeper, tax/compliance accountant and CFO. That’s where a part-time CFO can be more cost-effective and add more value to your business as well. They’re able to roll up their sleeves and help with the routine and compliance tasks if required.
To help you understand the difference between each role, I’ve outlined what each of them are and what they can do.
Bookkeepers will make sure all your business transactions are properly recorded and classified in your accounting system. They also keep your accounting records up to date, provided that you give them all the necessary information they need like invoices, purchase orders, contracts, leases and employment agreements.
Your Bookkeeper will also file source documents, so you can find them easily when you need them. There are many common online or cloud accounting/payroll systems that handle this electronically now. This means you shouldn’t need to keep hard or paper copies that take up valuable office space. These systems also allow you to authorise users (eg. Founders/Managers, Tax/Compliance Accountant) so they can go direct to the source if they need to.
Your bookkeeper will also complete some basic accounting controls like bank and payroll reconciliations. They can let you know when critical payments are due and tell you when it’s time to follow up overdue customer invoices. It’s best practice to make sure your bookkeeper cannot deposit or make payments though. They should be able to reconcile bank accounts but not access them.
Many accountants offer bookkeeping services but I’d recommend you keep the two roles separate. You should be able to engage a specialist bookkeeper on a fixed monthly cost or even use a specialist bookkeeper with an offshore processing centre to keep costs down.
It’s best to get a bookkeeper onboard as soon as you start operating so all your business transactions are recorded. You can find more useful information about Bookkeepers at The Institute of Certified Bookkeepers website.
You probably engaged an accountant to help advise you on the best way to structure your business. They can also look after your ongoing tax and corporations law compliance. Most accountants do this type of work, but it’s best to find one who is referred to you or who is a member of one of the three legally recognised local professional accounting bodies.
Even though the ATO and ASIC websites provide free guidance for SMBs, your Tax/Compliance Accountant will make sure you meet your income tax, GST, payroll, superannuation and ASIC obligations. They will also be able to keep you informed of any updates or changes that are relevant to your business. These tasks are essential for any business.
It is possible to find an accountant who offers compliance services for a fixed monthly fee. Most will also use online or cloud accounting and payroll systems if you ask them. This will make it even more efficient and cost-effective for you.
Part-Time Chief Financial Officer (CFO)
The Virtual CFO Association defines an outsourced CFO as:
“… a contracted service provider who can provide the critical financial management skills for [SMBs] at a cost that enables significant benefits to be delivered to the business …
Typically, [a part-time] CFO has a number of strengths and focuses on:
- Analysis through financial reports and interpretation of these
- Oversight of the business’ finance function
- Offers insights into business operations which allow well informed decisions to be made
- Behaves with a broader view of the client’s ethical and social responsibilities
- Heavy focus on budgeting and forecasting
- Provides performance management support
- Reviews risk exposures.”
The main objective of a virtual or part-time CFO is to help with your administration and accounting, so that you have the space to focus on your business.
This job description guide provides a good summary of the duties/responsibilities and qualifications of a CFO.
Virtual and part-time CFOs are a growing profession so you will find many in a simple Google search. But to find the one who is right for your business ask them these questions:
- What is their experience? Have they worked with companies in the same industry, with a similar geographic reach and size as yours?
- What are their accounting, professional, and post-graduate qualifications?
- Can they work in your office or only remotely?
- What are their areas of specialisation? Can they demonstrate their success in that area?
- How available will they be to you? How will you be able to communicate or access their services?
- Do they have an onboarding process to learn about your business and get started quickly?
- What is their pricing model? How does it suit your budget? Do they charge an hourly rate or a fixed monthly fee?
- Do they suit your management style and organisational culture?
- How hands on are they?
- What experience have they had with your online or cloud accounting system?
- What do they think are the core challenges facing your business and industry? Do you agree with them?
- How do they believe they will add value to your business?
- Do they understand your expectations and what their deliverables will be?
- Do they understand your business model, plans, goals and vision in the short, medium and long term?
- Are you willing and able to support and implement their recommendations?
Your Virtual or Part-Time CFO will become your trusted advisor and have a significant influence on the success of your business, so it’s important to take your time and find the right person.
The chart below shows how the different roles contribute to the overall accounting and administrative tasks.
While many large companies recognise the strategic value of CFOs and often appoint them to their Board, startups and small businesses tend to focus more on compliance. This may be because they don’t realise how much value a CFO (even a part-time or virtual one) can add to their business. Perhaps they’re also concerned about the cost of bringing on board a senior resource like a CFO. Another possible reason is that many accountants now offer advisory services. While these advisory services may add some value, they’re unlikely to offer the same depth of commercial and finance skill as a CFO who is part of your team.
The reality is that your business needs the services provided by an accountant, bookkeeper and a CFO, but you may not need or be able to afford all three. That’s where a virtual or part-time CFO makes sense. It’s a cost-effective way of getting your business up and running. In the long run, it will probably even save your business money.
If you think your business could benefit from the experience and skills of a CFO, let’s have a free, no obligation chat.