Many clients ask, why change or move to a new model? Where is the increase in value?  Think of the following analogy, which involves the IT industry and their interaction with clients.  In today’s world, almost every company has some form of technology in their office that requires a qualified professional to implement, maintain, service or repair.  These companies don’t employee a full-time IT employee nor do they have the new hire that is somewhat good with computers install the latest updates to the server.  But rather, they contract that out to qualified professionals.  If companies buy into this model for their IT needs, why not their accounting needs?

If you answer yes to any of the following questions, your company may benefit from a contract CFO or contract Controller, something I have been doing for years.

• Do you feel that your financials take too long to be prepared and when they are completed they are already irrelevant? (Not finished within 10 days after month end)
• Would you have to make ANY modifications or consult with a professional prior to sending financials to a bank?
• Are your tax preparation fees higher than you anticipated because your preparer had to make adjustments?

Not only will your company benefit by retaining someone with the higher skill set possessed by a contract controller, you can also lower your overall accounting cost.  By contracting, you are paying for direct results and you are only paying for what you need. No unused time, no payroll tax, no additional overhead.

The main alternatives to contracting are; hiring an employee, which I refer to as paying for someone’s time, or having your CPA firm perform these functions outside the office. The former can often be inefficient and comes with the traditional burdens associated with managing additional employees. The latter is not how a CPA firm is necessarily intended to operate. Independence issues and much higher fees will usually accompany this option over an employee or consultant. This option also often times leaves them stuck cleaning up the work during their busy season, when their time is already stretched

Here are some of the most common reasons a company would contract with a contract accounting consultant:

• Their budget precludes them from employing someone with the necessary skill set
• There is a pressing or urgent need
• There is a short-term project i.e. obtaining a loan, major purchase, buy-sell agreement, year-end planning, new accounting system
• Recent loss of full-time controller
• Develop internal controls and accounting processes
• Company is unsure of the long-term and only wants short-term commitments.
• Desire to improve efficiency while possibly lower costs

When choosing a contract controller or CFO, it is important to chose a consultant who has past experience in both public accounting(preferably both tax and audit) and experience as a high-level accounting manager for a company.  By having this combination of knowledge, it enables them to see both sides of the coin when it comes to the internal reporting needs of a company and the external reporting requirements for banks, tax preparers, and public financial statements.

I have seen the positive impacts, improved efficiency and cost savings for the companies I have been involved with.  Although it is a fairly recent trend, I am seeing an increase every year and an opportunity many companies are beginning to explore.  Feel free to contact me with any questions you may have regarding this topic.

The poll of small businesses in the region found that 59 percent of the respondents applied for credit, demonstrating existing demand among small businesses. Over two-thirds of the 426 poll respondents in the New York, New Jersey, Connecticut and Pennsylvania area experienced sales or revenue declines, implying a broad weakening of small business finances. Only half of small business applicants received credit, and 75 percent reported receiving only “some” or “none” of the credit they wanted.

“Until now, we’ve only heard anecdotally about difficulties for regional small businesses in obtaining credit without any numbers to confirm this,” said Kausar Hamdani, senior vice president and community affairs officer at the Federal Reserve Bank of New York. “A main purpose of this poll was to hear directly from small businesses about their recent credit experiences and to analyze them systematically in order to learn more about where the largest obstacles exist.”

Separately, financial software developer Sageworks conducted its own survey of credit and lending professionals at 159 financial institutions asking each respondent to characterize the number and volume of commercial loans their bank plans to make in 2011, as compared to 2010. The survey found that 48 percent plan to make more commercial loans, 31 percent plan to make about the same number of commercial loans, 11 percent plan to make fewer commercial loans, and 10 percent plan to make significantly more commercial loans.

The Discover Small Business Watch monthly index of small business economic confidence rose from 73 in August to 73.8 in September after falling 14.4 points since May.

“While the recession is technically over, large numbers of small businesses owners say they won’t see true recovery for at least six more months,” said Ryan Scully, director of Discover’s business card. “Three quarters of them were hurt by the downturn, which affects their ability to add jobs, build inventory or re-invest in their businesses.”

Forty-six percent of small business owners report having cash flow issues this month, down from 53 percent in August; 50 percent said they do not have cash flow issues and 5 percent aren’t sure.

Despite this, a record 68 percent of small business owners rate the economy as poor, up from 62 percent in August; 26 percent rate it as fair; 4 percent rate it as good, and only 2 percent rate it as excellent.

In September, intentions for spending on business development in the next six months produced two record numbers. A record low 16 percent of small business owners plan to increase spending, down a percentage point from last month’s then record low of 17 percent. Fifty-seven percent of small business owners report plans to decrease spending, the highest in the history of the Watch, while 24 percent report no changes to their spending plans and 3 percent aren’t sure.

Fifty-five percent of small business owners report economic conditions are getting worse for their businesses, equaling the record high percentage from last month; 23 percent expect them to stay the same and 20 percent see them getting better. Fifty-seven percent of small business owners say the economy is getting worse, down 5 percentage points from August; 26 percent say it’s getting better, 15 percent report it’s the same and 2 percent aren’t sure.

Nearly three out of four respondents, 71 percent, said small business owners are waiting for the economy to improve before they do any hiring, with only 9 percent who think otherwise and the remaining 20 percent just not sure.

When asked if the economic climate has hurt or helped their business, 73 percent said it had hurt them, 4 percent said it helped them and 21 percent said it had no impact. Of those whose businesses were hurt, 41 percent think it will take more than a year to recover, while 24 expect it to take six to 12 months, 11 percent said three to six months and 1 percent expects to recover in less than three month. Only 2 percent of small business owners said their businesses had already recovered.

When the economy improves, 46 percent of small business owners said their segment was more likely to begin hiring, while 35 percent thought larger businesses were more likely to lead the hiring charge; 19 percent weren’t sure.

On the issues of proposed tax breaks and federal stimulus, small business owners were evenly split on whether they would lead to more job creation: 41 percent think tax breaks and stimulus would lead to more jobs, and 42 percent disagree, with 17 percent not sure.

A 100 percent tax break for capital investments, as in the newly passed Small Business Jobs Act, would only help about one in four small businesses: 26 percent said it will help, 51 percent said it won’t help them, and 23 percent aren’t sure.

When asked if they needed a loan to grow their businesses, 71 percent said they did not; 20 percent said they did, and 9 percent aren’t sure. Of those who do need a loan, 44 percent need less than $25,000, 37 percent need $25,000 to $100,000, 11 percent need $100,000 to $250,000, 4 percent need $250,000 to $1 million, and 3 percent need more than $1 million.

When small business owners were asked what they would do with a no-strings-attached financial windfall from the following list of options: 31 percent said they would pay off debt 29 percent would make an investment in their business, 19 percent would save or invest it, 7 percent would put it to personal use, 3 percent weren’t sure, and 8 percent said none of the above. No one planned to invest it in technology.