What Can An Outside Controller Do For My Small Business?

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Note: This article is a two-part series where part one will focus on ways an outside controller can bring more accuracy and consistency to the financial reporting process while part two will describe examples to improve decision making and getting more insights from financial information.

Part One – Accuracy & Consistency (Daily Brushing & Flossing)

The traditional way that small businesses work with an outside accountant typically focuses on cleaning up the financials for annual tax planning and preparation. Sure, you probably have a quarterly check-in to make sure the estimated tax payments are accurate, but wouldn’t it be nice to have an on-call financial and business advisor throughout the year? As an owner you will know your business better than anyone, but likely still need help understanding financial statements, management reports and analyzing the data to make more informed decisions.

So how can this work for a small business that doesn’t have the budget or resources to hire a full-time controller? What are the specific ways an outside controller and advisor can recommend ways to improve the financial health of the company?

Engaging the right outside controller and business partner as your business needs assistance throughout the year can yield two main benefits – ensuring the data is accurate and consistent for better decision making and turning that data into knowledge for action for better planning and visibility to take advantage of opportunities and also anticipate problems sooner.

So how can we bring more accuracy and consistency to the financial data?

First, a controller can provide continuous support and training to those involved in maintaining the books on a daily basis. Most of the activity is centered on accounts receivable, accounts payable, payroll and inventory management. As a small business, likely you have a bookkeeper, office manager, spouse or maybe even yourself performing these duties. Tapping into a resource as needed when questions or non-routine transactions arise is much easier to deal with in the moment than correcting later on after the fact or with an inspection of the books in a period long after the transaction originally took place.

Many of you have tenured and loyal staff that want to perform well, but they need ongoing support and training towards entering this data correctly, timely and consistently. This ultimately translates into time and cost savings for when the ledgers are inspected for month/quarter end and yearend close because less cleanup and adjustments are needed. Another way of putting this point is, isn’t it better to have good oral health by caring for your teeth and gums through daily brushing and flossing than just before a dentist appointment vs. having your teeth drilled? Wouldn’t it be better to maintain proper accounting procedures throughout the year vs. experiencing long delays for the period or yearend close because of a long list of corrections, reclassifications and adjustments?

Second, an outside controller can objectively assess the current state and workflow processes used to manage the AR, AP, Payroll and Inventory functions. This assessment can recommend areas for improvement, switch from manual data entry to automation as well as better utilization of the accounting software all reducing inherent waste in the process which improves accuracy and speed of information delivery.

Doesn’t it frustrate you and your staff if the monthly close and financial reporting takes so long? Simply put, human beings are creatures of habit and this is not isolated to accounting. We all put off the activities we least like to do. Even if an improvement can bring a benefit, we’ve all heard the expression, “we’ve always done it this way.” A workflow assessment can map out each step to manage these functions of the accounting process with a specific action plan to implement those improvements.

Finally, an outside controller can recommend ways to strengthen internal controls and practical segregation of duties to minimize the occurrence of fraud. No one intentionally hires a criminal and unfortunately financial fraud still happens. You’ve put considerable blood, sweat and tears into building your business as a valuable asset which should be protected through setting up roadblocks to minimize theft and collusion. Mid-sized companies and larger corporations design, implement and monitor their internal controls and the right outside controller and consultant can bring these benefits to your small business as well.

Stay tuned for the upcoming release of Part Two – Turning Knowledge into Action (Icing on the Cake)