TOA model uses technological advances for streamlined processing, instant access to reports

To answer this question one must first think about how most business accounting is done these days. Most businesses traditionally handle their accounting needs in one of two ways: they either have their own accounting department consisting of one or more qualified and experienced personnel, or they contract with someone outside of their company to enter their bookkeeping data after-the-fact, usually on a monthly basis. Which of these methods a company uses generally depends on affordability and what the business owner expects from his or her accounting records.

An onsite accounting staff offers more timely results and should deliver in the areas of cash-flow management and focused reporting and analyses, but it is labor-intensive and expensive. An offsite, after-the-fact, arrangement will cost less and may be adequate for compliance purposes such as completing tax returns, but in most cases the resources to help manage a business on a day-to-day basis are not there in the after-the-fact model.

Total Outsourced Accounting the best of both worlds

Recently, improvements in technology and the demands placed on small businesses by the new economy have combined to forward a third alternative: Total Outsourced Accounting (TOA), which provides the same advantages of timeliness and management horsepower of the onsite accounting model for significantly less cost. The TOA model makes use of technological advances such as paperless workflow scanning capabilities, third-party hosting of programs like Quickbooks over the Internet, and view-only banking access. Such breakthroughs allow accounting professionals to coordinate 24-hour processing and provide business owners 24/7 access to accounting records and reports from anywhere on the planet where there is an Internet connection.

Not for everyone

TOA is not simply hiring a new accountant. There must be a significant buy in on the part of business owners and managers because of the degree of change inherent in the transition. We tell our clients who are considering TOA to be prepared for a three-month process. We warn them that they probably will not like us very much the first month; the second month they will tolerate us, but by the third month they will wonder how they ever got along without this system.

The overall changeover to TOA-based accounting is not unlike the transition businesses faced years ago when they went from manually penciling accounting data in paper journals and ledgers to maintaining such information on PCs and servers. Now we are taking the PC and internal server-based accounting system and transitioning to an Internet-hosted environment which is accessible by the business owner as well as his accountant from almost any location at any time of the day or night.

So, not only must there be a breakthrough on the part of the business owner to catch the vision of TOA, there has to be a willingness on the part of the company and its staff at various levels to change from more traditional and comfortable ways of handling their accounting and other functions to a more forward and efficient approach.

Who make the best candidates for TOA?

We look for several indicators when we consider taking on a new client for TOA. Do they have a Web site? Are they already communicating with their office remotely from home or other locations? Is there some experience with the outsourcing of other services such as payroll and IT? Such information may indicate the overall aptitude of the candidate to fully adopt some of the TOA processes; however, we have been surprised on occasion. There are some companies which at first seem to satisfy several or all of the indicators, but for one reason or another, cannot seem fully to make the transition. On the other hand we have experienced some companies which seem to step out of the dark ages in the technological sense who did extremely well with TOA when all was said and done.

What can a company expect when it transitions to TOA?

The transition begins with an evaluation of the company's systems and processes already in use. For example, which accounting software do they have? What is the current condition of their records? How up to date are their computers, printers and other hardware? How fast is their Internet connection? What bank do they use, and does it offer services such as view-only access and automatic bill paying?

Once all the processes are addressed, certain systems are put into action such as the third-party hosting of the accounting software, the paperless workflow software system and the required banking system upgrades. Mutual decisions are made as to who will be performing certain functions such as scanning documents, reviewing invoices and authorizing the payment of bills.

Perhaps the most significant activity is the mutual training that takes place. The TOA partner learns a tremendous amount about the new client so as to understand the nature of its transactions. While we may know quite a bit about how records are generally kept in certain industries, each company is unique in several ways depending on the owner's needs and preferences and the overall experience of its staff. We also spend a lot of time teaching the new client about our paperless workflow software system, the type of delegation system we use and how best to use their new systems to help run their businesses with more efficiency and profitability.

How can you tell if TOAis for your company?

First, stand still and evaluate where you are with regards to your accounting needs. Are you satisfied with the way things are being done? Does your current accounting solution provide you with ready access to important cash flow information you need? Does it allow you to evaluate how your business is doing this period compared to last? Can you make important changes and projections based on sound historical data? If you are already satisfied in these areas, then any desire you have to change may be based on your tendency to move forward toward processes that open up additional possibilities.

On the other hand, if you are in the process of changing or are thinking about changing your accounting system, or you are unhappy with the way things have gone, or your bookkeeper is leaving, or if you realistically need to downsize then a move toward TOA is likely a smart thing to consider. Changes are needed anyway, and the TOA alternative may answer the needs of your business to get past certain limitations or reduce costs.

How to choose a good TOA company

Because a successful transition to Total Outsourced Accounting requires significant changes in the way things are done to assure the required flow of information back and forth between a business and its TOA partner, look for a company which can provide a timetable which shows a step by step, programmed approach that takes the business from its current process to its new system.

The new system should take advantage of paperless technology and advanced workflow processes so that the end product is a more efficient and useful solution rather than one that is only more complicated and remote. Insist that the records be available at all times to the business owner and that in the event the decision is made to stop using the TOA company, the records are easily transferable to a system such as Quickbooks that can be loaded on your own company's computer.

Look for additional benefits which should be available such as continual backup and virus protection, paperless filing and document storage, and the ability to have face-to-face communication and "Go To Meeting" type document viewing and consultation. In the end you are looking to partner with a company who has been successful with the TOA transition and ongoing processes.

John D. Rand is president of Rand & Associates. Contact the company at www.randcpa.com or at 323-4440.