As a successful private equity firm manager, you have an affinity for crunching numbers and identifying trends in financial data. But you didn’t start or join a private equity firm to get stuck with accounting duties.
The growth of your firm can plateau when you spend too much time on accounting processes. Why? Because you aren’t devoting enough time and energy to value-adding functions like managing investor portfolios or exploring new investment opportunities.
The good news is you can refocus your efforts by using outsourced private equity accounting services.
Here are some signs that you should consider outsourcing. We will also discuss what functions you can outsource to help you hit key growth milestones.
Don’t Let Accounting Bottlenecks Plateau Your Growth
During times of rapid growth, your PE firm will encounter increasingly complex accounting situations. When your team is consumed with accounting, they can’t focus on growth.
The question is, when is the right time to change your processes?
There’s no litmus test for deciding when to outsource. However, there are some clear indicators you should look for. Consider outsourcing accounting if any of the following conditions apply to your firm.
Visibility is Poor
You need a high level of financial visibility to make investment decisions for your investors. By the same token, you need a clear view of your PE firm’s financial health and performance if you hope to grow.
When your processes are inefficient, financial visibility will plummet. You’ll often find yourself working with data that’s weeks or even months old. Outdated data can often lead to missed opportunities.
Poor visibility is also a barrier to your long-term growth.
You must slow down your decision-making processes until you access relevant financial data. And you’re more likely to make missteps that negatively impact cash flow and threaten continuity. For these reasons, you need up-to-the-minute insights into your firm’s financial health.
Accounting Processes Consume Too Much Time
Accounting processes should only take up a tiny fraction of your work week. When these processes overshadow core duties, you need to make a change.
To determine whether it’s time to outsource, simply monitor how many hours you spend on accounting during a given week. If you’re unhappy with your findings, revamp your strategy.
Your Team Is Overloaded with Work
When your team and other firm leaders are stretched too thin, you have a few options.
The obvious answer involves hiring more people. However, this effort may undermine your firm’s long-term growth if you are not in a position to incur added expenses to recruit, hire, and train an employee.
The other approach involves redistributing the workload. For instance, analyze how many hours your team spends on accounting and other back-office functions each week. Imagine how much more productive they would be if all of these tasks were off their to-do lists.
You can lighten the load on your staff by using private equity accounting services. Reducing their workload will also help them get more done each week.
Weighing Your Options: Hiring In-House Talent or Outsourcing
When exploring ways to relieve your team of their accounting burden, you can either hire in-house talent or outsource. Let’s explore each option in depth.
Hiring an Internal Accounting Professional (and Why We Don’t Recommend It)
A talented accounting professional can ease your accounting headaches and help you refocus on your growth goals. However, bringing in more internal staff is an expensive proposition. In addition to their salary, you’ll also have to cover various benefits, such as healthcare and employer-match 401K contributions.
Even if you’re willing to take on the expenses of an internal hire, you’ll have to find the right accounting professional. The recruiting, hiring, and onboarding process represents another major expense for your firm. Meanwhile, your team will continue to contend with accounting headaches while you search for the ideal candidate.
You also have to consider the possibility of a mis-hire. What happens if you bring in a candidate who is a poor fit for your team? In this scenario, team chemistry and productivity will suffer. The investor experience may also be negatively impacted, meaning your reputation could suffer.
With so much at stake, you must ask yourself if bringing in internal talent is really the best move.
Outsourced Private Equity Accounting Services: The Better Option
Outsourcing your accounting function is the best option for most PE firms that want to focus more on private equity deals than handling complicated accounting tasks.
When you outsource, you get access to a team of accounting experts. If you work with a partner like Finlyte, you can draw on professional service providers that already handle accounting for PE firms. With ample experience in the accounting profession, the Finlyte team is ready to go to work for your firm.
When you outsource, you know exactly what costs you’ll incur upfront. There are no hidden costs for necessary steps like onboarding or providing benefits. Instead, you pay a fixed monthly fee for accounting services.
Perhaps the biggest benefit of outsourcing is time to value. When you hire an internal accounting professional, it can take months to achieve a return on your investment. In comparison, Finlyte can deliver measurable value to your firm in mere weeks.
Finlyte’s Tailorable Outsourced Accounting Services
Finlyte offers tailorable outsourced accounting services for PE firms. We can scale our level of support to align with your firm’s needs and allocate as many resources as necessary to simplify your accounting function.
Our team will integrate with your internal staff in just days. Within a few short weeks, you’ll see major boosts in productivity and efficiency that fuel your growth.
As an all-in-one accounting services provider, Finlyte can assist with the following duties.
Day-to-Day Bookkeeping Support
Finlyte simplifies your daily routine by providing general bookkeeping support. We’ll track expenses, income, and other financial variables that affect your firm’s health. Our goal is to take the hassle out of accounting so you and your team can focus on more dynamic tasks.
Chart of Accounts (COA) Creation
A chart of accounts (COA) is your single source of truth for financial visibility. As a full-service provider, Finlyte will create a COA and organize your financial transactions by category. Your COA will provide the financial visibility you need to make informed decisions and fiercely pursue growth opportunities.
General Ledger Management
The general ledger (GL) stores all of your firm’s financial statements. We’ll create and manage your GL to reduce accounting blind spots and increase visibility. The GL will include all sub-ledger accounts, so you have a better understanding of revenue and expenses.
Account Reconciliations
Account reconciliations are key in the world of private equity management. We’ll use these reconciliations to verify the accuracy of your accounts and identify potential discrepancies. Performing regular account reconciliations is one of the many ways Finlyte helps you stay audit-ready.
Accounts Receivable/Payable Processing
Delays in A/R and A/P processing can disrupt cash flow. Finlyte makes these delays a distant memory by streamlining accounting tasks such as accounts payable and accounts receivable processing.
We’ll ensure all A/Ps are settled promptly so you can maintain healthy vendor relationships. We also process A/Rs so you can maintain adequate liquidity.
Payroll Coordination
Finlyte’s accounting professionals can also manage your payroll. By assuming responsibility for payrolling processes, we’ll further streamline your back office and reduce the workload on your staff.
Month-End Close Support
In the tightly regulated PE vertical, you need a consistent month-end close process. Finlyte provides month-end close support, which involves reconciling your books, reviewing records, and compiling essential accounting data for compliance purposes.
Support Working with Large Auditors
Are you facing an audit from a major regulatory authority? Finlyte can help you navigate this process using our wealth of experience. We’ll help you achieve and maintain compliance. As a result, you’ll be able to continue serving your investors.
Achieve Your Growth Potential with Finlyte
Finlyte’s private equity accounting services can be tailored to meet the unique needs of your firm. Whether you want to outsource your entire accounting operation or simply augment your existing staff’s capabilities, Finlyte can help.
We also offer various other business process outsourcing services. All of these services are designed to support your growth. From HR to payroll management, Finlyte can simplify your back office. Our support allows you to focus on building your PE firm.
Would you like to learn more about how we can support your firm? If so, we invite you to schedule a consultation with our team. Let’s discuss a solution that fits your growth plans.
