Outsourced Accounting Helps Growing Companies Navigate Cash-Flow Complexity

On August 1st, 2023, Uber made an announcement that surprised many: For the first time ever, the company had turned a real profit. While it wasn’t particularly shocking to hear that a $90-billion business was cash flow positive, it caught many off-guard to learn that it took them 14 years to do it.

Chances are, you don’t run a business like Uber, which, thanks to deep-pocketed investors and really good marketing, can afford to accrue massive losses for well over a decade and stay afloat. (Uber was about $32 billion in the hole when they announced their first-ever profitable quarter.)

For most businesses and nonprofits, consistently maintaining positive cash flow – meaning that more money is coming into your business than is going out – is essential to success and survival. It’s how you pay the rent, keep the lights on, and grow. Bad quarters happen, but unless you’re a Silicon Valley darling, successful organizations make money.

Cash flow is especially important when your company is growing. A positive cash flow means that you can reinvest in your operations – hire new employees, purchase equipment, execute marketing campaigns, expand your offering, and enter new territories. You can also use your positive cash flow to attract investors and get approved for bank loans, raising even more cash to invest in your growth.

Positive cash flow is essential to growth, and growth is good, obviously. But that doesn’t mean it’s simple.

More Money, More Problems

Everyone knows that negative cash flow over a sustained period indicates trouble, especially when its causes are poorly understood and there isn’t a solid plan to turn things around. When more money is flowing out than in, it means that, unless you have an Uber-like growth plan, your current business model is probably unsustainable. You will likely have to cut costs and increase revenue to stay in business.

What many business and nonprofit leaders don’t realize is that positive cash flow – and the growth that comes with it – can be just as cumbersome.

While positive cash flow is a sign of a sustainable model, it can also mean that your financial operations are about to get a lot more complicated.

Time and time again, we have seen growing businesses and nonprofits struggle to stay on top of their books. The problem comes down to this: These organizations assumed that what worked yesterday will work today. They were no longer a small organization – or at least not as small as they once were – but they still tried to run their finances like one. When they were smaller, these companies relied on staff members to manage all of their finances, from bookkeeping and tax prep to cash flow management. As their revenue increased, so did the complexity of their financial operations. Pretty soon, their staff found themselves in over their heads.

At a certain point, every growing organization must invest in a more robust financial management solution. What works for mom ‘n’ pop shops does not work for larger companies. As your business scales, so does the complexity of your cash flow, regulatory requirements, and everyday decision-making.

If you continue to rely on the financial management that worked when your business was smaller, you risk impeding further growth, getting entangled in serious cash flow problems, and potentially running into trouble with regulators. You also miss out on opportunities to give your business an edge over the competition. To survive and thrive, you must invest in the financial management services your organization needs.

But how can you scale your financial management in a way that makes sense for your company?

Outsourced Accounting for Smart, Sustainable Growth

How can your growing organization quickly, easily and affordably scale your financial management services?

Outsourcing your financial management to a trusted accounting firm is a good way to access the services you need without building your own in-house financial department. The salaries of an internal accounting team can be prohibitively expensive and may actually hinder your growth. Outsourced accounting, on the other hand, allows you to access all the services and capabilities of an in-house department (and more) at a fraction of the cost.

Outsourcing also gives you the flexibility to scale your services. As your organization grows, you can easily add or drop services according to your needs, without having to hire or lay-off staff.

Here are a few ways outsourced accounting can help your business or nonprofit achieve sustainable growth:

  • Tracking key KPIs. An outsourced accounting firm can give organizations more visibility into their cash flow by tracking key performance indicators, from operating cash flow to working capital ratio, sustainable growth rate, and more. Analyzing these KPIs helps businesses gain a more nuanced, sophisticated understanding of their cash flow, identify potential threats and opportunities for improvement, develop better strategies, and make decisions with confidence.
  • Helping you prepare for audits and ensure compliance. As businesses and especially nonprofits grow, they face increased scrutiny from regulators. An accounting firm with the right industry experience can help you prepare for audits and ensure proper tax management.
  • Giving you the tools to plan ahead. An outsourced accounting firm can help you project upcoming cash flow up to a year or more in advance. Knowing when to expect positive or negative cash flow, and understanding the contributing factors, helps your management develop better strategies and make smarter decisions about what to do with the cash you have now. (For example, if you know that you are facing negative cash flow next quarter, you may choose to hold-off on investing in new equipment until later, since you don’t want to risk increasing your debt.)
  • Measuring your expenses against your budget. An advisor can help you design smarter budgets and break your expenses down into buckets, such as marketing or employee costs, allowing you to see how money is being spent within specific areas of your organization and the relative profitability of each area. It’s like giving your business an x-ray or an MRI, allowing you to take a more detailed look inside and see what’s working and what isn’t. This increased visibility enables management to identify where to invest and where to cut expenses.
  • Making key business decisions. The greatest value of an outsourced accounting firm is how they can turn data into actionable insights. Outsourced accountants can work directly with your management team to make data-driven decisions about when to hire new staff, how to best utilize employees, how to optimize pricing, when to pay out bonuses and distributions, and more.

Outsourced Accounting for Chicagoland Businesses + Nonprofits

Dugan + Lopatka CPAs provides a full range of outsourced accounting solutions for businesses and nonprofit organizations in the Chicagoland area. Our clients trust us because:

  • We take a proactive, hands-on approach. Our CPAs work directly with your management team to turn actionable insights into real results.
  • We have decades of experience in both the nonprofit sector and key business industries, including construction, distribution, manufacturing, service providers and more. Learn more about our industry specializations here.
  • We offer a flexible, a la carte outsourced accounting model that scales with your needs.

From tax preparation and cash flow management to forecasting, strategic planning and more, D+L’s trusted CPAs provide a full range of outsourced accounting services customized to your needs. Learn how our outsourced accounting services can help your organization achieve sustainable growth here.

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