Category Archives: Accounting

Controller, Bookkeeper or CFO?

Do You Hire a Controller or a CFO?

Many people use Chief Financial Officer (“CFO”) and Controller interchangeably because they think it is the same position. In some companies, a Controller could be the top financial leader. But that does not mean they are a CFO or CFO-level. Before we answer the question of do you hire a Controller or a CFO, we need to understand when companies need to hire a financial leader.

Do You Hire a Controller or a CFOWhen Companies Need to Hire a Financial Leader

Every company needs a financial leader – depending on the stage or life/size of your company this financial leader may be a bookkeeper, accounting manager, Controller or CFO. For example, some companiesover $25 million in revenue may want to consider having both a Controller and a CFO. In this blog, we will focus on the difference between a Controller and a Chief Financial Officer (CFO).

The Strategic CFO


 

Our Minimum Viable Product

Not long ago my mother died at the age of 97. My father left us a couple of years earlier at the age of 100.

Apparently I’m getting old.

I realized that I didn’t have any kind of succession plan. I had long since realized that most CPAs wouldn’t be interested in buying my practice because they weren’t familiar with my particular tax specialty. It is also very difficult to develop skilled professional staff in a small CPA firm.

Recent university graduates are expensive to hire and have a lot to learn. They take at least 2 to 3 years of development before they can be expected to pull their own weight. Almost 3 years ago I hired a CPA from the Philippines.

In the course of the last 3 years we experimented with tools to facilitate collaboration remotely. We worked with a variety of file-sharing options, developed our own working paper system to replace Caseware™, and tried a number of web conferencing apps before settling on APPEAR.IN.

It finally dawned on me that it was my understanding of outsourcing and the systems for collaboration that we had developed together that represented the biggest value of my particular practice. Traditionally CPAs transition into retirement by finding someone to take over their clients.

So in the last few months I started to work try to define what my “Minimum Viable Product” is…

I hired a number of staff from the Philippines to help me and set about defining CALIBR8.me as a way of connecting small business clients, CPA staff from the Philippines and local CPAs who needed better, more effective tools for staffing their practices.

The courses we developed for in-house training represent good value for CPAs in practice that need CPD credits at a reasonable cost. It should also help in providing some of the key skills and tools that they will need to effectively outsource to highly-skilled and reasonably-priced Filipino staff.

 

6 Alternatives for Online Invoicing

Do a GOOGLE search for “Online Invoicing Systems” and you’ll come up with an enormous list:

About 1,810,000 results (0.33 seconds)

 2 Types of Online Invoicing Packages

The truth is there are a large number of alternatives to choose from. So many in fact, that you’d be hard-pressed to evaluate very many of them. However there are really only 2 types of online invoicing packages that a start up should be looking at:

  1. Standalone Invoicing Systems

  2. Online Accounting Systems

I’ll look at 2 popular standalone systems and 4 different online accounting systems.  They were chosen based on their relative importance in the marketplace and my estimate of their “staying power”. In other words I don’t think it makes sense to evaluate an alternative that is reasonably likely to disappear. I did this in part by researching the companies on CRUNCHBASE. Of course most of these companies do a pretty good job of letting members of the accounting profession know about them and, as a result I am quite familiar with a variety of offerings from each of these publishers…

Traditional Paper-based Invoicing System…

Billing Traditional

Using An Online Invoicing System…

Billing Online

Accounting vs Invoicing

The billing and collections processes are an essential part of any accounting system. Arguably they are the most important parts. The decision to implement some sort of invoicing system, must happen very early on – when you send out your first invoice.

For most startups the bookkeeping can be done after the fact, however if your business is going to survive you’ll have to bill early and often – assuming you have customers. That means building an invoicing system right out of the gate. The good news is that it is much easier to evaluate an invoicing system than it is to evaluate an accounting system.  Comparatively, an invoicing system can be quite simple. If you’re evaluating a standalone system, you don’t really need to know anything much about accounting.

Remember that as a small business owner, you’re likely to be one of the primary users of the invoicing software. When it comes to using accounting systems, you’re much more likely to get someone else to do the bookkeeping for you.

If you haven’t yet made a decision regarding your accounting system, it isn’t really very risky to select a standalone invoicing system. Ultimately you can continue to use the invoicing system alongside your accounting system indefinitely, or simply transition later to using the invoicing features of whichever online accounting system you decide on. In fact you could even elect to try out Wave Accounting (see below) for its invoicing functions alone, since there is no cost for using the system.

Standalone Invoicing Systems

Freshbooks (Toronto , ON)

Freshbooks

 

According to Crunchbase, Freshbooks received $30 Million Series A on July 23, 2014.

I have used their application for my own accounting practice since 2012. It is very easy to use and I highly recommend it – particularly for small, service-based businesses. Of course as an accountant, I don’t have to pay to use their system. If I did I might be tempted to test PayPal.

 

 

PayPal (San Jose, CA)

PayPalCalifornia-based PayPal was acquired by EBay in 2002 and is a market leader in the online payments space.

Until recently I wasn’t aware that they offered an online invoicing solution for small business. If I had, I might have evaluated it for my own practice. Given that they don’t currently appear to charge a fee (other than transaction-based fees), they would probably be worth your while to take for a test drive. Note that PayPal offers a solution for web-based businesses that sell products online.

 

 

 

 

Online Accounting Systems

Generally I would recommend that you select a bookkeeper or an accountant first, rather than an accounting package. Any of the packages discussed below will fill the accounting needs of a small start up. However in the wrong hands, any accounting system can be messed up. While many of my colleagues will disparage one or another system, from my perspective this is generally related to their own familiarity with a particular package instead of the particular flaws in the system itself.

On the other hand if you were to evaluate a free system – eg. Wave Accounting – primarily for its invoicing functions, you could easily either start using it later on for all of your accounting needs or transition to another system.

Wave Accounting (Toronto, ON)

WaveAccording to Crunchbase, Toronto-based Wave accounting has raised $24.6 Million in 4 Rounds from 6 Investors, and has 2 million users worldwide. While the number of users is impressive, it is the only online accounting package that is completely free to use.

 

For my part I use it both for accounting and invoicing in Sutton Innovation Inc (a tax comsultancy practice). My partners in the practice have remote access to the data and I outsource the bookkeeping to a colleague in the Philippines.

So while I personally use it most often for invoicing and tracking receivables, it is a full-featured accounting package and I can easily supervise the bookkeeping and perform year-end accounting adjustments.

Xero (Wellington, NZ)

Xero
Founded in 2006, Xero went public in 2012. According to Crunchbase it has some 370,000 users worldwide – including one of my larger clients. Unlike Wave, Xero actually charges a fee to users – hence the lower number of users.

 

 

 

 

Quickbooks Online (Mountain View, CA)

QBOPublished by Intuit, QuickBooks Online (along with Sage One below) is one of the oldest and most established brands for financial and accounting software. Personally I use it – in conjunction with Freshbooks – for my accounting practice. In addition I use their Profile tax preparation software and can certainly recommend the company and its products.

 

 

Sage Online (Newcastle Upon Tyne, UK)

Sage

While Quickbooks is strongest in the US, Sage is stronger in British Commonwealth countries and in Africa. Over the years Sage has acquired Simply Accounting and MYOB – both of which I have used in the past. I have not tested their online software – it was just recently launched.

 

However, given the reputation of the firm, it clearly warrants a look if you are evaluating online accounting software.

 

While I believe that these probably represent the best options for start ups looking for online invoicing solutions, if you don’t think these 6 options give you enough choice feel free to check out the 27 Free Alternatives listed by Mashable (self-described as “a leading source for news, information & resources for the Connected Generation”).

27 Free Alternatives – Mashable

Why Professionals Say ‘NO’

Both public accountants and  lawyers in private practice depend on new entrepreneurs defying the odds to try and establish new businesses. However they are only too aware of the risks that anyone will face as an entrepreneur. In fact a key role is to understand the nature of these risks and to help mitigate them to some extent.

Lawyers practicing commercial law will help with legal structures and contractual arrangements much of which is designed to protect the business owner from his or her partners, other shareholders, suppliers, customers and even the government in the form of the taxman.

Similarly public accountants help ensure that financial systems are properly designed, that financial information is accurate, that the appropriate, tax-efficient legal structures are put in place, that tax and regulatory compliance doesn’t become a problem. They also use their experience to understand risk and opportunity found in financial information.

Since entrepreneurs depend on professionals to identify risk, they shouldn’t be surprised when lawyers and accountants seem somewhat negative. From the professional’s perspective there is almost no risk to them in recommending  against making an investment.  If you don’t make an investment, you cannot prove how it ‘would have turned out’ . If someone else succeeds with an investment there are always factors that differentiate their situation from yours.

The alternative situation – recommending an investment – is fraught with risk for the professional. The entrepreneur can expect  a large number of caveats from the professional to limit their (the professional’s) risk.

The Cost of Professional Advice

The best professional advice is expensive, and you have to line up to get it. Hourly rates for highly-skilled professional accountants start at more than $300 an hour for a manager. For senior managers and partners, rates often exceed $600. Large, multinational companies are prepared to pay these rates because they know that the best advice is worth it, and they only pay for what they need.

These same multinationals ‘poach’ talent shamelessly from the ‘Big 4’ accounting firms to staff up their internal accounting and tax departments. So when the VP of tax for an international mining company calls up a tax partner at KPMG to discuss a tax issue, it’s more or less a discussion amongst equals.