The majority of online enterprises begin as one-person operations. At first, the entrepreneur serves as the company’s salesperson, project manager, accountant, and subject matter expert all in one. Although that can work well during the initial stages, most of us soon realise that we need some extra hands.
Financial management is one of the first tasks that many founders choose to outsource as their business expands. It makes sense to do so because the entrepreneur may not be able to acquire the necessary level of skill themselves to manage finances in such a difficult sector that takes a lot of attention.
A VA may be hired by some entrepreneurs to just keep track of their costs and income, but if the VA lacks accounting skills, issues may arise within the first few months.
In this article, we’ll take a look at some of the roles people fulfil on an accounting team for an internet business and provide you with a few options for creating your own financial dream team and accounting systems so you can get the best possible start.
Not all businesses require a full accounting crew, but there are other forms an accounting setup may take, and you need to pick the one that best suits where your firm is now and where you anticipate it to be in the future.
What Function Does the Accounting Team Serve?
Above all else, an accounting team’s job is to ensure that your company complies with all legal obligations in the country in which you do business (this can include sales tax, income tax and so on).
The second crucial responsibility of an accounting staff is to give the company owner accurate financial reports and data so they can make decisions. They must consistently assign transactions to the appropriate account codes while tracking them in the accounting software on a daily, weekly, or monthly basis. This produces a data cache that the business owner may utilise to inform decisions for the future based on past events.
While most small businesses are good at compliance, they do not particularly shine at measuring the profitability of various goods and revenue streams, and they typically don’t perform any forecasting at all once they have the correct historical data (which is a lost opportunity for businesses looking to grow).
Now that you have a general understanding of the accounting team’s high-level responsibility, let’s look at each of the key roles on the accounting team.
The company’s CEO or owner
This position’s importance on the accounting team is frequently underappreciated. However, it is a fundamental responsibility of the CEO or business owner to understand the financial data generated by the company and base decisions on the information that is available.
Business owners frequently believe they don’t need to be involved with the money at all because they have an accountant, but that is a very naive belief.
The owner/CEO must comprehend the company’s profit and loss statements, balance sheet, reports comparing the budget to actual spending, and cash flow projections. Their accountant ought to explain such reports to them if they don’t comprehend them.
It is crucial that the owner has the ability to critically examine the available data as well because they will be aware of a variety of information that the accountant is not.
For instance, if your accountant is freaking out because your P&L statement reports a $15,000 increase in costs month on month, you will be in a position to explain that the investment was for a one-off marketing campaign — it’s not the case that expenditure got out of control.
Knowing what you anticipate seeing in each report is also crucial. You’ll know that something is wrong with your reporting if you sign a significant client, but their payment isn’t included in your profit and loss report. You can successfully get a reading on the state of your company’s finances by keeping a tight, critical eye on them.
The function of a tax accountant is very obvious. Their responsibility is to adhere to compliance requirements and offer guidance on how to build the company to manage risks and reduce taxes. They are in charge of gathering all the information needed to fulfil tax obligations, submit taxes, and manage all tax-related correspondence for the company.
There are, for instance, tax-effective ways for a business owner to withdraw money from their company and pay themselves (and ways that are very non tax-effective).
The tax accountant can also provide assistance with judgments on the location of the company’s headquarters and the best organisational structure. In order to give you time to make any adjustments that will result in a more advantageous tax situation for the firm, they should also provide advice on tax planning methods before the end of the fiscal year.
A very large company will already have a Chief Financial Officer (CFO) position in place. However, small and mid-sized companies sometimes find it difficult to justify the expense of hiring a full-time CFO, leading to an increase in the use of virtual CFOs.
In addition to making sure that pertinent reports are supplied and financial data leaving the company is accurate, the virtual CFO’s job is to think strategically while keeping both growth and risk management objectives in mind.
The CFO explains the meaning behind the figures and assists the company in using them to guide decision-making. It is their responsibility to comprehend the company and the industry, as well as the employees and their information needs, before putting everything together.
The main responsibility of the CFO is to enable those working within the company make decisions based on reliable data, examine the company critically, and ask what is and isn’t working.
Smaller organisations can acquire this skill set most effectively by hiring a CFO on a temporary basis; they don’t require high-level strategic counsel full-time. In companies that require a clear, comprehensive financial strategy in order to continue expanding, a CFO may only be required for a few hours each month.
For small businesses, the CFO will be in charge of creating budgets and cash flow forecasts, as well as supplementary reports for strategic financial choices. They can offer an overview of the company’s current state and its general direction, as well as offer guidance on long-term planning, strategic management, and the development of dashboards for tracking development.
The daily accounting software operations are handled by the bookkeeper, who also ensures that each item is accurately assigned to the appropriate account in the chart of accounts. He or she will be responsible for tracking costs, including costs of goods purchased, liability insurance costs, utility payments, staff payments, and advertising costs.
The Most Effective Accounting Combinations for Every Growth Stage
Online firms can use a variety of combinations of these jobs, and in the section below, we’ll go through which combinations are most effective as your company expands.
Initiator and Tax Accountant
Typically, the entrepreneur takes on all of the duties first on their own. They hire an accountant after they realise they need assistance with their tax compliance and tax returns. For startups and independent contractors, the Founder + Tax Accountant combo works effectively. Some of the various accounting team combinations have advantages as a company expands.
Entrepreneur, Tax Accountant, and Virtual Assistant (not recommended)
The founder typically hires a bookkeeper or a virtual assistant when they recognise that daily bookkeeping tasks are taking up too much of their time or is becoming above their level of expertise (VA). The issue with virtual assistants at this time is that bookkeeping requires a particular skill—many people need an accounting degree to handle it—and that VAs frequently make mistakes.
This implies that faulty data is used to make judgments and leads to inaccurate reports. To repair everything at the end of the year, you would need to pay the tax accountant a higher hourly fee than you would a bookkeeper.
For this reason, the founder, tax accountant, and virtual assistant combination is typically not the most effective arrangement.
Entrepreneur, Tax Accountant, and Bookkeeper
Founder + Tax Accountant + Bookkeeper can be the next phase of an accounting team construction. For the majority of online firms, this is a desirable mix, and an expert bookkeeper should set up the accounting software and ensure that everything is accurate and effective.
Because everything was done correctly throughout the year, your tax accountant won’t need to charge any additional fees when preparing your tax return. The tax accountant only needs to make a few tax changes in order to file the tax return; nothing else needs to be fixed (s).
VCFO + VA + Founder + Tax Accountant + Bookkeeper
The owner will require greater detail in the accounting software as the company expands.
There will frequently be more transactions for the bookkeeper to process at this stage of the firm. Involving a VA in the procedure now makes sense in order to decrease the administrative burden. The bookkeeper needs to review the VA’s work.
Most organisations will often add a virtual CFO to the mix at this point. In order to take advantage of the strategic financial opportunities that are now beginning to emerge, forecasting becomes crucial at this time.
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