Blade is a smooth and charming, visually stunning and very malleable and flexible

Copyright Qode Interactive 2017

Outsourced Bookkeeping – the next step for Companies with Commercial Loans or Factoring Arrangements

Outsourced Bookkeeping – the next step for Companies with Commercial Loans or Factoring Arrangements

Over the past decade or so, outsourcing the bookkeeping function of many small businesses became popular and small business owners saw savings in payroll and overhead, among other areas. Some large national bookkeeping firms emerged, offering the benefit of leveraging well experienced CEO’s, CFO and Marketing Guru’s, however, many of the clients of these large bookkeeping firms have asset-based borrowing arrangements, due to seasonal products, service-based business or other factors, and end up incurring higher costs, either with the bookkeeping service or through hidden costs with their lender.

Asset-based borrowing arrangements, such as factoring of revolving lines of credit that are tied to eligible asset categories require timely and accurate reporting of such assets and related financial activity. Many bookkeeping services view this reporting as extra time or outside of the scope of bookkeeping services and charge extra for this activity. Additionally, many Factors or ABL Lenders require field examinations, which if not properly prepared for can cost thousands of dollars. Field examinations are typically performed on a frequency that is at the discretion of the lender and can be required from annually to monthly, or even a daily collateral monitoring situation, depending upon the Lender’s comfort level with the collateral and reporting. The bookkeeping firm is typically heavily involved in preparing for and assisting with the field examinations. If the bookkeeping firm is inexperienced in handling field examinations, field examinations can be very costly, as the field examiner is charging a daily rate (ranging from $750 per day to over $1,200 per day) for the exam, plus expenses, while the bookkeeping firm is typically charging extra for preparing for and assisting with the field examination.

Alternatively, outsourcing the commercial loan reporting, in addition to or independently from the bookkeeping, to an experienced professional, can not only enhance the lender’s confidence in the commercial loan reporting through timeliness and accuracy, but may reduce the cost of the field examinations and perhaps even allow the Lender to reduce the frequency of field examinations. The manner in which monthly information is gathered, organized and remitted can be leveraged to prepare for field examinations on an ongoing basis. Field examinations that are not properly prepared for can cause budget overruns that double the fees and even more. Furthermore, a bad field examination typically give the Lender a reason to increase the frequency of examinations.