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In this bonus episode of In the Thick of It, outsourced accounting expert Patrick Tam joins Scott to discuss the advantages of third-party financial support for any business.
Running the financial and accounting aspects of a business is complex, time consuming, and often outside of the wheelhouse for most entrepreneurs and business owners. That’s why many companies, both small startups and larger established businesses, are turning to outsourced accounting firms.
As the CEO of Bright Balance Accounting, a fractional accounting and finance firm, Patrick has more than 15 years experience in finance across multiple industries. Tune in to learn when it makes sense to outsource your accounting, what to look for in a firm, and how the right partner can provide strategic advice to grow your business.
About Bright Balance:
Bright Balance delivers cost-efficient, quality transaction processing, accounting, financial reporting, and financial analysis services to the middle market using an integrated onshore and offshore team. They strive to offer unmatched professional service in the most flexible and cost-efficient, quality transaction processing, accounting, and FP&A / CFO augmentation to the middle market, with a team of people who maintain a high level of trust, love to deliver results, and have fun doing it!
To learn more, visit brightbal.com
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What is In The Thick of It?
Join Scott Hollrah, founder of Venn Technology, as he takes you "In the Thick of It" with the real stories of founders who are actively navigating the challenges and triumphs of running their businesses. This podcast goes beyond the typical entrepreneurial success stories and delves into the messy, gritty, and sometimes chaotic world of building and growing a company. Get inspired, learn from the experiences of others, and gain insights into what it truly means to be in the thick of the entrepreneurial journey.
Why would you ever have a fixed, full time
team for a business that has variable needs?
Every business has variable needs, and those
variable needs get impressed upon accounting the
same way they do other functions.
Why not have a flex resource to help,
even if you have full time people you
welcome to in the thick of it Toolbox,
the special series where inspiration meets implementation.
Here, we don't just share success
stories, we equip you with proven
tools and strategies from seasoned founders,
turning entrepreneurial dreams into actionable plans.
Prepare to be enabled and empowered on your journey.
You're not just listening to a
podcast, you're gaining access to an
essential toolbox for your business success.
Let's dive in.
You're listening to a special episode of the
in the Think of it podcast toolbox series.
Today we're talking outsourced accounting.
Running the financial and accounting aspects of a
business is complex, time consuming and frankly, not
very fun for most entrepreneurs and business owners.
That's why many companies, both small
startups and larger established businesses, are
turning to outsourced accounting firms to
handle this critical but unexciting work.
My guest today is Patrick Tam, CEO of Bright
Balance Accounting, a fractional accounting and finance firm.
Patrick has over 15 years experience in
finance across a variety of industries.
He'll share when it makes sense to outsource your
accounting, what to look for in a firm, and
how the right partner can provide strategic advice to
help grow your business, not just crunch the numbers.
So whether you're already working with an outsourced
accounting provider or just considering it, this episode
is full of practical tips and advice.
Let's dive in.
I'm so thrilled to have
Patrick Tam with bright balance.
Patrick, welcome to in the thick of it. Yeah. Thank you.
So give us some background.
Where'd you go to school?
What did you study?
I'm originally from Tulsa, Oklahoma.
I went to Oklahoma State.
I didn't think I'd find myself in accounting initially.
My mom was a, you know, I was around it a lot,
but I was actually set up to be an art major.
Those are worlds apart.
I don't know if you know that.
Yeah, you wouldn't think accountants being creative, but I
studied art as a child and really enjoyed it
and thought, well, it's an easy progression from school.
You go into college, what do you want to be?
I was like, yeah, let's study art.
But I kind of realized as I approached college
that you can't really make a living or be
hard to make a living as an artist.
So I fell back on before I even started
kind of fell back on accounting as well.
It's like the next most logical thing around me.
We'll try that.
And pretty much didn't like it.
I felt like it was difficult.
I know you, in your comments, will talk about how
accounting was your favorite thing to have gotten past.
I wouldn't say I'm that far away from
that sentiment, at least in the academic setting.
But I made it through.
I didn't change my major or anything like that.
And it wasn't until I graduated and got in
the real world, had a real job that I
realized it's totally different than in school. Yeah.
Talking about art, I mean, art, such a broad field.
What aspects of art were you into? Was it painting?
Was it sculpture? Was it sketching? Was it.
I did everything.
I mean, from a young age,
my grandmother was really into art.
And so that was something we did as a family.
It's kind of one of those things.
If you have a child that is talented
in something or you recognize they're interested in
something, you might just lean into it.
And so I think that was what my parents did every I'd
have art camp or something like that they send me to.
And so as I kind of promoted that, it
made it a natural progression maybe to study it
in school and think about a career.
However, I didn't see that many professional careers that
might lead to a good living at the time.
Do you still dabble in the arts?
Yeah, I still enjoy as a hobby,
painting and that kind of thing.
What do you like to paint?
My style is a little bit abstract.
I'm a fan of impressionist art.
So it goes everything from
somewhat impressionist to complete abstract. Very cool.
Yeah.
I've known you for a while.
Did not know that about you.
So you talked about how our experience or enjoyment
of accounting in college was probably on par.
And for people who haven't heard my story,
among the top ten happiest days of my
life, coming in at like, nine and ten.
We'll start with coming to faith and getting
married and having my three awesome kids.
But somewhere in that eight and nine, nine and
ten spot are the days that I completed managerial
and financial accounting in college as a marketing major.
Had to take both of those along with some finance classes,
and I made C's in both of those accounting classes.
I was not a C student.
I could not have been happier to have gotten a C.
And my parents were fine with it,
too, which made it all the better.
So, yeah, accounting is not a strong suit, and
we'll talk more about this as we get further.
But I think that that is the
case for a lot of business owners.
Accounting is not a strong suit for them,
and that's why firms like yours exist.
Not only am I not good at it, but it's
not something I want to take the time to become
good at, especially when there are people in the world
that live for this kind of thing.
So after college, you did what?
I graduated from Oklahoma State.
My first job was in commercial banking, of all things.
I helped implement activity based costing throughout the bank, which
is kind of a dry and obscure thing to do.
But the cool thing about it is it allowed
me to see every area of the bank's operations.
So everything from commercial lending, which you're familiar
with, how it works, to cash vault operations
and wholesale lockbox operations and things where you
have nightly processing of items.
So it gave me a window into a business that had 30,
40 functions to it that I could study and learn from.
And so for the first couple of years of my
professional career, learned the ins and outs of something that
had a fairly complicated operation to it in a way
that for me, was an easy process of discovery.
That was part of the job is, hey, learn what
the functions of all of these different departments do and
figure out how much they cost to operate.
So when you talked about activity based costing,
is that what you described it as?
Like, that literally is, how much does each of
these components of this process cost the bank?
And then from there, was there an effort
to reduce, or was it simply to understand?
Yeah, the first thing was first to understand, right.
And maybe to reduce, maybe to better price.
It's hard to know what is the profitability
or the cost inherent in some of your
transactional processing, especially because as a bank, you're
not charging for everything, right?
A bank fundamentally is making money
on interest, on interest margin.
And then most of its operations are a
loss leader, as it takes deposits and all
that has brick and mortar branches and things
that have to have operating expense to them.
So the whole concept, which is taken
from manufacturing, has to do with understanding
costs and attributing it to activities that
are related to products and customers.
Going back to college for a second,
your major was accounting or finance? It was accounting.
Okay.
Did you have coursework that was around manufacturing and
process and that sort of thing, or is that
something just innate or something that you learned?
Yeah, I think it goes back to a little
bit of why accounting for me was not interesting.
But yet in school, yet after school was
so helpful and interesting in an academic setting. Yes.
We learned cost accounting, managerial accounting.
You talked about leaving or getting past.
An element of that is cost accounting.
They'll teach you, but it's all academic.
It's not applied in a real world way.
At least it wasn't where I went to school.
That was 20 years ago.
So for me, my experience, it was dry
and not very interesting, whereas the real world,
you have that opportunity to see complexity in
business, and there's maybe not one single right
answer, one textbook way of doing something.
So I think there's an element of discovery and
problem solving that's inherently better in the real world
when you practice accounting than when you're studying it.
That makes a lot of sense.
You were at the bank for a couple of
years, and what did you do after the bank?
Yeah, so I was in Tulsa.
I left, moved to Dallas in 2007,
and worked for a string of different
industries, different companies, different roles for about
15 years, and various private companies.
Some public companies wasn't necessarily like job hopping
or moving from thing to thing that much,
but every two, three years would either have
a promotion or move to a different company.
A lot of my time was spent in financial
services, specifically insurance, but had others as well.
Software startup at one point,
commodity trading company as well.
So I guess benefited in my career by just
seeing a lot of different industries and different company
sizes and having fairly interesting roles within them.
Yeah.
Were they all in the finance and accounting office?
Yeah.
I'm guessing you probably weren't doing accounts
payable, but were you in kind of
a strategic role in those different companies? Yeah.
So most of my career has been in FP A,
which is financial planning, and know that's kind of the
part of the accounting and finance function within a company
that will look a little bit more to the future,
work a little bit more with the operations and the
business to understand profitability of things.
So I've kind of always positioned myself towards maybe that
side of it just because of the desire to add
value in a different way than recording the past.
Earlier.
When we were talking about kind of the
artistic, creative nature that you have, I got
to believe that the FPNA aspect lends itself
to some creativity and asking, what if?
And if we turn this knob here,
what's it going to do over here?
And thinking through how all these things connect?
And does that resonate at all? Yeah.
The problem solving process can
be a fairly creative one.
Analyzing, optimizing a business process, or
understanding its bottlenecks and constraints.
I think thinking outside of a box is helpful
in applying ideas in your process involves creative thought.
You had a number of these
positions internally with different companies.
You did that, I think you said, for about 15 years.
Talk to me about bright balance and
what the vision was in starting.
That I had worked, like I said, in several different
roles, several different industries, and I kind of reached this
point where I realized either I can continue to try
and I could be CFO of one organization, I could
continue to work the kind of hours I was for
a single organization, or which I had kind of realized
at that point, has its own.
Everywhere has its own issues, and everywhere has its
own hurdles, its own constraints to your growth.
And I found a lot of my own.
Call it ambition.
To add value was sometimes intention or conflict
with departmental politics, or you're dealing with things
a lot out of your control, like the
success of an industry, the success of a
business model, the success of a management team.
But I love the work.
I really loved just being able to
understand businesses and help problem solve.
So it occurred to me to look into consulting.
I was with a software startup at the time, and
it allowed me a little bit of flexibility that I
used to kind of explore the consulting side.
So I started looking around my network.
Hey, if you need help, let me take a look.
Maybe I can help you on an hourly basis.
That's how it started in 2018 19, I was just me.
And then inevitably a client would ask, hey, I
need help more than what you're giving me.
I need a controller.
I need an accountant, senior account or something
to help with the month and close.
So we'd bring in others into the process.
So it's kind of by accident that the firm started,
because it really started out of my own desire just
to help companies, help them with that extra need that
wasn't solved already and grew from there.
The term that I use to describe
what a firm like yours does is
outsourced accounting, and maybe that's too general.
Do you term it something different? Yeah.
I call bright balance a
fractional accounting and finance firm.
That can mean a lot of things.
It's something which I didn't really tell you how we
became a quote unquote firm, but it was really COVID.
In 2020, all of a sudden, everyone
can work from wherever they want.
You don't have to be in the office.
Everything's remote.
We all remember that time where we're working from our house
for a year, basically, and for us at the time, it
allowed us all of a sudden to help our clients.
In California, no one has to travel.
I can help on a fractional basis,
anyone, no matter where they are.
And I think it opened up a lot of doors for
business owners to realize I don't need a full time person,
I don't need someone to come in the office, and I
don't need them sitting down the hall from me necessarily.
I just need to advance these certain objectives.
I need certain outcomes.
And so bright balance started in 2020 officially, and
we hired from there and grew pretty quickly.
A lot of it had to do with COVID
I think that really kind of accelerated things.
But going back to your question about who we are
and what we do and kind of what's out there,
I think the industry as a whole is realizing accounting
doesn't need to be an in house function.
It's easier to realize that when you're a startup,
when you're looking at, well, I have a bookkeeper
who's been helping me, or we see a lot
of times founder run businesses that started very small.
Maybe the spouse is the bookkeeper, right?
They have an admin or
something that's doing their quickbooks.
And so ultimately they will graduate from that.
Realize, maybe I need more than a part
time bookkeeper that may or may not understand
the business, may or may not necessarily understand
all of accounting or financial reporting.
So there's this call it need
out there that's always been there.
But I think for the services
industries is really able to absorb. Right.
You don't have to hire full time anymore.
And as that becomes more prevalent and widely known,
I think it's a big tailwind to our business.
You touched on something that I think is
worth drilling a little bit deeper on, too.
And actually, I'm going to correlate this back to
something different that our firm did years ago.
We now have an amazing
rockstar marketing team in house.
But years ago, we worked with an outside agency.
I looked at what we could pay them, where they
had people that could write copy, they had people that
could do graphic design, they had people that could do
video production strategy on and on and on.
And you don't typically, unless you find a
unicorn like we have, you don't typically get
that full, rounded skill set in one hire.
And depending on the size of the business, it
probably doesn't make sense to go hire three, four,
five people to handle all of those different things.
When I think about the offering of, I
liked how you described it, a fractional accounting
and finance organization within the accounting and finance
world, much like I described with the marketing.
You've got your day to day bookkeeping.
You've got your accounts payable, your accounts
receivable, you've got your bank reconciliations, you've
got your month and close.
But then there's also that analysis.
There's that strategic thinking.
There's that really understanding, okay, what's
going on in the business?
When I look at this balance sheet, or what
is the P l telling me, and what are
the things that we need to go do different?
Much like that outsourced marketing agency provided this
full suite for us for less than the
cost of one full time equivalent.
I think you guys really kind of do the same.
You know, one of the easy cases we come
in is you need a variety of people, variety
of levels, but you can't afford all of that.
And not only are we covering all those
bases for less than a full time person,
but it's also more risk mitigated, right?
That full time person at some point may go on
maternity leave or quit, or have an illness, or even
just simple vacation sometimes creates a little bit of business
impact, whereas a firm has that built in redundancy.
You also have at the same
time, an element of best practice.
A lot of firms, and ours is no different,
will start specializing in certain industries or verticals.
And so as you look at software companies as
an example, and you see one after another after
another, you kind of realize a lot of them
are dealing with the same issues.
A lot of them have the same needs.
A lot of them, depending on where they are in
their growth story, have a lot of the same process
that should be implemented, the same call it best practice.
And so you also get this call it awareness
from a firm that kind of will help guide
you and lead things that a lot of times
an individual may not have that background or experience.
You touched on something that I think is actually
important, not just in the context of the accounting
and finance aspect of the business, but I think
about the work that we do.
I think about other outside parties we've brought
in to help us with different things.
I think it's important for any business to have
people from the outside looking at things, because to
the point you just made, when you bring in
somebody that is a consultant of sorts, whether it's
marketing, whether it's accounting, whether it's strategy, whether it's
fill in the blank HR, they are seeing things
across a much broader spectrum.
And they're able to provide perspective that
you can't get when all you're doing
is looking in the mirror every day.
It's way too close.
You need outside perspective in multiple areas of your
business to help make sure that you're doing things
according to best practice and taking advantage of trends
in the industry and so forth.
Yes, they call it the tactical benefit
of that diverse experience and kind of
knowing where to go with different.
You think a lot about accounting.
Where to go with that is part of it.
But there's also this element of when it comes to
having a network, I mean, if I think about our
clients and our client needs, I often tell our people,
our team, like we're more than just accountants.
And when I say that, what I mean is, well,
if you're looking at getting bank financing or need refinancing
on something, we have a network of people that we're
working with already on the same things elsewhere.
So part of it is having that kind of ready
to go network that says, okay, payroll providers, I can
give you the lay of the land, bank and credit.
Like, maybe you're not bankable yet.
Well, there's still options.
We can give you the lay of the land.
So kind of knowing how to navigate outside the company
is as important as knowing what to do inside.
That is a really good point.
And thinking back to another personal experience, going back
to 2020 and dealing with all the PPP and
EIdL, and even more recently, we bought our office
building and going through the process with the bank,
I could not have done that on my own.
I could have, but it would have taken much longer.
It would have been much uglier.
There would have been so much more back and forth.
And to be able to say, I'm not
good at this, I don't enjoy doing this.
Let me hand this off to somebody who does, and
I know I'm going to get a better result.
That was life giving for me, and it helped us
get to where we were trying to go faster.
Yeah, definitely.
Accounting and finance is no different than so
many other functions in a startup, so many
other functions in a founder's company.
Ultimately, as you grow in scale, you need
to find, at what point am I delegating?
How do I trust others to execute on my behalf?
And I think growing a
company, it's a difficult process.
I think often it's one that in the
accounting finance function, we're a trusted and critical
element of the operations of a business.
So I understand how sometimes that's a difficult
thing to start to let go of.
Often I think it's not an open ended rope,
like you're not letting completely go of it.
And so I think having someone help you,
I think of it as not outsourced, but
we're really a part of your business.
We're going to sit with you, meet with you
every week, be a part of what's going on.
It's not something you're handing
over or outsourcing, per se.
If I'm a founder, I'm a couple of years into
my business, what do I need to be thinking about?
What do I need to be looking for in the business that
would make me go, you know what I need to find?
A fractional accounting and finance firm. Yeah.
So I would say if you look at what
you have today, you look at your growth plans,
and probably, if you're early on, you fit into
some form of this category of having a bookkeeper.
Maybe they're also your tax firm that's
doing bookkeeping for you on the side.
Maybe it's someone you know, an
admin or something like that.
But at the point you realize,
first, I need something more timely.
That's usually one pain.
Point is the speed.
The second is kind of the sophistication.
So you want to move from cash basis to accrual.
You want to understand more than just the
cash activity in the bank and the point
at which you realize, okay, maybe I need
to forecast and understand what's happening in the
business going forward, not just strictly backward.
A lot of times, those are the catalysts that kind
of drive you to think, like, I need more than
a bookkeeper, ma'am, there's three or four things in there
that I want to unpack at the end.
You talked about forecasting, and this may tie back
into a question I'll come to in a minute.
But for me, there's kind of a pride factor, that there
are certain things that I'm freely willing to admit that I'm
not good at and that I don't want to do.
But when it comes to something like a forecast, man,
I don't know that I want to admit that somebody
outside would know things better than I would about my
own business, and that that might be something that would
hold me back from bringing somebody in, is letting down
my pride and saying, okay, no, I'm not as good
at this as I think I am. Yeah.
I mean, I think that's an element with so many
things you'll have to delegate or accept others into, right.
As they help you.
You probably will know your
business better than anyone, hopefully.
And you will know if that forecast is on or off base.
Again, it's more of a collaborative effort.
So don't think if you have a business that you feel
like is complicated, or if you feel like, well, it's going
to be too inefficient for my time for me to teach
someone else how to think about forecasting this.
Think along two lines.
One, it's an investment, so maybe you're fine
today, but if you double in size again,
how will your time need to be spent?
And it would probably be better to make that
investment sooner rather than later at some point.
So you think trending things forward, how do I
delegate what I need to, or at least get
help or support around what I need?
The forecasting element is not done in a silo.
It's not done in a vacuum.
It's really a partnership.
So you might very well know all
the plans you have to grow.
You also might have some blind spots, whereas
you think about those plans in the future.
Someone else looking from the outside is going
to say, well, wait, Scott, how's this going
to work if you're scaling delivery and yet
we have some bottlenecks on onboarding or something?
You probably will be aware of
those, but you might not be.
Yeah, I can think of many of
those kinds of conversations that people have
helped me think through from personal experience.
There are a couple of things that I look back on
and go, gosh, I wish I had done this earlier.
One, and I may have told this story before
at some point, but I remember in January of
probably the third or fourth year in the business,
I am going online, I found some system to
help me generate 1099 for contractors and other vendors.
And I'm going back through all the
books, and I'm having to total up.
Okay, how much did we.
Okay, wait, can I get this out of the.
Now, do I have to go back to the
bank to figure out how much we paid?
And I spent hours and hours
and hours generating 1099s for contractors.
And that was one of those.
Golly, there is much better and higher use of
my time as the founder, as the visionary that's
trying to move this business forward than generating 1099.
The other thing.
So we ran on Quickbooks for the first many years,
and Quickbooks is great in a lot of ways.
I mean, it makes things pretty darn simple.
There's a lot of limits to what it can do
for you, but when you're first starting out, it's great.
And it'll pull in all your banking transactions, and you
can go in there and code them and tie them
back to invoices if you need to and whatnot.
But, man, I would get in these patterns where I wouldn't pick
it up, I wouldn't do it for weeks at a time.
Then all of a sudden, I had this flood to
try to do things before the end of the month.
And I will also say, and I hate to admit this, I
didn't know how to fully do a bank reconciliation, and I didn't
know how to actually close a month in the system.
And I went for years without closing a month.
And at some point another advisor of mine said,
hey, Scott, let's walk through your p l.
And let's look at how you're doing month by month.
And I'm like, kind of sheepishly
giving him my financial reports.
And he's like, you're not closing your books, are you?
I'm like, I don't even know what that is.
And so again, another area that I
wish that I had handed off sooner.
Kind of going back to something you said a minute
ago, I think a lot of people look at accounting
and finance as a necessary evil, a cost center.
But when you're working with the right people, I
think it can actually be something that is strategic
and potentially the sort of thing that can help
you generate more revenue and generate more profitability.
Can you talk about that a little bit? Yeah.
I mean, it kind of goes back to
when I make the comment, our people or
our firm, we're more than just accountants.
I think accounting is a necessary evil in
a way, and someday it will be automated.
So the fact of the matter is, most
accounting is the recording of the past.
And so if that's all we're doing,
you can find ways to do that
faster, cheaper, more automated, which is helpful.
The way I look at it and the way I want our
team to look at it is that's context, and that is involvement
in a business where you're going to see a lot of things.
And as you see those things, you
can speak into areas of value.
It's an input into a bigger function if the
founder, the CEO, if the management team lets it,
and that's part of maturing your business.
So it's part of not controlling so much, but
realizing your highest and best use as a CEO.
It's bringing people in to advise
and be strategic with you.
When you think of it, you get what you put into it.
And what you need to put into it, in a lot
of cases is trust as a CEO, to trust another team
who might not be fully employed directly by you.
You get out of it.
This perspective, you get out of
it, hopefully out of that team.
You're having insight into the direction to move things
in the future, and it doesn't happen overnight. Right.
That's a process you need as a CEO to understand.
It might take a year for that team to really
add all of the value that I'm talking about in
that they've gotten to know your business, they've gotten to
know your habits, they've gotten to know you as a
CEO, the tendencies that you have, right.
Because we're seeing the same thing in other
places, and every business is run by people,
and all these people are people, right?
So there'll be things, see, they'll say,
Scott, have you thought about this?
Well, a lot of that might have to do with you
as a leader versus someone else and what your organization seems
like it needs, or what the finance function needs, given your
growth plans or your business or your industry.
So that stuff takes time.
It also takes an audience like you as
a CEO need to be willing to realize
that you could have help in that way.
And I think probably not to your own fault,
because most accounting firms don't think that way.
Most accounting firms are exactly what I said thinking.
I shouldn't say most, but a lot of
them are focused on coding the bank feed,
booking the transactions, reconciling the balance sheet.
But the good ones, ones who are partners
of the business, should be thinking like you.
If I'm in your shoes, what are you going to need next?
And that might not be anything to
do with closing the books, right?
It might have everything to do
with how you're pricing your product.
For somebody that's listening to this and saying,
okay, light bulb, I need to go find
somebody to take this off of my plate.
What are the kinds of questions they should be asking?
What are the kinds of things that they
should be looking for when selecting a firm?
Yeah, it's a good question.
The first thing in how to find
a firm, probably it's a trusted advisor.
It's often a relational, call it sell.
For us, we're getting almost always a referral
from someone else who's already worked for us.
We're getting a referral from a bank who's
worked with us, or a VC or a
private equity firm who's worked with us.
So how to find, reach out to
your network and those around you.
See what their experience has been and kind of
explore that from a relational standpoint for what their
ups and downs have been with that firm.
I would say when it comes to what
to look for, I think first the delivery
model, because everyone's, in the end all these
firms, they have a certain level of expertise.
They have a staff, right?
So what's their service offering?
Are they a CPA firm, which is
different than just fractional accounting and finance?
Fractional accounting and finance
generally is consulting.
CPA firms are generally practicing public accounting.
They're registered with the board, which means
they're often doing tax audit work.
Other things that might to you, seem similar,
but are going to spread them much thinner.
They're going to split their time.
When I talk about the delivery model, what I
mean is, who am I going to work with?
Who's my point person at your firm?
Who's going to execute just the point person.
Am I getting a single person?
Am I getting a team?
If I'm getting a team, tell me about
who they are and where are they based.
And is it all in the US, or is it also offshore?
Where is it in an offshore?
And how do you guys work together?
Do you work through an intermediary for that
offshore, meaning someone else is marking up, and
then again, or are they your own people?
These are all things, I think, as you investigate, will
drive some of the way that they deliver for you.
And I think in the end, the question you're trying
to answer yourself is, how can I see this team
being engaged in my business to enough degree that I'm
getting more than just accounting out of it?
Expanding on that, we began working with your firm,
I guess, two years ago, and won't get into
the reasons why we transitioned from our previous provider,
but there were a lot of hiccups with delivery
and responsiveness and so forth.
And as we started looking for the new firm,
and glad we found you all, for us, there
were several main areas that we needed help in,
and the bookkeeping was definitely one of them.
But also, even though we have a payroll system, somebody
still has to go in and run the payroll and
do the state tax filings and things like that.
Then there's occasionally the interactions with the
bank, and then there's the strategic, let's
do the planning aspect of it.
And then there is also the tax aspect.
There's probably three or four other things
that I'm not even thinking of.
And so I think that when you are evaluating a
firm, you've got to figure out which of these buckets
do you need them to help you with?
Is it all of them?
Is it three out of five?
Is it just one?
Anyway, I think that's another
important thing to consider.
Yeah, it's something to interview the firm about.
So with one of them, you might say,
well, hey, how do you improve accounts payable?
What's your best practice for that?
They might say, well, we go paperless.
We want to automate with Bill.com and
have that integrate with your ledger.
Like they may have a solution for most of those things.
I think a lot of it will kind of depend on, do
you have a fire or do you not have a fire?
Because a lot of times, say, 50% of
the clients that come to us are reacting.
It's reaction to, the bank won't give me financing because
I don't have good financials or I can't tolerate not
understanding as much about my business as I need to.
I know the books are behind.
I mean, we've had some clients come to
us nine months behind, twelve months behind.
Some come to us when the team walks out.
They had an in house person and they realized, this isn't
going to work when I had the second person walk out.
Now I have to go to a recruiter and find another one,
and I have to wait, and then I have to train them.
A lot of that's a
reaction to something that's happened.
So I think as a business owner, hopefully the audience
here can be proactive about it, not wait till there's
that issue and have the time to interview and say,
okay, with your firm, what are best practices that you
see in my business that I would need to cover?
And a lot of times we'll have what's called a
scoping call, where we walk through the basics of what
you have going on and look at your financials.
We can pretty much tell in an hour if you're
in good shape or not in good shape, where the
pain points are, where that added low hanging fruit would
be in the first, call it one, two months.
As you say, you think about what
to ask them for help with.
I think part of it is invite them to tell you what
they can help with, give them a full view of what's going
on, be open and transparent, and then ask them, what would you
guys do for me in the first 90 days that would move
the needle and they should have an answer.
When you do get into these conversations and
you're positioning to set up an engagement, what
are some of the common objections that you
get from business owners about outsourcing?
That's a good question.
So inherently, you lose control a little bit, right.
So to me, in what I see, the biggest
hurdle is often that lack of physical presence in
the office and the lack of the ability to
kind of control what the person's doing.
There's a trade off between all of the benefits we've talked
about and losing some element of control to be able to
decide kind of everything, every aspect of what an employee would
do for you if they were in house.
Something I know that I was personally a little
bit nervous about was that giving up control, but
not so much in the ways that you described.
More, okay, am I really comfortable with
somebody else having access to my bank?
And as we've gone through this, and you'll
probably work with people a little bit differently
from company to company, but you don't have
unfettered access to the bank.
And yeah, you can go in and view, you can pull
statements, you can see the transactions, but you don't have the
ability to just unfettered go transact on our bank.
And I think that was something when I
first started this that I had to get.
That gave me a lot of comfort
in seeding some of that control. Yeah.
And that's part of maturing in your business, right.
As your accounting and finance function matures, as
your business grows, there are all kinds of
things where ultimately, if you have 100 people
in your organization or 1000 people in your
organization, you're not controlling any of that.
You're not even looking at the bank account anymore.
There's a point in which that
control is based on a system.
It's based on a process.
For us in the beginning, like you talk about the
first time you give access to an outside firm on
the bank, any concern you have, we should explore.
Okay, you think we're going to
wire money out or something?
We can put in controls, right?
So to your point, it is an unfettered access.
It should never be that, right?
So you can question that of the firm
and they should have good answers that say,
okay, here's what we usually do, right?
Here's the way it should usually
work, because ultimately that protects everyone.
And likewise, I think there'll be other
suggestions they make, like, well, you should
maybe have positive pay on your account.
If you're writing checks and things that are just other
controls as a treasury function, you should have in place
something you just said, another light bulb moment.
You talk about positive pay.
I know what that is just because the industry that we
work in, we come across it with some of our clients.
But that's a term that I'm guessing there's probably
plenty of founders, particularly in smaller organizations, that don't
even know what that is and so describe it.
But more importantly, these are the kinds of
perspectives that you're going to get from an
outside firm that you're not going to get
if you're trying to do it yourself.
I think it's a good example of
you don't know what you don't know.
And if you hire professionals, they're going to look
at something totally differently that they do every day
and say you're crazy to do it that way. Right.
We've come across some clients who have a single
bank account with a few million dollars in it.
They're cutting checks off that bank
account they're taking deposits in.
Everything's just in one place, and
they're $20 million a year.
And you kind of look at that
and you're like, well, first, nothing's interest
bearing, which in today's environment does matter.
So we tell them about ICs and how to
have things off balance sheet yet have yield.
Second, they're not maybe taking advantage of being able
to get as many electronic payments from their customers
because they're nervous to get out their bank account
number yet when they write checks at the bottom
of every checks, their bank account number. Right.
So there's this element of, there's kind of
like a basic structure that they should have
in place if they're going to grow.
And at that point, they have no idea what that is.
They should take advice from someone like us, because
in the end, it's really not more costly.
It's actually just a lot more functional and
in the end, a lot more controlled.
When is the right time for somebody to take this on?
Is there a time in the lifecycle of the
business that this really makes a lot of sense?
Is there a time of year that this makes sense?
Yeah, that's a good question, too.
I think if you've realized pain points and are
reacting to them, the time was already yesterday.
So think about your business.
What do you have in a growth plan?
Right now it's December.
I don't know when this will get released, but in
2024, think about what do I have in the next
year, the next two years, then back up six months,
because as a fractional firm, you're not obligating too much.
Right.
You're obligating to invite a partner
in and understand about the business.
You'll have a little bit of cost,
but it's fractional, it's not full time.
There's not a huge stairstep in cost, but
there is a benefit in acting in a
proactive manner versus a reactive manner.
So my point is, earlier than you think would be an
advice for those who have businesses on the earlier stage.
For those who already have in house
team members, and they're worried about like
one team members, really critical.
Like you had said originally in this, you're a
firm believer in having that outside influence and help.
We have a lot of clients where they have a full time
in house controller, and we are the second set of eyes.
We are the, call it fractional CFO, as well
as augmentation for helping that controller not get bogged
down in too much of the minutiae and the
detail in the real transactional stuff.
So even if you feel like, well, I'm not
at the stage I need to outsource anything because
I can afford full time people, you might be
surprised to hear half of our teams are already
half full time people and we're just helping them.
We're augmenting them, which
gives them that flexibility.
One thing we didn't talk about, the reason I
believe in fractional one of them is why would
you ever have a fixed full time team for
a business that has variable needs?
Every business has variable needs, and those
variable needs get impressed upon accounting the
same way they do other functions.
Why not have a flex resource to help,
even if you have full time people?
So I think for those that feel
like they're further along, they're more mature.
Hey, I already have a full time CFO.
I already have a controller.
Well, those individuals might benefit
from extra help as well.
That's a great point.
Well, Patrick, thank you so much for coming into the
studio and being on in the thick of a toolbox.
Yeah, thanks for having me.
That was Patrick Tam, CEO
and managing director of Brightball.
To learn more, visit brightball.com.
That's brightbal.com.
If, if you or a founder you know, would
like to be a guest on in the thick
of it, email us at intro at Founderstory us.