Solve the Mystery of Staffing Your Accounting Department

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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You are either spending too much or too little time and money to get what you need (and should expect) from your accounting and finance department. Most startup, entrepreneurial, and growing businesses struggle to solve the mystery of how to properly and effectively structure their accounting and finance department to maximize the value they receive from it.

There are basically three Tiers to running an accounting department, whether large or small. Tier 1, which is the lowest in terms of compensation and hierarchy, includes data entry and other routine tasks like receiving, entering, and paying bills and entering timecards for payroll. The middle Tier includes somewhat higher level tasks like reconciling accounts, ensuring receivables are entered accurately and correctly, managing cash, and providing some reporting to management. The highest Tier focuses only on high level accounting entries, financial statement reporting and analysis, accounting/ERP system design and structure, training others in the accounting and other departments, forecasting, and helping make strategic decisions that impact the company's operations, bankability, taxes, competitive advantage and much more.

Giving one person the responsibilities of all three Tiers is irresponsible, especially if you expect that person to perform them all efficiently and at the lowest cost possible. Either the person does not have the right background to do it all, or, if they do have the right background, you end up over-paying them to do routine and simple tasks. Knowing that most companies cannot afford to hire someone in all three Tiers right away, what is the best way for a business to get everything it needs for the best price?

Start by hiring a very part-time independent bookkeeper or bookkeeping solutions that can recommend an affordable accounting system that they know and can train others to use to fulfill Tier 1 tasks. This person will fulfill items in Tier 2 and a little bit of Tier 3 initially, and they can be as affordable as $100/month. The bookkeeper is essential because they will make sure your business is compliant and even getting a little bit of strategic data. Then have this person train lower cost employees to handle the Tier 1 functions. This will be a very good and healthy start, although some of the Tier 3 functions will not be covered. This will be OK in the interim, but ultimately most businesses cannot neglect Tier 3 for too long without suffering negative consequences.

Finding the right part-time bookkeeper is not always easy. They need to know your accounting system and have some experience in your industry. Some CPA firms have bookkeepers on staff that they hire out to their clients, but more affordable options exist in the form of independent bookkeepers if you put in the effort to find them. There are usually ample options in every market, and they are often more affordable and more flexible to best fit your needs.

As the company grows the part-time bookkeeper may need to put in more time, but the bulk of the work will be absorbed by lower cost employees in Tier 1. The uncovered parts of Tier 3, like forecasting and strategy, will need to be solved by another part-time addition to the team, and they are usually referred to as a part-time or outsourced Chief Financial Officer, or CFO. The CFO Services these professionals offer have grown in popularity and demand over the last decade because of the affordable and high-impact solutions they offer. For more information on the right time to engage these services, read my recent article, 4 Signs You Need a CFO.

Ultimately the part-time bookkeeper will become overwhelmed by the time and expertise demands of the company and it will make sense to bring on an Accounting Manager or Controller full-time to handle all of the Tier 2 functions as well as assist in the fulfillment of the Tier 3 functions. The last full-time hire in a company's accounting and finance department should be the CFO. Not only is the CFO the most expensive position in this department, but it also requires the least amount of time dedicated to it. It will also need to become full-time when an organization grows so large (usually over $50 million in sales) and too complex (multiple locations, international expansion, multiple business models, etc.) for a part-time solution to truly cover all the needs of the business.

You can solve the mystery of properly staffing your accounting department by understanding these three Tiers of tasks and leveraging part-time and full-time resources to get exactly what you need at the very best price available.