Business Advisory

There is no single turnover figure that tells a business when to outsource finance function. A company can generate substantial revenue and still have relatively simple finances. Another business can be much smaller but already be dealing with payroll, VAT, multiple revenue streams, overdue customers, project costs and difficult cash-flow decisions. The real trigger is usually complexity. As a business grows, the finance work required to keep it under control often grows faster than the finance capability behind it. The bookkeeping may still be getting done, but reports arrive late. Nobody owns credit control. The founder is checking invoices. Hiring decisions are based on the bank balance rather than a forecast. That is normally the point at which the question changes from: “Do we need an accountant?” to: “Do we now need a proper finance function?” When to outsource finance function A business should consider outsourcing finance function when its existing accounting setup can no longer provide the financial information, controls and day-to-day support management needs to run the company confidently. That does not necessarily mean the bookkeeping is wrong. It may simply mean the business has moved beyond bookkeeping alone. Typical warning signs include: The right time to outsource accounting therefore depends less on turnover and more on whether your finance capability has kept pace with the business. Bookkeeping vs a finance function: what is the difference? The distinction matters because many growing businesses initially assume that better bookkeeping will solve every finance problem. It will not. Bookkeeping records what has happened. A wider finance function records, controls, closes, reports, forecasts and helps management understand what needs to happen next. Good bookkeeping is the foundation. Transactions need to be recorded correctly, bank accounts reconciled and financial records maintained consistently. If that foundation is weak, everything above it becomes less reliable. You can read more about Path’s bookkeeping services if getting the underlying records under control is the immediate problem. But a growing finance function goes further. It may include: For businesses that need several of these capabilities working together, a complete outsourced finance function can provide a more joined-up approach than adding separate providers whenever a new finance problem appears. 9 signs you’ve outgrown your current finance setup You do not need to experience all nine problems before making a change. One serious bottleneck may be enough. More commonly, several smaller issues begin appearing at the same time. 1. Your monthly numbers arrive too late A month-end report has limited management value if it arrives when the business is already well into the following month. Imagine a digital agency that has a strong month for sales but discovers six weeks later that subcontractor costs and project overruns significantly reduced its margin. The information may be technically accurate, but it arrived too late. By then, the agency may already have: As businesses become more complex, financial reporting needs to move closer to the decisions being made. That may mean introducing a proper month-end process and regular management accounts rather than relying almost entirely on annual statutory accounts. 2. You manage cash flow from the bank balance Your bank balance tells you how much cash you have today. It does not automatically tell you what your cash position will look like after the next payroll run, VAT payment, supplier batch, tax liability and several slow-paying customers. Consider a recruitment business with £120,000 in the bank. On the surface, cash looks healthy. But the company may also have: The important question is not simply “How much money is in the bank?” It is: “What will happen to cash over the coming weeks and months if our current assumptions are correct?” Once those questions become important, the business needs cash-flow reporting and forecasting rather than balance checking. 3. You don’t know profitability by client, service or project Revenue growth can hide weak margins. A consultancy might know that it generated £150,000 during a quarter but still be unable to answer: This becomes especially important where different services require different levels of staff time, subcontractor cost, software or materials. A business can grow revenue while accidentally concentrating growth in its least profitable work. The finance setup therefore needs to move beyond producing a total profit figure and start giving management information that reflects how the business actually operates. 4. The founder still handles finance administration In many small companies, finance starts with the founder. They raise invoices, approve bills, chase customers, send payroll information, check the bank and answer the accountant’s questions. That is understandable when the company is small. It becomes a problem when the same founder is also responsible for sales, recruitment, customer relationships and strategy. For example, the owner of a growing professional services company may spend every Friday afternoon: None of those tasks is individually enormous. Together, however, they can consume a significant part of the owner’s working week. Outsourcing finance can create clearer ownership of routine financial processes while allowing the founder to retain approval over the decisions that actually require their involvement. 5. Payroll, VAT and bookkeeping are disconnected Finance problems often appear between processes rather than inside them. The bookkeeper may maintain one set of records. Payroll may be processed separately. VAT information may be reviewed quarterly. Management reporting may happen somewhere else again. Each individual task can appear to be working while the overall finance process remains fragmented. For example, payroll changes may not be reflected in reporting quickly enough. VAT treatment may need correcting because the bookkeeping records were incomplete. Reimbursements may be processed without a consistent approval process. As employee numbers and transaction volumes increase, those gaps become harder to manage informally. A connected finance function should define: Businesses with growing teams may also need more structured payroll services rather than treating payroll as an isolated monthly task. 6. Debtors are growing without proper credit control An increasing sales ledger can look like growth. It can also become a cash-flow problem. Suppose a B2B company increases monthly sales from £80,000 to £120,000. That