Tag Archives: outsourcing bookkeeping

Introduction

In this fast-moving world of financial services, CPA bookkeeping is the backbone of financial integrity and business success. CPAs would face the great importance of accurate bookkeeping in pursuit of gaining the trust of their clients, regulatory compliance, and offering insightful financial advice. This article explains in detail how CPAs bookkeep, the benefits associated with the outsourcing of such services, and how Magistral Consulting offers comprehensive solutions to raise your practice to the next level.

CPA Bookkeeping services will include the following.

Recording Transactions   

All the daily transactions, such as sales, purchases, payments, and receipts, are recorded in their respective accounts. This is fundamental work meant to ensure that everything about financial activity is noted and put in the right class. For example, 2020 saw more than $500 billion worth of purchases and expenses from small businesses alone in the U.S. that require accurate bookkeeping.

Reconciling Accounts

The records should agree with the bank statements and other financial documents. Reconciliation helps to discover and correct errors; hence, it protects the integrity of the financial information. A study by Robert Half reported that 29% of finance professionals said they spent a minimum of 5 hours per month on bank reconciliation.

Generating Financial Statements

Preparing key reports like the income statement, balance sheet, and statement of cash flow. Accounts are meant to take snapshots of the financial health of a company; therefore, this will help in making decisions and strategic plans.

Key Elements of Effective CPA Bookkeeping

CPA Bookkeeping, to be anything worthwhile, must have the following key ingredients so that the management of one’s finances is complete.

Key Elements of Effective CPA Bookkeeping

Regular Updates

The keeping of regular updates is very central to any CPA bookkeeping. This means a business has to keep its books in such a way that every new transaction or change will promptly show. This prevents the rush at the end of the month and ensures timely and proper financial reporting. In fact, according to QuickBooks, every business with a regular update of its bookkeeping is likely to have accurate financial reporting and fewer discrepancies at month-end by 50%.

Accuracy and Consistency

Development of accuracy and consistency is an associated part of bookkeeping by the CPA. Proper data entry and regular accountancy prevent small mistakes from snowballing into massive financial discrepancies. As per the estimation of the Association of Chartered Certified Accountants, the margin of errors in inadequate CPA bookkeeping can be averaged to be 25% of total financial loss resulting from misreported data and correction costs involved. That is why the inclusion of high accuracy and consistency are to be upheld to avoid such pricey mistakes.

Compliance Management

Compliance risk management is an aspect that pertains severely to effective CPA bookkeeping. CPAs must update themselves with all tax laws and financial regulations; since non-compliance may cause the most serious legal consequences and cost the public image of the CPA, non-compliance of individual or corporate tax laws alone caused penalties of over $10 billion to businesses in 2020. Given this fact, compliance management is not only imperative for the sake of the law but also part of running a reputable CPA practice.

Secure Data Management

This goes without mentioning that proper data management is very secure in CPA bookkeeping right from the view of financial data protection from breaches. Strong security measures against unauthorized access are quite essential in a bid to prevent possible financial losses and reputational damage. According to a report filed by IBM Security, the average cost for a breach is about $3.86 million, thus requiring CPAs to have secure management of their clients’ data. CPAs should use the newest cybersecurity practices to protect the risky financial information of their clients. Detailed reporting is another primary service category under assurance services.

Detailed Reporting

Effective CPA bookkeeping is pegged on detailed financial reporting. Comprehensive financial reporting helps to provide insight into financial performance and aids in decision-making. They help identify trends, project future performances, and give support for key strategic business decisions. According to PwC, businesses that have detailed financial reporting are 60% sure to meet their financial goals. Such detailed reporting will help the CPA to give meaningful and useful financial insights with strategies for growth to their clients.

Benefits of Outsourcing CPA Bookkeeping

Outsourcing CPA bookkeeping to specialized firms can have many benefits that will help a CPA practice to be more efficient and profitable. These include:

Benefits of Outsourcing CPA Bookkeeping

Cost Savings

Outsourcing reduces the headache of in-house book-keeping staff, reducing overhead costs. According to a study by Deloitte, companies can save up to 30% through financial services and CPA Bookkeeping outsourcing.

Expertise and Accuracy

Professional firms are staffed with experts who ensure the accuracy of high order, following the latest regulations quite precisely. These firms keep themselves updated with the changing standards of the industry to minimize errors in their work.

Scalability

Outsourced services can be easy to scale with your business by accommodating that growth without adding employees. This scalability is particularly helpful for seasonal businesses or those that have an unusual growth spurt.

Technology and Tools

Outsourcing firms make use of state-of-the-art software and tools. In turn, this regard books of accounts need outsourced companies to avail state-of-the-art solutions. According to Gartner, corporate businesses that adopt state-of-the-art financial tools see an efficiency gain of 25%.

Magistral Consulting’s Services in CPA Bookkeeping

Magistral Consulting specializes in providing top-notch bookkeeping services tailored for CPAs. Our comprehensive service offerings ensure that your financial records are accurate, compliant, and insightful. Here are some of the key services we provide:

Transaction Recording

All monetary transactions are recorded accurately. This is a zero-tolerance error service and, in reality, forms the very basis of any financial analysis. We have the competencies to deal with complex transactions that are quite common within the Private Equity and Venture Capital environment to ensure that capital calls, distributions, and management fees are all correctly recorded.

Account Reconciliation

We ensure that your books are properly reconciled with bank statements and other books of accounts from time to time. When reconciled in due time, it goes a long way toward preventing fraudulent transactions and, more so, in better service provisioning for the integrity of financial statements. We effectively reconcile complex accounts for investment banking and hedge funds, given the huge volumes and complexities of the transactions involved.

Financial Statement Preparation

Magistral Consulting specializes in making detailed financial statements, covering income statements, balance sheets, and cash flow statements, thus giving you an overview of your financial health. These statements are very important for management and other concerned parties. We also prepare specialized reporting for Investment Banking clients in line with the requirements of their industry and those of regulators.

Ledger Maintenance

We have properly maintained and detailed ledgers for all accounts payable, accounts receivable, and general ledgers to give a record of the financial activity. This will aid any entity in having proper financial reporting and analysis. We focus on ledgers for Hedge Funds that involve detailed investment allocations to investors, performance fees, and other important relevant components.

Compliance and Reporting

Our team ensures that your financial records are in full compliance with the latest regulations and prepares necessary reports for tax filing and audit purposes. The services shall be along the strict compliance needs of the financial industries, including adherence to regulations issued by the financial authorities.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

Some of the key features placed in effective CPA bookkeeping include frequent updating to always keep accurate financial records up to date, accurate or consistent entry of data, management of compliance based on tax laws and regulations guiding finance, safe management of data from breaches, and a detailed report based upon financial performance that creates insight into decision-making.

These could include cost savings due to reduced needs of in-house staff, access to high accuracy, and brought-on-board expertise of professional firms. Other benefits could be scalability to match the speed and employment of advanced technology or tools to make sure that the bookkeeping is highly efficient. This would allow CPAs to begin to focus on core activities such as tax planning and client advisory services.

Technology drives innovation within the practice of a CPA bookkeeper. Some of the most important technological developments are cloud accounting for on-demand access to and collaboration in data, AI to drive tools for automated entry and reconciliation, blockchain technology for secure, transparent recording of transactions, and business data analytics to interpret insights into financial performance.

Magistral Consulting offers CPAs the following special bookkeeping-related services: drafting of all transactions, account reconciliations and statements, financial statement preparation, ledger maintenance, compliance, and reporting. Such services will enable CPAs to ensure the accuracy, compliance, and insightful nature of the financial records of their clients so that they may be better placed in managing the finances of their clients.

Introduction

Financial process outsourcing has been on the horizon of businesses for over a decade now. But there are a few trends that are making this process all the more strategic. It is not only about cutting costs, but having the right partner who could improve the processes, change culture, bring in the new talent and technology and make finance more predictive and proactive.

When it comes to Financial Process Outsourcing, the following trends are changing the landscape of the industry

Smaller and niche clients

Bigger players with a headcount of hundreds of thousands started taking advantage of outsourcing around a decade back. They are increasing it in terms of scale and complexity, however, the major volume is now going to come from smaller players as small as 1 or 2 men companies. Niche processes that are difficult to deliver on a turnkey basis also show promise.

Technology

Technology impacts all industries all the time. Financial process outsourcing is no exception. It has now moved from process outsourcing to process reengineering to automate steps and bring down the costs further and improve the operational efficiencies

Outcome-based offerings

Outcome-based offerings are still to take off but are on the horizon. It makes the vendor, your business partner where they are accountable for business results and not only delivering on the processes. Metrics related to a reduction in sales outstanding, operations costs, cycle time reductions, liquidity improvements, forecast accuracy are a few related to advisable business outcomes

Strategic importance

Outsourcing started as a low-cost low-value add jobs outsourcing. It still is to some extent. However meatier and strategic jobs are now being outsourced. Processes like budgeting, fundraising, investor communications, etc. are also being outsourced apart from the run of the mill accounting jobs

Advantages of Financial Process Outsourcing

There are multiple reasons why outsourcing the financial processes is the best way of doing it. The reasons not only involve cost savings but a host of others that raise the operational standards of the client, whatever business they are in.

Magistral's Financial Process Outsourcing Advantages

Financial Process Outsourcing Advantages that Magistral Consulting Offers

These advantages are:

Cost

Of course, cost considerations here are tangible and very obvious. One dollar saved is a dollar earned. That is a saving that starts showing in the P&L as soon as you decide to outsource. Depending on your location and the process that you wish to outsource a savings of 50-80% is very normal and can be expected.

Flexibility

Apart from the absolute cost savings, there is a further scope of savings due to fractional resources. Fractional resources mean that you are not hiring anyone permanently but are tapping into the skill and experience of the resources only as and when required.

CFO outsourcing

CFO outsourcing or substantial outsourcing of strategic tasks is an emerging trend. This is all the more important for start-ups or funds that are small and can’t afford a full-time CFO.

Focus on core tasks

Outsourcing frees up the management and workforce bandwidth to focus on more strategic aspects of business and operations

Technology

As the vendor is experienced and has worked on outsourcing similar processes from other clients as well, it’s in a better position to recommend and implement a technology that might reduce the effort or improve the turnaround time for a process. It is done by automating several tasks of the process using Artificial Intelligence and machine learning algorithms.

Operational efficiency improvements

Outsourcing to an expert improves the operational efficiency of a process by multiple notches. Something like an increase in efficiency due to touchless processing, reductions in operations cost, and reduction in Day Sales Outstanding (DSOs) are very typical operational outcomes of outsourcing

Improved plan compliance and making finance more predictive

With tools like dynamic real-time scenario planning, dashboards, visualization tools, data science and analytics, and on-demand reporting, it’s possible to make the finance function more predictive

Financial Process Outsourcing: What could be outsourced?

Financial processes that are low value add and not strategic could of course be outsourced. Now added onto transactional outsourcing is the strategic outsourcing elements that require specialist interventions. The activities that could be successfully outsourced are:

Bookkeeping and back-office support

The activities that are time tested to produce cost benefits and improve the quality of operations are account reconciliations, deferred revenues, customer billing and payments, expense processing, general ledger, financial and tax reporting, currency consolidation, payroll services, and vendor invoicing.

Controller services

The services like audit reports, auditor facilitation, compliances, MIS, dashboards, etc form the backbone of outsourcing here

Financial Planning and Analysis (FP&A)

This is the bulk of the planning and analysis aspects of the Finance function. This includes acquisition integration support, board reporting, financial data analysis, ratio analysis, comparative analysis with competition, financial research, along with planning, budgeting, and forecasting

Fundraising

This aspect requires a very specialist intervention. Here the offerings include pitch deck content and design support, investor reach-out, modeling and valuation, and investment bank’s selection

Mortgage process outsourcing

This is a specialist process of a lender whose critical elements could be successfully outsourced. These elements are marketing, loan origination data entry and analysis, underwriting documentation, background investigation, property assessment, accounting, financial checking, documentation checking, mortgage underwriting, and every other micro sub-steps required for the evaluation, underwriting, and approval of loans.

Magistral’s tried and tested process for outsourcing

Magistral has helped scores of clients in the financial industry and elsewhere in outsourcing operations. Magistral follows a customized and low-risk process for a smooth transition. The process puts business continuity and risk minimization at the center. Here are the major steps in offshoring that is proprietary and unique to Magistral:

Magistral's Financial Process Outsourcing Steps

The approach followed by Magistral Consulting for outsourcing financial processes

Project Kick-Off

There is a call with all the client stakeholders to understand their challenges and expectations from offshoring a process. Once the business imperative of offshoring is understood, a proposal for services is prepared. The proposal carries in detail the commercials, methodologies, KRAs and KPIs, project plans, and other details required for client management to take a call. Once the proposal is signed off the action begins.

SOP preparation

Before taking any project for delivery Magistral invests a great deal of time and expertise in preparing Standard Operating Procedure documents. For preparing SOP a trained analyst gets in touch with the client SPOC (Single Point of Contact) and by his skills in business analysis brings all the knowledge of people onto a process document. We call this “bringing what is between the ears onto the paper”. Every fine detail is captured. A Magistral SOP document would carry lots of process diagrams, tips for analysts, swim-lanes, along with audio and video recording of meetings and training. The whole of this process is done without any cost to the client. Clients first-hand see the expertise that Magistral brings to the table without any investment on their part. Once the SOP document is ready, the signoff about its accuracy is taken from the relevant personnel in management. Till this point client does not spend even a single penny and we are fine about it.

Business Reengineering

Once the detailed SOP is ready, business reengineering opportunities make themselves evident. There are processes where either cost could be reduced or turnaround time could be improved by Artificial Intelligence, Automation, and Machine Learning. The same is shared and validated with the client.

Pilot Projects

Our proposals are always signed based on the projects or milestones that we deliver. It is never based on the number of people (FTEs) that we employ to deliver services. Normally vendors will charge for FTEs and then they will sit and undergo process training at the client’s expense. With Magistral, you only pay when we deliver the project or processes that meet your quality standards. We start with low volumes. Trainers get trained in the process. Coordination with the client is very close and done almost daily to fill any gaps in delivery and expectations. For bigger projects, an onsite analyst sits with the client for weeks and is responsible for business analysis and knowledge transfer.

SLA finalization

Many times, there are no Service Level Agreements decided for internal teams. We make sure we are accountable for everything we deliver and decide the SLAs of every process. These SLAs can be in terms of improvement in quality, turnaround time, analyst’s availability, prompt acknowledgment of requests, etc. With Magistral, if you have internal SLAs, we promise to beat that further with at least 20% improvements.

Process Stabilization

With SLA compliances meeting standards, we increase the scope and volume of work offshored.

 

The phased approach ensures the client is never too invested to back off. The process is also designed to give enough confidence to the clients to trust the expertise of Magistral.

About Magistral

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsutling.com for any queries or business inquiries.