Upgrade your $170K accounting service, downgrade the cost
“Price is what you pay, value is what you get.”
You’ve probably heard of and seen them before. Maybe on a Forbes list, or maybe it was one of the last few clicks you made online before arriving at our site.
Maybe it’s just growing pains of developing a new accounting service model or maybe their true aim is to squeeze as much value out of their own business rather than help you realize the value in yours.
Whatever the cause, bigger isn’t always better.
Private equity and venture capital-backed accounting firms are becoming increasingly prevalent as retiring practitioners exit. Whether it’s working their employees to the bone or outsourcing their work to God-knows-where, the reality is that VC-influenced firm management tends to engender disengaged, overworked, and often inexperienced employees. Mistakes happen, things get overlooked, and costs slip out of control.
All on your dime.
Case in point: a recent client of mine had previously engaged a venture-backed accounting firm. Service quality was inconsistent and low; price was high.
Phase 1: After an introductory call and review of the financials, we bid $28K for annual accounting services. It was no small discount from the ~$80K annual costs they incurred the prior year. About $52K of savings, by my math.
Phase 2: In our onboarding process, we noted that the account where they held their seed investment capital was yielding less than $10 per month. We recommended a high-liquidity, low-risk investment account at their existing bank which offered a 4.3% yield (plus rapid access to the funds whenever needed). The upshot? Approximately $180K-$200K of no-risk annual investment income until the money is ready to be spent in operations.
And just like that, we added an entire extra month of runway. Not bad for a quick call to the bank and few clicks of the mouse.
I just wish we could’ve recovered the $80-$90K of lost yield from before we were introduced.
$80K of explicit fees plus $90K of foregone cash flow is a very expensive accounting proposition.
If you have a high-potential startup, your seed or Series A capital may seem plentiful when the wires first hit your account, but it doesn’t last forever. Best to use the money wisely and prepare for the next round: we suggest using the bulk of the capital to develop your product and capture market share, rather than for overpriced accounting services.
We can help you along the way. In more ways than one. Curious if you’re utilizing optimal financial, tax, and accounting processes in your business? We do a free review of your entire financial function, then share our findings with you. Of course, we’d love to assist you in implementing our recommendations, but there’s no obligation and you’re also free to pursue them on your own. Drop us a line here and we’ll be happy to lead the way.