F.A.Q.

Revenue recognition is an important Generally Accepted Accounting Principle (GAAP) that describes how and when a business should record or accrue revenue, which is distinct from cash coming in.

Revenue recognition should be of particular concern to private businesses that are (1) growing, (2) want to sell, (3) accept customer deposits or prepayment. For companies that meet this criteria, thoughtful and GAAP-compliant revenue recognition practices can be the difference between successful growth and bankruptcy; a successful transaction and a surprise discount or derailment of your company’s sale; and navigating cash demands and an unanticipated cash crunch.

Look for appropriate experience in your industry (for a fractional accounting team, look for case studies); certifications in the platform(s) you use (such as kept.pro’s 100% QBO Pro Advisor-certified team); education (this should be verified as part of your background check for an internal team member, or your outsourced provider should be able to describe doing this as part of their vetting process). No bookkeeper will be able to do everything well or separate duties to protect from fraud without additional team members. At $2M-$30M in annual revenue, look for opportunities to leverage fractional talent for oversight, or use a cohesive fractional accounting team.

Is your business as profitable as others in your industry? Does your cash position reflect as much? If not, theft or fraud could be contributing factors. Ask your accounting team to walk you through the month-end close checklist and separation of duties designed to prevent and surface discrepancies – including fraudulent activity. Ask to understand how controls work. (For example: Do bank signatories have access to record entries in the accounting system? Is payroll entered by one person and checked/approved/released by another?) If the answers aren’t to your satisfaction, it may be time to bring in an outside expert to take a look at your books.

Very few privately held businesses under $30M in annual sales need a dedicated, full-time CFO. Exceptions might include: businesses that expect to rapidly grow through that threshold and need to build out an internal team along with commensurate infrastructure; businesses that are undertaking a program of acquisitions; businesses that are preparing for an IPO (going public). In general, most businesses focused on existing operations to fuel organic growth should consider fractional financial expertise for as long as possible.

On its own, QBO (QuickBooks Online) can handle inventory accounting for businesses with limited inventory needs. For businesses with more robust operation requirements for inventory management (eCommerce, manufacturers, distributors), inventory management systems such as Fishbowl or Unleashed that integrate with QBO can be cost effective until your business is ready to move to a full ERP or similarly full-featured & integrated solution.

Moving off of an SMB accounting solution should be done with care as fully-integrated middle market alternatives carry significant hidden costs. Make the move when the pros (operational efficiencies or decision making benefits) measured in dollars outweigh the upfront + ongoing costs of switching. A cost-benefit analysis should be conducted with your internal project sponsor. We recommend sticking with your current solution until there’s a clear and imminent path to $30M+ in annual revenue. This may vary with business type.

Moving off QBO should be done with care as alternatives carry significant hidden costs. That said, move off of QBO when the pros (operational efficiencies or decision making benefits) measured in dollars outweigh the upfront + ongoing costs of switching. A rigorous cost-benefit analysis, based on a detailed implementation plan that appropriately considers change management costs throughout the organization, should be conducted by a qualified financial operator in partnership with your internal project sponsor. In general, we recommend sticking with QBO until there’s a clear and imminent path to $30M+ in annual revenue, depending on the business type.

A fractional accounting team is a type of outsourced accounting provider that offers a cohesive team with the tools, training, oversight, structure, roles, and specialized experience to take on some or all of a businesses accounting operations. These teams can be an efficient way for businesses that can’t afford a full accounting team to realize the benefits of one (accurate, complete and timely financials; improved controls and reduced risk; better financial reporting; and more.)

A fractional CFO is a Chief Financial Officer who is contracted to provide financial leadership and oversight in a part-time capacity. The fractional CFO, is also known as part-time CFO, outsourced CFO, virtual CFO, or fCFO. Specific experience may vary, and you’ll find that different fCFOs are appropriate for different scenarios (For instance, some fCFOs may focus on acquisitions, others on capitalization or operations.) Critically, a fCFO is more than the title and should be someone with actual CFO experience that is relevant to your specific set of objectives or challenges.