We may often find a small business entrepreneur wearing multiple hats in running their start-up such as handling tech, marketing, finance, and sales. Given the priority of sales and marketing, finance and compliance take a back seat. However, what makes finance and compliance as important as other aspects of business is, it involves multiple compliances, process which might not look serious at the time of running operations but will come back hard on founders at a later stage. Take for Example, Companies who provide services in marketplaces like Upwork. for convenience of business would accept payment online, without checking on the requirements for GST, Tax implications on services subscribed from outside India. Now with exchange of information from various departments, now inconsistencies are identified between GST, Income Tax, AIS etc. This can create problems for businesses in future not sure of the specifics which are sought by the departments. It is prudent to note that the cost of non-compliance is always higher than the cost of compliance.

For a small business owner who cannot hire a full-time employee to manage the finance functions, engaging a professional firm to manage the finance helps in getting relived from the regular compliances and assign reporting responsibilities to share information on revenue, profit, receivables etc. on a periodical basis. However, it is important to note that the ultimate responsibility still lies with the business owner for all the legal filings for business.

Consultant can provide services as simple as month end reporting to financial information to handling day to day financial matters dealing directly with vendors and customers, liaising with government authorities.

Below is a list of pros and cons of engaging a consulting firm to manage finance functions of a small business [Not an exhaustive list]

Pros

• Access to experienced professionals at cost of accountants, for an early-stage start-up and small businesses, it is good deal to outsource the finance function
•  Team with experience in multiple areas such as tax, law, and accounting work together
• Use of knowledge base of the whole team instead of experience of individual staff
•  A professional firm would be more up to date on the latest amendments as compared to full-time accountants
•  More time available to focus on business operations
•  Pay-per-service concept reduces the cost of professional services as compared to hiring experienced staff

Cons

• Consultants work from their premises and availability on demand might be a constraint.
• Gap in communication between the company and consulting firm might lead to error in reporting information to authorities.
•  As the business scales up, the reporting requirements go up, and the need for having in-house finance team increases, migrating from outsourcing to an in-house finance team might take some time.

With the changing business environment, it is important for all business owners to make an evaluation on this topic, to decide for their businesses which is the most appropriate model for their businesses.