The Ultimate Guide To Outsourced Accounting
Outsourcing accounting services can provide startups with a range of benefits, including saving time and resources, access to expert knowledge and skills, compliance with regulations, and flexibility and scalability. These benefits can help startups manage their finances effectively and focus on other areas of their business.
What is outsourced accounting?
Hiring accountants with the required skill sets and experiences can be challenging, especially for startups. It's essential to hire the right team as they are in charge of preparing the organization's financial statements, analyzing critical financial data, drafting invoices and helping manage employee accounts. With new start-ups in the industry, it’s all the more difficult to find the right talent.
About 33% of small businesses outsource their accounting, despite the widespread belief that accounting and bookkeeping should be kept strictly within the business. It's certainly a critical decision and depends on whether the company's staff has enough experience, and if they are comfortable taking up expanding accounting tasks. However, over 60% of start-ups also believe they're overpaying their taxes, which could be a massive contributor to the organization's finances. Due to this fact, many have started to feel that outsourcing accounting is indeed the right way to go. A 2020 Deloitte survey stated that over 70% of companies turn to outsourcing due to cost reduction, while 40% believe that increased flexibility was the deciding factor for them. More and more, we are seeing companies partner with a third party to take care of accounting and bookkeeping instead of having an accounting team of their own.
So should you also consider outsourcing your accounting? There are some considerable advantages, which we have listed here for you.
The perks of outsourced accounting
Small businesses and startups may choose to outsource their accounting services for several reasons. Here are a few:
The recruiting process is undeniably rigorous and sluggish for every organization. Each hire needs several managers, dedicated strategists and interviewers. This doesn’t even take into account the time and costs invested in the process, which could drive outstanding results for the company.
It’s tricky to find accountants who understand the business and its related requirements. Outsourced accounting is an excellent choice in such scenarios.
One of the flagship factors of outsourced accounting is that it saves the organization tons of money. It does not just eradicate the cost of hiring an accounting team but also saves time and effort.
The in-house accounting teams usually face challenging situations when dealing with monthly or hourly employee salaries or taking care of employee benefits and insurance. It's time-taking and adds a significant amount to the operational cost. Outsourcing helps save on taxes, salaries and additional employee benefits, which would have to be considered when onboarding a full team full time.
It saves time
Massive growth in business usually results in more time being spent on managing expenses and operations rather than time being invested in the company itself. Outsourced accounting helps save not just a significant amount of time but also energy and resources.
Additionally, the uncertainty of budgeting, debt management, and processing payrolls is no longer the organization's responsibility. Instead, they trust the outsourced team of accountants for the same. The outsourced team streamlines the process along several parameters, saving the company tons in time, energy and resources.
Prevents roadblocks in the business
Accounting is a fundamental need and highly time-sensitive. Since it is a significant domain of any organization, any possible challenge could break the business's continuity. The challenges could include system down time for maintenance, shortage of human capital, or poor infrastructure that could result in penalties, delayed payments, and losing out on essential data.
Such interruptions in businesses could lead to losing clients due to the inability to meet deadlines. Outsourced accounting takes the upper hand here as most third parties work with cloud-based technology, which minimizes such interruptions. Working on the cloud also ensures perpetual availability and safety of data. Outsourced accounting also provides the feature of time-bound services if required by the business.
Work with the best in the industry
Outsourced accounting enables businesses to work with experienced professionals at an affordable price. If such experienced professionals were to be hired by the organization, the expenditure would be significantly higher.
If needed, outsourcing allows businesses to even work with a team of financial experts. Choosing the proper third-party organization is essential, but once the choice is made, you can be sure that the accounts of your business are in good hands.
Escalated data protection
Data is bigger than ever which is why data security, internal or client-based is a huge concern for everyone in the industry. A considerable amount of data is produced daily as most accounting services have gone digital.
Most small organizations lack the resources or the knowledge required to protect their data which could result in massive cyber-attacks and data thefts. The brunt of such attacks could be devastating. If outsourced to an experienced firm, the business would be working with cloud-based servers supporting encrypted transactions, abilities to recover lost data, disaster management features and secure storage for perpetuity. No wonder the requirement for such accounting services is at an all-time high.
Promotes business expansion
A deciding factor when picking a third-party organization for outsourcing accounting services is their ability to scale your business. The extent of scalability can be assessed by the level of automation possessed by the team. Experiencedorganizations know when to scale up or down according to business requirements. Such skills are honed over time and could play a key role in taking your business to the next level.
Many such organizations also have a well-documented set of procedures that have been implemented with several other companies to scale their business. Given that your business has the horizon to implement said procedures, you can be sure of the fact that implementing the suggested process-driven solutions could be the next big thing for your business.
No room for error
Due to budget constraints, companies often end up hiring candidates who are inexperienced, which might lead to unnecessary errors while bookkeeping in-house. On the other hand, while outsourcing, you usually deal with companies and experts who specialize in accounting services.
They come with years of experience implying the probability for them to make errors tends to be near-zero. Third parties must provide error-free accounting assistance as they rely solely on their services for revenue. Going for outsourced accounting further reduces the risk of a bad hire and human error.
The cons of outsourced accounting
We've discussed the perks in detail. Let's look at a few cons.
It might come with hidden costs
Services might add up once you partner with an outsourcing company. Such add-ons or tasks are often unpredictable as they depend heavily on the business requirement. It can however be dealt with if expectations and budget constraints are laid out at the very beginning.
Outsourced accounting companies require a considerable level of control over business financials. Given the extent of the services they provide, it becomes a necessity. Such transfer of authority requires a significant level of trust in the association with the outsourced team. Having said that, it can certainly make you feel like you no longer have complete control over each financial event and decision being made for your company.
An outsourced team can certainly never replace an in-house team. Services and answers required might not be instant at all times. If you choose to associate with the right accounting team, the communication and requirements are usually met to get the job done.
So should you outsource your accounting needs?
As you might have realised, outsourced accounting has some undeniable perks and advantages. Having said that, it’s equally important to approach the right service for your business. Here are some factors you must keep in mind while making the decision.
Have a well-defined set of requirements
Business requirements must be conveyed concisely to the third-party organization to drive good results. To have a detailed set of requirements, the limitations of your organization should be assessed along with what you seek from the outsourced accounting team.
Get the price right
Having tons of options is a blessing and a curse at the same time. When picking the right accounting company, assess the services they provide in exchange for what they charge. After careful consideration, you can pick one based on your ideal budget and terms of payment.
Go for quality over quantity
You can never put a price tag on experience. Ensure that you are going with a team that's experienced and houses professionalism. Make sure you connect with past clients and learn from their experiences. It'll help you decide which team fits your business best.
Accounting tasks you can consider outsourcing
Apart from the necessities, here's a list of accounting services you can consider outsourcing.
- Payments creation
- Payroll related services
- Reporting to authorities
- Following up with debtors
Outsourced accounting has created substantial results for numerous organizations in the recent past. While there are undeniable pros, the cons shouldn’t be neglected either. Outsourcing could give your organization access to a fully functional, scalable accounting team of experts dedicated to your business needs. Of course, in the end,you know your business best. So weigh your options, go through the services on offer, talk to colleagues within the industry, and pick a partner that makes sense for your business.