When business owners hire third-party accounting firms to manage their finances, they may be provided with an engagement letter. This type of document is new to many business owners, especially those that are outsourcing financial functions for the first time.
Essentially, an accounting engagement letter is an agreement to provide services to a client. The agreement describes the business relationship and sets expectations for both parties in a way that is less formal than a traditional contract.
Business owners frequently wrestle with determining which activities should be outsourced to a freelance bookkeeper or accounting company. Budgetary restrictions can limit a company’s ability to outsource financial tasks, as can concerns over delegating duties. In these instances, it often makes sense to offload tasks that will have the greatest ROI first, and then include others later as means allow.
While many industries have their own accounting nuances, churches utilize entirely different principles and practices. As a result, their financial needs are far more complex than many other similarly sized organizations.
Churches and businesses view revenue generation differently, use revenue differently, and report revenue differently. Churches need money to operate; however, unlike businesses, their primary goal is not to generate revenue. Instead, they collect money to pay for operational expenses, fund campaigns, and support their ministries. Furthermore, a church does not have shareholders, so any excess income is not paid out – it is reinvested to advance its mission. This is reported on a “statement of activities” instead of an income statement like a traditional business.
Shrewd business owners understand the benefits of outsourcing accounting functions. Utilizing an accounting firm maximizes business value by improving financial reporting accuracy and timeliness, allowing for better strategic planning, and reducing tax burden. However, these benefits depend on a solid working relationship with an experienced accounting firm. When there is a poor fit or the firm is performing inadequate work, its value is likely lower than expected. In extreme cases, business objectives and strategic growth plans can also be stymied.
If you notice any of these critical issues, it may be time to fire your accounting company:
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