Early startups often grapple with mounting pressure to achieve corporate superiority. One of the initial challenges is managing operations with limited capital. Consequently, establishing a dedicated finance department remains a distant dream for business startups due to its costly and resource-intensive nature. Fractional accounting services emerge as a significant breakthrough in such scenarios.
The term “fractional accounting” is particularly relevant to startups and small-sized companies. It represents a need-based accounting process in which companies hire accounting professionals as required, rather than employing them full-time. It operates as a task-based accounting service, meeting specific needs without committing to continuous outsourcing.
What Is Fractional Accounting?
Fractional accounting offers a more tailored approach to outsourced accounting services. Startups and small-sized organizations opt for fractional accounting services, hiring finance professionals for flexible hours based on required tasks and budgetary constraints. This adaptability makes it perfectly suited for newer ventures with limited resources.
The role of fractional accounting is valued for its cost-effectiveness and substantial return on investment (ROI). This service proves economically viable for organizations with limited capital, allowing the fractional accountant to work on specific goals and tasks, paid solely for the completed work rather than a fixed monthly income.
This is the essence of fractional accounting—maximizing efficiency while minimizing spending, and directing resources towards more critical investments.
What Is Included In Fractional Accounting Services?
Effective financial management involves a wide range of accountancy and bookkeeping operations, encompassed within fractional accounting services.
CFO Services
A Chief Financial Officer (CFO) serves as the financial guide of an organization, making key financial decisions. However, for most startups, affording a full-time CFO is often unfeasible. Fractional accounting services bridge this gap by providing CFO services on an as-needed basis, overseeing financial matters, and strategizing when required.
Fractional accountancy will cover the CFO services as it is one of the most crucial positions. In a fractional accounting mechanism, the CFO will only work when required. The typical role will be to oversee the financial matters and devise a strategy.
Financial Management – Fractional Accounting Services
Maintaining a vigilant eye on the financial transactions and positioning of a business is the key to perfect financial management. That said, it is also offered in fractional accounting services and forms the base of some of the most important reporting processes.
From reporting financial transactions to depicting budgeting forecasts, everything is a part of the financial management system. A fractional accountant will have to deal with all these steps for hassle-free financial management.
Bookkeeping
Keeping a daily track record of the books is a regular process. Bookkeeping is the fundamental component of financial accounting and is crucial in making informed decisions. Hence, maintaining your books will prove instrumental in the success of a business. Amidst other issues, bookkeeping has the topmost priority.
Audit and Compliance – Fractional Accounting Services
Compliance with federal laws, in particular that of the IRS (Internal Revenue Service) is one of the highest priorities of business owners. Any shortcomings in meeting compliance goals can have serious legal consequences. Similarly, keeping an audit trail of all financial transactions is mandatory for financial reporting.
Fractional accounting will entail audit and compliance to keep the financial operations of an organization rolling smoothly.
R&D Tax Credit
Businesses venturing into research and development projects are eligible for R&D tax credit. However, the documentation for applying for an R&D tax credit is not straightforward. To this effect, qualified research activities (QRAs) and qualified research expenses (QREs) are recorded per the IRS’s requirements.
Fractional accounting services incorporate the filing process of the R&D tax credit. The complete record of transactions for the listing of QRAs and QREs is necessary R&D tax credit.
Concluding Remarks
Fractional accounting is a highly sought-after service for early startups that helps them take off without compressing their payroll. The financial complications of running a business are washed away by delegating finance operations to a fractional accountant. Furthermore, it will save you time and resources that can best be used towards business growth.
Nuage Digital is an accounting and digital development agency that is fully equipped to empower new and seasoned business owners with tailored fractional accounting services. Get in touch with our experts and let us draft a plan of action for you.