While some businesses usually hire an in-house accountant, globalization has opened a new option in the finance industry, that of outsourcing accounting services. However, it’s not a one-size-fits-all solution that applies to all businesses. Learn more about the pros and cons of outsourced accounting services and find out if it’s right for you.
What is Outsourced Accounting?
Outsourced accounting is the process of hiring an accountant or third-party service company outside your own to perform the functions and operations that span the accounting department experience. The outsourced accountant or bookkeeper will handle tasks relevant to the company’s financial record management.
Depending on your need, the outsourced professional or third-party firm may offer accounting services such as:
- Payroll processing
- Filing taxes and sending payments
- Accounts payable and receivable management
- Balancing ledgers
- Drafting financial statements
Outsourced accounting is in demand, especially for startups and small businesses, where resources aren’t enough for hiring an in-house accountant. In an infographic by Cogneesol, small businesses address several accounting issues such as lack of knowledge and skills, non-segregation of accounts, untracked expenses, delayed tax submissions, unorganized documents, and receipts.
Additionally, 88% of the respondents that hired an outsourced accountant generally feel satisfied with the services they are getting.
Pros of Outsourced Accounting
Cost and Cost-effectiveness
One great benefit of outsourced accounting services is its ad hoc payment model. This refers to the price based on the time it takes for the provider to deliver the services you require. Typically, outsourced accountants bill on a per-hour basis, which works well for businesses that need to scale up or down, depending on what tasks needed to be done for the day.
In contrast, hiring an in-house accountant involves paying for more than the services they render. For instance, you need to offer employee standard compensation and benefits, allot and set up their office space, and provide training, which could rack up costs for you.
Better Use of Time
Managing books and record-keeping takes time to accomplish. While doing it in-house might seem like a cost-effective solution, it also takes valuable time that you or your limited number of employees could have spent on other core business functions like production and management.
Hiring an outsourced accountant will help you allot time more effectively, and ensures you stay on schedule with your tax payments, payroll, and other financial matters. Outsourced accountants are highly trained individuals who specialize in accounting work and can be trusted to deliver promptly so you can focus on running your business.
The outsourcing industry is a highly competitive place, and most professionals who render their expertise in this arena are well-trained and talented to meet demands from clients. When you choose to outsource your financial management, you also get access to a worldwide pool of highly skilled individuals who work with efficiency and quality.
The Chance to Improve Your Company
According to the 2018 Client Accounting Services (CAS) Survey, 30% of the respondents received financial advice from their outsourced accountant that helped them augment profit. These professionals can also help you offer better and more efficient services like issuing invoices and paying your bills on time.
Accounts that are adequately maintained don’t need labor-intensive management anymore. You can set a per-contract arrangement with your outsourced accountant so that they only provide the services you need and terminate the partnership once they have delivered the service required of them.
Cons of Outsourced Accounting
Since outsourced personnel work outside your premises, you cannot monitor what happens in real-time, giving you less control over how responsibilities and functions are being handled by the third-party firm or professional. You need to set explicit policies and procedures regarding communication and transparency of work to ensure they apply best practices in completing their tasks.
Seemingly Losing Oversight
When you choose to outsource, you may initially feel that you are losing oversight of your financial spending. If you have done it by yourself for a long time, delegating the work to someone outside of your company could be daunting. However, having rules in places such as scheduled check-ins and regular reports can decrease the feeling, helping you trust the professional to take over your accounts.
It is in your best interest to protect your company’s sensitive information such as your financial statements and payroll. Choose a trustworthy provider that prioritizes your security, while applying transparency and well-established policies to mitigate risks. It is fortunate to know that, 68% of outsourcing firms consider data security and compliance as significant factors in delivering services, according to Fortunly.
Flexible Outsourcing Solutions
Before delegating your financial functions to an outsourcing provider, choose a company who will listen and offer flexible outsourcing solutions fit to your business needs. At Yempo, we cater to companies of all sizes, especially those that are new to outsourcing. Learn how we can help you. Ask us today.