Should I build a team of in-house accountants and bookkeepers or should I engage an outsourced provider for the accounting services that my business requires?
Here at CloudCfo, we are hopeful and optimistic that 2022 can be a significant turning point for many Startup and SME businesses across the Philippines. After two years of hardship and uncertainty for businesses in the Philippines, and across the world, we look forward to a year when businesses can plan to grow and scale in confidence!
Now, as certain businesses are able to start looking forward with a little more certainty as the PH economy opens up, business owners and founders in the Philippines can start to focus on their strategic needs and requirements to start growing their business in 2022. On the finance and compliance side, one key question that business owners and key decision-makers may be asking themselves is the question referenced at the top of this article (see above).
Of course, the answer can often depend on a variety of factors: available resources, company size, company age, costs, financial objectives, management’s financial expertise, investment strategy and much more.
However, by reading this article, you will gain a greater understanding of the many key benefits associated with engaging an accounting services provider here in the Philippines.
An Accounting Provider Can Enable Growth and Scale
For the past two years, many businesses across the Philippines have been battling both a) economic forces of the market and b) the practical and operational challenges of the pandemic. In many cases, just staying afloat has been the sole objective for most Startup and SME businesses across the Philippines.
However, as we mentioned above, we hope that 2022 can be a year where Startups and SMEs have greater confidence in the market and can start really planning for growth!
As explained in more detail further below, when engaging an accounting services provider, your PH business immediately benefits from a pool of experts, tried and tested systems and processes and a wealth of experience from professionals who know your industry and your specific finance and compliance challenges.
However, business owners should also be aware that an accounting provider can also help, support and enable a business to grow!
One example is in the area of recruitment. The costs, resources and time associated with hiring and building an in-house accounting or bookkeeping department (not to mention, the costs, resources and time of having to replace departing team members!) are eliminated when a company engages an accounting services provider.
For example, let’s say you have an accounting team in-house. What if one of those accountants or bookkeepers leave after 6 months? The company will a) have a position to fill, b) a knowledge gap to restore, c) costs and resources associated with offboarding and onboarding and d) a potential disruption across the finance function of the business for a period of time.
In contrast, when engaging an accounting provider, if one of the accountants or bookkeepers leave the team, it will be the provider’s job – not the company’s job – to ensure there is an adequate replacement. Any potential disruption due to staffing issues can be avoided!
Another example is when a company has to manage periods of high-growth. Let’s take an online retail or an e-commerce business for example. They may go through an unexpected period of growth where sales increase significantly over a short period of time. For an in-house accountant, this can sometimes be overwhelming if they do not have the resources to manage the increase in transaction volumes.
However, if this happens, an accounting provider can quite quickly move an extra resource into the team. As the systems and processes are already set up and streamlined by the provider, the new team member should know what needs to be done almost immediately!
Another area where an accounting services provider can help a company to grow is the area of process and controls. This is explained in more detail below. However, a provider of accounting services will have the expertise and knowledge to create and implement robust processes and controls that align with your business model and with your compliance requirements.
Then, as the business starts to scale, these financial processes and controls can scale simultaneously. In short, by engaging an accounting services provider that relies heavily on processes and systems, a business can really scale without worrying about the finance function being left behind!
Compliance is Still Complex in the Philippines!
Whether you are a small family business, an SME or a large corporate enterprise operating in the Philippines, your company will have an ongoing range of tax and compliance obligations throughout the financial year.
While some elements of the tax compliance framework in the Philippines have moved online as a result of the pandemic, the pandemic did not change the frequency or level of tax filing reports. Tax compliance in the Philippines remains a challenge – but a challenge that can be easily overcome with the right accounting resources in place!
As tax and compliance in the Philippines must be considered on a monthly, quarterly, bi-annually (industry dependant) and annual basis, if you do not have a competent accountant or accounting services provider for your business, it will be quite difficult for the company to ensure adherence to the many requirements and obligations under the local PH compliance framework.
By engaging an accounting services provider, your business can benefit from a treasure chest of skills, knowledge and experience to help ensure compliance with all relevant laws, updates on finance and tax legislation as well as all other accounting-connected compliance activities that might relate to the specific industry in which your business is operating.
For example, finance and lending companies in the Philippines will have a number of different compliance obligations when compared to a service company business models such as digital marketing or branding agencies.
As such, there is a high chance that one or some of the accountants or bookkeepers working for your accounting provider will already have come across the exact same finance or compliance issue or query that is affecting your business! They may have already resolved a similar issue while working with another client! This is where the comprehensive expertise and resources of an accounting provider can be very helpful!
The key point here is that when you engage an accounting services provider, you have access to the knowledge, skills and expertise of a team or pool of experts – not just a single accountant or bookkeeper.
This is a significant benefit for a company operating under a particularly complex and far-reaching compliance framework!
Technology and Systems
There is no doubt that the world took a significant step forward towards digitalisation as a result of the pandemic.
Over the past 2 years, we spoke to hundreds of Startup and SME businesses looking to move from manual finance management to a more automated and efficient way of managing their business finance and taxes. In short, moving away from handwritten ledgers and a jigsaw of excel sheets to a centralized and cloud-based accounting system.
Many Startup and SMEs in PH have already made the move to a cloud accounting system and are already leveraging the significant benefits of online finance management!
Cloud accounting systems such as Xero and Quickbooks Online are now being used extremely effectively by startups, SMEs and even larger corporates across the Philippines for their finance management requirements.
Accounting systems are now efficient, powerful and inexpensive and can really help businesses to build a fully optimized, automated and progressive finance function.
A significant step forward from excel sheets and manual generation of reports!
However, for companies seeking to transition away from the traditional or manual way of managing their accounts and finances to an online finance system, change management is not always easy – particularly if the company does not have the technical expertise in-house with the knowledge (and desire!) to drive the transition to digital or online finance management!
As always, there is a solution for this!
By hiring an accounting services provider that uses cloud accounting solutions to perform all of its services, your business can benefit significantly – from the perspective of both a) set-up and implementation and b) ongoing management of your company’s ledgers and finance function.
Below are just some of the ways in which a cloud accounting services provider, such as CloudCfo, can help Startups and SMEs move to an online/digital finance management system:
- Set-up and optimization of the cloud accounting system;
- Alignment of the accounting system, and particularly, the Chart of Accounts, with the business model of the company;
- Alignment with the local Philippine compliance framework (e.g. withholding tax requirements);
- Development of streamlined processes and controls for accounts receivable and accounts payable;
- Automated generation of financial reports and automated financial analysis (budget variance, financial ratios, etc);
- Ease of tracking financial KPIs
In short, by selecting an accounting services provider that leverage technology to provide its accounting services, the company can effectively outsource the change management and transition process to a more effective and streamlined online solution for finance management.
The impact of Covid-19 has encouraged many businesses in the Philippines to move their finances online. The future of accounting services via technology is already here!
What is your business waiting for?
Accounting Processes and Financial Controls
Accounting services providers will usually work in accordance with set systems, processes, timelines and controls. From the provider’s perspective, this is a key requirement for scaling their own business as a service provider.
Engagements are often in the form of a Service Level Agreement (or SLA) between the accounting services provider and the business which would clearly identify the various tasks, timelines and deliverables that must be completed each week, month, year, etc.
However, as a result of this process-driven system of working, the company or client itself can also benefit from aligning with these processes and systems!
Let’s take an example. Let’s say that the accounting provider’s process requires that all company sales invoices or official receipts must be provided to their accountants by Tuesday each week and then recorded in the company books by the following Thursday. If this is followed, in theory, the company can ensure that documentation is provided on a timely basis, that tax filings are always submitted on-time and that sales data will be accurate at months end!
The importance of scalable back-end finance processes and controls is particularly relevant for high volume transaction businesses such as fintech companies, e-commerce businesses, online marketplaces and platform/subscription business models where growth can be sharp and exponential.
With proper back-end finance processes and practices in place from the outset, there will not be a need to reconstruct new financial processes and controls every time the business goes through a period of growth.
The above are just a few examples. However, there is no doubt that by leveraging the expertise, knowledge and experience of an accounting services provider, a company can benefit from robust financial processes and controls that are set up to scale as the company scales!
Independence and Objectivity
It can be a real source of comfort for owners, founders, investors and shareholders to have an external and independent accounting services provider keeping track of company finance and compliance requirements. In particular, this has been the case through the pandemic and now as companies start to emerge from the pandemic, because closer monitoring of cashflow and balance sheets, and general finance management, has been more important than ever!
The accounting provider can often be the financial Gatekeeper of your business!
In circumstances where the accounting provider is a reputable company with a strong track record, business owners and managers should be able to concentrate on growing the business, confident in the knowledge that their finance function is under control.
For many companies in the Philippines, an annual audit of the company’s finances is required under law. This audit must be performed by a competent auditor that is entirely independent of the company and independent of the accounting provider.
While audit season is generally a busy time for businesses, the audit is a very helpful safeguard system that can help to ensure a company is managing its finances and compliance obligations properly.
For more information, on the end of year audit requirements, check out The Audited Financial Statement in the Philippines.
However, the statutory audit only happens once a year – at the end of the year. A year can be a long time when it comes to finance management and compliance in the Philippines!
By having an accounting services provider managing and reporting on your business finances on a regular weekly and monthly basis, the business benefits greatly from independent financial oversight and monitoring.
Finally, where there is an independent auditor auditing the work of that independent accounting provider each year, business owners should be able to have full confidence in the financial governance of their business!
CloudCfo | Cloud Accounting Services Provider for Startups and SMEs in Manila and the Philippines
CloudCfo is the cloud accounting services provider for startups and SMEs in the Philippines, currently servicing 130+ businesses across PH!
We help PH businesses to grow their business through the use of cloud accounting technology together with a reliance on robust financial controls, systems and customized processes that align with each specific business model.
Contact the CloudCfo Team today and let’s consult on how our Team of Accounting Experts can support your company’s finance and accounting requirements!