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Outsourcing Financial Management: Best Practices, Better Questions
by Erika Napoletano
When you went into business, you had a vision of happy customers, more orders than you could handle, and needing to hire and expand because you were delivering everything beyond expectations. You went into business to build a successful business. But you probably didn't go into business to get stuck dealing with all the numbers behind running a successful business.
For smart business owners who aren't interested in the day-to-day details of business finance, outsourcing financial management is a logical and savvy solution. But how can a growing business find the best financial partners to help guide them into the next levels of success?
We sat down with Ron Tite (CEO, The Tite Group) and Marcus Sheridan (President, The Sales Lion), to explore their thoughts about outsourcing the financial management needs of your business. They'll help you ask better questions and find best practices as you search for the best resources to help you grow.
What's one mistake you see companies repeatedly making when it comes to outsourcing their financial management needs?
Sheridan: The biggest mistake I see small mom-and-pop businesses make is undue—and blind—trust. They don't pay attention to the details and then get taken advantage of because they don't know what to look for in a sound financial management partner. Worse, they get embezzled from. If you don't know what to look for, it's sometimes difficult to catch.
Tite: Lack of balance. Many growing businesses live at either side of the spectrum—either micromanaging the process like it's their personal account or throwing their hands up and walking away from the responsibility entirely. As with most things in life, the best answer lies somewhere in the middle.
What scares business owners about outsourcing this component of their business operations?
Sheridan: The feeling that someone else is playing with their money, and therefore it comes down to a lack of control. Many business owners feel aloof and uneasy because they know they lack needed financial knowledge but they don't know how to find a partner they can trust.
Tite: The Newsroom said it best: “The Greater Fool is someone with the perfect blend of self-delusion and ego to think that he can succeed where others have failed. This whole country was made by Greater Fools."
That's every entrepreneur. Try getting that person to admit they're weak in something as objective as finances. It frightens people because way back in the deep, dark recesses of their mind, they think, "If I can't do that, where else am I lacking?"
Self-doubt isn't usually a trait that entrepreneurs want to illuminate.
What are some of the benefits to outsourcing your company's financial management needs?
Sheridan: For many small businesses, hiring someone solely to do the books is a big financial investment, and a job that frankly doesn't merit a full-time gig/salary. Besides that, if you're going to hire someone that really understands money, it's not cheap. So this means you are either paying a lot for an employee, or a smaller amount without the employee hassles—with a likelihood of greater qualifications because of the fact we're talking about a company that specializes in outsourced financial management.
Tite: When I became an entrepreneur, I had the creative and strategic knowledge to advise clients and build the business, but I didn't have the financial expertise to keep it running. So I outsourced it.
The benefits? It's all about focus. Knowing that finances are being handled by someone more knowledgeable, I can focus on what I'm good at and grow the business. When I need to make tough decisions, I get the best advice from an unbiased source. Finances should never be one of those "I'll go with my gut" areas of the business.
What part of a company's financial management simply cannot be outsourced?
Sheridan: What you actually buy/invest in that can have a direct impact on the business, especially something like sales or marketing software. If someone doesn't fully understand your business, there is no way they can make a statement like, "Yes, spending 15K a year on that CRM is worth it."
Tite: The decisions. At the end of the day, it's your money and no spreadsheet in the world will make a decision for you. The numbers can inform you and maybe even guide you toward a resolution. But the big decisions are not to be taken lightly and they're not to be made by someone outside the organization. You don't need to know it all. You just need to know enough to make informed decisions.
What three questions would you advise companies to ask potential vendors when they're interviewing potential financial management partners?
- How would you define success as a financial manager within this relationship?
- What are the most common mistakes you've seen your clients make with money and how did you react to what they were doing?
- Would you rather offend me and tell me the truth or be my best friend and keep me as a client for a long time?
- How will you add value to my business beyond the basic financial needs?
- What is your greatest area of expertise or interest?
- How have you helped a small organization become larger?
About This Author
Erika Napoletano is an author, columnist, speaker and branding strategist, hailed by Forbes as a “spinless spin doctor.” She's a twice-published author, including The Power of Unpopular (Wiley 2012), a columnist for American Express OPEN Forum, an acclaimed speaker from TEDx Boulder 2012, and speaks at conferences across the U.S. on the inherent power of truth in business… or as she refers to it, the power of unpopularity.
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