7 Benefits of outsourcing accounting services
The necessity to develop a full-fledged accounting team is directly proportional to the growth of your business.
To properly manage payables and receivables and maintain records, a business can outsource accounting or hire an accountant.
Taking assistance from a business accounting services firm gives you time to breathe and shift focus on what’s necessary.
However, there are many factors that a business should weigh up before going for bookkeeping outsourcing, like accountability, affordability, transparency, and many more.
What is outsourced accounting?
Outsourced accounting is when you hire a third-party business accounting services provider to handle your accounting tasks for a fixed price.
They take care of your entire accounting needs, including general bookkeeping, business transactions recording and reconciliations, employee payroll, tax filing, financial planning and projections, and anything else you need under this umbrella.
Since the outsourced accounting team takes up critical tasks, they cannot be viewed as service providers, but as part of the company.
Without hiring accountants, you get knowledgeable professionals to work for you in building a foolproof payment and accounting system.
Most accounting firms offer the above-listed services in packages or specialize in one niche like taxation or audits.
Benefits of outsourcing accounting services
The benefits of outsourcing accounting services are endless. Some reasons why you should go for outsourced accounting services are:
1. Cost-effective
Business accounting solutions are cheaper than hiring employees to work in-house. Hiring an accounting team costs begin when you advertise for the position.
And there are payroll and employee benefits expenses. If you want experienced professionals, you will have to pay more.
Other costs include materials and stationery supplies, gadgets and software expenses, employee allowances for overtime, training, and other payables.
Connecting with a third-party accounting solutions provider, you can just pay per service used by finding a provider who fits your budget and needs.
2. Expertise
Irrespective of the tools you use, you need expert assistance to run the accounting team and manage the clunky process.
So, when you decide to hire and develop your in-house accounting team, it can be pretty expensive, putting together the salary and other costs.
Instead, if you outsource accounting, you can let well-experienced accountants take charge of your bookkeeping.
These professionals would have hands-on experience in various dimensions of accounting and finance, given that they have worked for many clients from different industries.
3. Scalability and flexibility
When your company scales, the team size of every department grows, particularly accounting. Your payables and receivables reach numbers that you have never handled before.
You will have no other way than to pay more or hire more employees.
But, if you outsource accounting, a sudden scale-up won’t be an issue as accounting outsourcing companies can employ more accountants depending on the need.
And the same goes with the opposite scenario when there is a dip in business activities.
4. Taking the stress out of your business
The end of the financial year is a stressful time for everyone.
This is when companies close their accounts annually, collect every record, documents and put them in place.
Other anxiety-inducing periods are audits and taxation, which can put your employees in panic mode.
Accounting outsourcing companies are well used to these situations and have strategies to handle them like a pro.
5. Lower risk of fraud
Internal frauds are unavoidable when you have an in-house accounting department.
With accounting outsourcing companies, the probability of any security violation, data theft, or other risks is lower.
They have highly secured systems in place to protect your data.
Despite having the entire access to your financial stack, revenue, loan statements, liabilities, and assets, the outsourcing accounting agency cannot do anything negative that can hamper its reputation.
6. Increase in business efficiency
If you are focused on growth and have new plans in the pipeline, it’s time for you to think about outsourced accounting and bookkeeping services.
Thanks to financial outsourcing, your CFO can make better financial decisions, plan future projections and investments and mitigate risks for the betterment of your business.
By letting your employees do what they know best and outsourcing the rest, you create a solid roadmap for your company’s financial advancement.
7. Not just an accountant, but an advisor too
As highly experienced accountants render business accounting services, they can offer insights that can potentially change your cash flow and management.
You can identify potential risks and downfalls at the earliest for your financial team can take steps.
Cons of outsourcing accounting services
Outsourcing accounting services has some drawbacks too, which can have a little to significant impact depending on your business structure and operations.
1. Less control
As the outsourced accounting teamwork outside your premises, you cannot approach them anytime for real-time updates.
It can be hard to develop trust and understand their work disposition until you both establish a healthy work routine with proper communication.
Accounts being a key part of your company, it will be hard at first to hand in work to someone not a part of the company.
Before you begin the contract period, establish a few ground rules and ensure the modes and frequency of communication.
You can have weekly meetings and calls to gather updates.
2. Hidden costs
Accounting outsourcing companies charge you based on the accounting positions and the number of professionals you require.
But a hefty invoice with hidden charges from the agency can shock you because there are hidden charges that might not be discussed or neglected when you sign the contract.
Some standard costs charged for providing business accounting services are disengagement cost, overhead multiplier cost, hiring costs, and others, depending on where the firm is located.
Never skip pages while signing the contract and read it thoroughly to understand the hidden clauses.
3. Delay in communication
Communication and work delays can be expected while working with an outsourced accounting agency.
Communication delay is not common for all agencies. But, it’s very natural for the message to get lost or ignored, causing a delay.
While there are options to contact them like phone calls, messages, and emails, delays in communication due to procrastination or other factors will be there.
When should you consider outsourcing your accounting services?
Outsourcing is definitely cut out for all. But it gets the best value for the money invested when the company goes through the following scenarios.
• A small business that struggles to manage transactions and records spends its nights with balance sheets and projection graphs.
• A company of any size already has a bookkeeper but needs advanced accounting and financial management assistance to manage the liabilities better and make better margins.
• Companies that have plans to scale and looking for ways to expand their accounting team without surpassing the budget.
• Companies that have hit sudden growth and crossed $1 million revenue, where the top management can no longer participate in finance and accounting decisions.
Now that we have established the best fits, who can go for business accounting solutions, let’s move into other technicalities.
This assessment will determine whether you need outsourced accounting and bookkeeping services or to hire an in-house bookkeeper.
Do you already have a bookkeeping team? Are they overloaded with work and need an additional workforce or advanced tools to finish tasks? Or, do they barely have work and finish on or before time?
Is your current bookkeeper equipped with advanced bookkeeping skills to take up next-level roles?
If you don’t have an accounting team in place, what’s your assumed workload?
If your answers underline the necessity of hiring one or more assistants, but the budget looks huge, then bookkeeping outsourcing will be the feasible option.
Things to look for before outsourcing your accounting services
Accounting outsourcing companies are a dime a dozen, and you don’t want to get stuck with the wrong choice. Consider the following factors for finding the best agency to outsource accounting.
Security
Data security is prioritized here because even a minor violation can lead to disasters.
Generally, accounting firms care about their reputation and will not get into activities that can bring it down. Nevertheless, it’s good to ensure that twice and get it in writing.
Check their security systems and other measures they take up to handle confidential information.
Cost
Every firm has unique pricing plans based on multiple factors.
Other than checking the outsourced accounting services cost, go over their plans.
Find on what basis they estimate an accountant's salary, monthly or hourly basis.
It’s better to choose an accounting solutions provider who offers more value for money than just being economical in pricing.
End-to-end accounting services
What kind of accounting services do you need help with? Is it payroll or accounts payable and receivable management or accounting data analysis?
If you have a team or a responsible person managing the accounting tasks right now, discuss with them what needs to be outsourced.
For a clear understanding of requirements and expectations on both ends, you must know what your company currently needs.
Are they flexible to work with?
Businesses can grow in a very short span of time and scale their operations. In such instances, your accounting outsourcing partner should be able to bring in more accountants to take care of your work.
Before choosing to outsource accounting, study the flexibility level of the providers.
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