News & Blog

October 25, 2018

October Outsourcing and Support

Now is the Time to Outsource

As a business owner, you may want to do it all — from payroll and benefits to HR and marketing… but it’s not always a good idea. Like most business owners, what really keeps you up at night is most likely, 1) retaining good employees, and 2) your business finances! In this blog, we will address the finance side with a couple of suggestions for outsourcing business support services that may just improve your bottom line (and help you sleep better at night).

3 Important Areas You May Want to Consider Outsourcing

1) Succession Planning

A frequent consideration many of our entrepreneurs entertain in their succession planning is – ESOP (Employee Stock Ownership Plan).

ESOPs were established in 1975.  According to NCEO ESOPs began with 250,000 participants and 1,600 plans. In 2015 the number of participants rose to over $14 million participants in over 7,000 plans. Other statistics from the Employee Ownership Foundation showed that 56% of their members had secondary retirement plans for their employees.

ESOPs are a benefit plan whereby an employee takes an ownership interest in the organization Generally, this benefit structure is not for failing businesses. A company will set up a trust and choose a preferred vesting schedule. The funds are distributed when the employee leaves the company. Owners can give shares as a bonus, stock options, profit sharing plans or the employee can buy stock directly.

This benefit is an effective management tool to align employee interests with the owners. This will affect loyalty which can increase productivity and reduce turn over since the employee can impact worth of the stock directly. NCEO Analysis also shows ESOPS layoff rates are significantly lower in ESOP companies in contrast to other companies.

For an owner who is creating an exit strategy and a majority of net worth is tied up in the company, this may be a preferred option. The owner is able to cash out at once or gradually release shares while transitioning control to management. With proper planning of an ESOP, the owner’s exit from the business can result in sizeable tax savings. Through Sec 1042 deferral provisions, gains can be postponed by purchasing the qualified replacement property.

2) CFO Outsourcing

CFO Outsourcing has been another increasingly popular trend for many business owners who are succession planning or advance to the next level. This is an optimal financial choice to have a breadth of experience and independent viewpoints without the price tag. The cost savings of CFO outsourcing is attractive to many business owners who aren’t able to foot the bill for an average CFO salary of $250K plus benefits and taxes.

According to the team at Wilke & Associates the main reasons for business failure are:

1. No Sales
2. Poor Cash Flow
3. Bad Debt
4. No Business Plan
5. Growing Too Fast

How can you prevent failure and be on a trajectory for future success?

Get good counsel. Start with an outsourced CFO.

This is an excellent choice for evaluating and solving problems that in-house staff are too close to. This option can help streamline systems, issue accurate financial statements, prepare financials for potential investors & VCs, restructuring, plan how to fund capital improvements, and institute retirement plans. It frees you up to do what you do best… run and manage your business.

There are downsides to outsourcing CFO services. Although, these accounting professionals have impressive experience, they didn’t start your business, don’t know your staff the way you do, and don’t know the history of your company. Also, once workflow systems are instituted, they may not work according to plan. Be sure to test the system, and adjust it to work with your business and workflow. Be careful the outsourced CFO can communicate effectively and relate with current accounting staff. This will help the staff buy into new ideas.

Any smart business owner will combine the advice of an outsourced CFO and staff input to come up with the best solution to succeed.

Litigation Support

A consistent need of any business owner is litigation support. Unfortunately, whether the complaint is based on unintentional mistakes, gross negligence, greed, divorce or regulatory non-compliance, in our litigious society any business owner is subject to being sued.

According to Norton Rose Fulbright
This is the breakdown of litigation types

Contracts 40%
Labor/Employment 39%
Regulatory/Investigations 19%
Personal Injury18%
IP/Patents 12%
Product Liability 10%
Class Actions 9%
Insurance 8%

You may not have revenue over $1 billion, but you are a business owner. So it is important to be prepared with a trusted CPA to be your ally before entering a courtroom.

When choosing a good CPA to perform litigation support choose a firm that has experience, credentials and the availability to give you their full attention. You will want to make sure your CPA will have the wherewithal to partner with you until the case is resolved. Regularly, proceedings can drag out and have periods that they will be required to make you a priority due to deadlines and to appear for court dates. This may be a long process and making sure a good working relationship is in place is a must.

Depending on the nature of the case and your industry you may want a CPA professional who has varied background experience or specialized experience. Interviewing a firm to partner you want them to have current credentials such as CPA ABV CVA and/or CFE. These designations are important to your credibility. You may want at CV (Curriculum Veritas) of each potential CPA and ask about the cases they have participated in and the outcome.

Contact us today to begin your plan today for success.

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