Zirtual Postscript: Questions to Ask Your Outsourced Accountant/CFO

August 18, 2015 Jamie McDonald

The implosion of Zirtual, the virtual assistant provider that laid off its 400 employees with an email in the middle of the night on August 10th, is a story of great interest to those of us carrying forward the banner of cloud and outsourced accounting. Note that startups.co agreed to acquire Zirtual and the service will live on.

Summing up the story, the company’s CEO, Maren Kate Donovan, outsourced financial operations to Keating Consulting Group and Ryan Keating, the outsourced CFO, allegedly made some mistakes that led to the overnight shutdown of the company. CEO’s version of events is here and the outsourced CFO’s version is here. There are some shocking quotes in both articles but the point of this article is not to dwell on the mistakes that were made but rather to give some counsel to business owners who are considering outsourcing their accounting operations.

Smart people like Boris and Mark are rightly arguing that the proper conclusion is not to immediately eliminate outsourcing non-core financial operations as an option. If you are considering outsourcing, the right thing is to do the proper due diligence on the firm you are hiring to run your financial operations.

I interviewed Chad Davis from LiveCA LLP, one of the largest outsourced accounting firms in North America, to ask what due diligence entrepreneurs should do before hiring a firm.

What are the most important due diligence questions for a company to ask their outsourced accountant?

Chad Davis (LiveCA): When you are interviewing a firm, here are some of the best questions that we've been asked.

  • Can you send me the names of X number of clients that have been with you for X number of years? This question shows how the relationship changes over time between a firm and its clients.
  • Can you send me the name of someone that just signed up X months ago? This provides a good sense of the onboarding process.
  • Can you provide X number of references that have company names that start with the letter X? This removes testimonial bias.
  • If we decide to part ways, can you show me your off-boarding process? This question helps set expectations in the event you need to part ways.
  • Can you show us your systems so we understand how you work? This tests transparency and openness of the firm.

What are the best practices for communication and reporting between the CEO and an outsourced accountant?

C. Davis: Although the size of an organization does play a role in how information is communicated, there are some standard processes you can follow to help the relationship work.

  • Identify Key Information. Ensure the outsourced accountant understands what numbers drive the business. The CEO should communicate which figures they require, how they should be presented and how often they’re calculated.
  • Use Connected Technology. Applications exist now that make it a lot easier to gather, manipulate and present data in real-time. If your outsourced bookkeeper lacks the skills to put in a system, make sure you choose to work with someone that can. Think API’s, webhooks, interactive dashboards and collaborative document management.
  • Create Process Documentation.  By asking an outsourced accountant to write down what they do, how they do it and if you’re lucky, why they do it, you’re creating an asset that can be reviewed, transferred and improved over time. When you grow to a size that requires someone in-house, that document will be invaluable.

Whether a CEO decides to outsource their accounting department or not, it’s not the decision that will ultimately make or break the company. Outsource when it makes sense and bring in-house when it makes sense. Either way, ask good questions, make changes when changes need to be made and don’t be afraid to ask for the things that are important to you.

And most importantly, if you are running a business, have enough control over your cashflow to not have to shutdown in the middle of the night.

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