Denice R. Preston
LendEDU, backed by Y Combinator, has put aside more than $50,000 for its outsourcing finance department to prepare professional financial statements for its monthly budget. But there was one issue: they were unsure of the accuracy of the figures.
As director of Finance and operations at LendEDU, James is responsible for precise bookkeeping, preparing financial statements, and the internal processes for financial management.
After achieving a low six-figure revenue in its annual report, LendEDU, a Y Combinator-backed company, boldly chose to bring its accounting and finance functions into the company. LendEDU is a site that assists consumers in discovering and evaluating financial products, including personal loans, student loans, and insurance products. It is looking to help support business expansion while being more efficient.
During this period, my position at the company changed, and I was promoted to director of Finance and operations, a new place for our company that was growing. It was, in fact, an entirely new job for me too. Together, we concluded that we had to engage independent consultants to help get our company up and running.
This accounts for how our company relocated its accounting and finance processes in-house with the help of Toptal’s Finance expert, Andrew Fales.
Early Struggles in Forming Our Accounting Processes
At the time of its summer 2017, LendEDU was a tiny, new company that experienced rapid growth in various areas. With steady increases in cash, revenue, employees, and customers, it became clear that the official accounting and bookkeeping processes would soon become essential.
Before this, LendEDU was laser-focused on expansion and aspects of its business that directly contribute to it. Naturally, the comparatively small resources were not utilized to establish formal payees and receivables teams. Instead, people with relevant expertise and responsibilities added these tasks to their lists.
Near the end of summer, our business began thinking about the advantages a proper accounting procedure could bring. A faster turnover of receivables could boost the flow of cash accrual accounting strategies, which can help us better assess the performance of our business, and a formal bookkeeping process can help us efficiently control our financials.
We had the resources to invest in this area of the business. But it didn’t seem appropriate to employ a full-time accountant at this point. So, we started to research finance teams that could manage this task for us. We discovered a reputable company that specializes in handling accounting functions for start-ups. The hourly rates were astronomical. However, we thought, “You get what you pay for,” so we decided to proceed.
This was a critical error. By the end of August, the company had sunk more than $50,000 in our finance outsourcing department. However, we did have a monthly statement of financials to prove it. Our revenue was broken down by product line, our costs accounted for, and the format was professional.
LendEDU’s Increased Spending on an Outsourced Finance Department
There was one issue: we could not believe the figures. The close-out process every month was a nightmare. The representatives at the company we hired knew how we made money and did not want to learn. Long emails that referred to imbalance discrepancies, billing mistakes, and lists of questions were exchanged. However, reconciliations were always delayed until the following months. The process was faulty, poor communication, and customer support was terrible. Perhaps the most disappointing thing was confidence in our financial information was low.
Starting the Transition to In-house
Following eighteen months of transferring money to this accounting firm externally and battling to get valuable results, we’d had our fill.
We opted to bring our accounting functions inside the company. The benefits of this change were thrilling. The process of getting accounting operations in-house allowed us to produce monthly financial statements much more efficiently, quickly, and cheaply. However, the issue was that we couldn’t employ a full-time accountant and did not have CPAs readily available.
When I reached this point, I’d grasped the fundamentals of the accounting procedure that we needed to establish, and I could handle most of the work. However, I needed someone knowledgeable to talk with regarding the process and, most importantly, to review my work. In essence, I needed someone who understood what I didn’t and could spot errors and help me correct the mistakes. We found the person we needed at Toptal. We have used the website previously to contract an expert in software development for our website. This was a fantastic experience. This time, we required someone with accounting experience or preferably an accountant CPA who was knowledgeable of the field within which our company operates.
Hiring & Onboarding Process
After we posted the job on Toptal, We received various inquiries from freelancers interested with impressive resumes. Within a few days, we scheduled five interviews via phone within the next week.
We discussed our needs and then inquired about how each candidate could assist us in avoiding the accounting problems we’ve faced before. We discovered a connection to Andrew Fales.
Andrew is a CPA who founded a highly-respected tax accounting company specializing in various aspects of compliance and accounting for entrepreneurs. Andrew has also provided consulting services to many companies throughout his career. In a 30-minute phone conversation, Andrew laid out a strategy for us to set up the internal financial system. He said he also had a good understanding of QuickBooks and advised that he would guide him in using the program.
In addition, Andrew seemed to fully know how our company functions and the goals we wanted to achieve. Andrew said he planned to “work out of the job.” His idea was to help us become self-sufficient, which was our aim. His motivation for this method was that we could consult him for other issues we faced as our business advanced, which is precisely the way we’ve done it.
Month One
After discussing how much we would budget, Andrew and Andrew, we set off to work. The first month, Andrew and I talked via Zoom for about 2-4 hours per day, three days a week. I shared screen-sharing while Andrew guided me through QuickBooks software, showed me shortcuts, and stressed accrual accounting concepts that were crucial to efficient bookkeeping. There was plenty to be learned. Every time I asked about an issue, Andrew had an answer. Andrew would offer multiple solutions when there was a lapse that needed to be rectified. In just one month, we created a formal accounting system designed to prevent future errors and run the business effectively.
