The technology industry is one of the most dynamic and ever-changing sectors, with new innovations and advancements being added to the field every day. It should come as no surprise, then, that as a tech company grows, so do its accounting needs. Accounting presides over each growth stage. From the startup to the maturity stage, the need for accurate and timely financial reporting becomes increasingly important.
Importance of Consistent and Proper Accounting Practices in the Technology Industry
From launching a startup to expanding to an Initial Public Offering (IPO), cultivating a financial culture of scalability, adaptability and stability is essential to remaining competitive. Proper and consistent accounting practices are integral to that process, empowering tech companies to:
- Make Informed Decisions: With proper accounting practices, tech companies can accurately track their income and expenses, cash flow, and profitability. This information is essential in making informed decisions about investments, expansion plans, and other business strategies.
- Ensure Compliance With Regulatory Requirements: Tech companies are required to comply with Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), which are particularly important for companies planning to go public. Consistency in accounting practices allows for accurate, transparent, and comparable financial reporting across different companies.
- Facilitate Tax Compliance and Due Diligence: Tech companies are also subject to various tax regulations, including income tax, and payroll tax. Proper accounting practices ensure that companies accurately track their tax liabilities and comply with tax regulations.
- Boost Investor Confidence: Investors need to have confidence in the financial health of the company they are investing in or looking to invest their money in. Proper accounting practices and consistent financial reporting can help tech companies build trust and demonstrate their financial stability, attracting investors and securing funding.
Professional accounting services, including outsourced accounting, can be a strategic asset across all business stages, promoting secure financial health and long-term success. can also offer a more cost-effective solution for tech companies seeking to manage their finances effectively throughout every growth stage, especially for startups and small businesses that lack the resources for in-house capabilities.
Navigating Your Growth As You Innovate
Venture/Startup Stage
In the early stages, a tech startup primarily focuses on developing a product, securing funding and acquiring customers. At the same time, these startups often find themselves short-staffed in the accounting function, as described in a recent podcast. They may be using a part-time bookkeeper or, as entrepreneurs tend to do, wear the “accountant hat” themselves, taking on multiple responsibilities. It is important, however, to establish a solid financial foundation from the beginning.
Outsourced accounting can provide the necessary accounting and bookkeeping services for startups, helping them set up the accounting system and establish financial processes and procedures that they need to manage their finances efficiently and create financial projections and reporting while maintaining strong internal controls. Investors will want to see that the business has a solid financial plan in place and is recording financials promptly and accurately.
As the company grows, it must hire more employees, manage cash flow, and keep track of expenses. Outsourced accounting can also help startups with payroll management, bookkeeping, and tax compliance, allowing tech companies to focus on the core business activities that fueled the business' creation and leaving the accounting functions to the professionals.
Growth Stage
During the growth stage, tech companies face a number of challenges that require a more sophisticated and streamlined approach to financial planning and management. Outsourced accounting plays a critical role in helping companies navigate these complexities. As companies scale operations and expand their customer base, outsourced accounting can provide financial planning, budgeting, and forecasting services providing a clear view of their financial health and highlighting any potential financial risks.
Moreover, outsourced finance and accounting can help companies pursue new funding sources, acquisitions or partnerships by providing financial analysis, due diligence, risk assessment and risk mitigation support. This enables company leadership to make informed decisions based on accurate financial reporting.
To effectively manage financial risk and avoid pitfalls, outsourced accounting can provide companies with the or accounting and ancillary systems. This might include software implementation or migration, such as moving from QuickBooks Online to Sage Intacct, to provide companies with the right tools and infrastructure as they scale. Outsourced accounting can provide visibility through dashboards and other real-time data analytics.
Maturity Stage
Financial operations can be handled by an in-house accounting team at this point. However, companies still need to ensure they are managing their financial reporting effectively to maintain profitability, optimize operations, and manage risk. Outsourced accounting in this stage can bring a more strategic perspective, assisting with ongoing financial reporting, compliance, and performance measurement and giving companies the insights they need to remain competitive.
As we’ve seen with companies in various industries, sound financial management practice requires a blend of stability and dexterity to adapt and thrive in a constantly evolving economic landscape. Following recent trends, large corporations increasingly seek to outsource accounting operations to reduce back-office management and improve efficiency.
Recognizing the Benefits of Professional Outsourced Accounting Services
Outsourcing accounting functions can offer several advantages for tech companies as they grow. These include cost savings, specialized expertise, scalability, time savings, improved data management, and compliance. These benefits help tech companies make informed decisions and remain competitive in a rapidly evolving market.
The shift from focusing on starting a tech company to understanding the significance of professional accounting support is substantial. While the initial stages of a business are fueled by entrepreneurial enthusiasm, the evolving financial landscape necessitates a more specialized approach. It's crucial to identify the signs and understand when to seek accounting assistance in order to sustain growth and minimize monetary risks. As tech companies reach milestones and encounter new challenges, recognizing that a dedicated accounting partner is an asset rather than an expense demonstrates their commitment to long-term success and expansion.
How Cherry Bekaert Can Help
We believe the finance and accounting function is a crucial business partner when it comes to business performance and the growth strategy of any company. Whether your tech or tech-enabled company is in the early stages of business or is a leading well-established enterprise, understanding and properly managing your financial and accounting operations is vital to continued growth.
Cherry Bekaert’s Outsourced Accounting Services practice offers specialized and industry-focused accounting talent, simplified processes, and advanced technologies that enable your critical accounting functions to run efficiently and effectively, avoiding costly mistakes. As a team of over 350 professionals including a large offshore team, we have the bench strength to scale with your company and provide cost-competitive services. In addition, we bridge the gap between management, bankers, tax advisors, auditors, and payroll providers. Let us be your outsourced accounting firm no matter your stage of growth.
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