Outsourcing Your Accounting Team

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Pros & Cons of Outsourced Your Accounting Team

As companies continue to operate on leaner budgets, some have found that outsourcing certain functions is a good way to keep quality up and costs down. Outsourcing is not a new concept. For many years, businesses have transferred services such as bookkeeping, accounting, and Controller/CFO services to third-party firms. While once seen as an option for larger companies in the past, today the floodgates of outsourcing have opened and more and more companies are reaping the benefits.

According to a recent KPMG survey, about 40 percent of companies planned to increase their use of outsourced accounting. With the availability of advanced financial automation solutions and a deluge of cloud-based systems, all types of companies, small and large, are taking advantage of what it can do to for their businesses.

According to a survey by the National Small Business Association, 40 percent of entrepreneurs spend more than 80 hours each year managing their finances. Even if you’re working 10-12 hour days to bootstrap your startup, those hours add up to more than a week each year. A week that you probably don’t have the luxury of spending doing anything other than growing your business (unless it’s taking a much-needed vacation).

If those hours aren’t enough to make you want to offload your accounting to someone else, there are also a few key milestones to have on your radar. Hiring your first employee, reaching $15,000 in monthly expenses, and seeking out additional capital (either from investors or lending institutions) are all signs it’s time to increase your investment in accounting.

With that in mind, many business owners still struggle to handle their business accounting as they scale. If you’re a pragmatic business owner, you know that one the best ways to make a decision is through a good old fashioned list of pros and cons. Follow along to learn more about the advantages and disadvantages of outsourcing your business’s accounting team.

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Should you outsource your business’s accounting team?

We compiled this list of pros and cons to help you decide whether to take your accounting to an outside professional, instead of handling it yourself or hiring an in-house accountant or bookkeeper.

Pro: You can get more experienced guidance for your money.

Determining the exact savings of outsourcing your books versus hiring an accountant or a bookkeeper is nuanced, but the consensus is that outsourcing saves businesses money. This is even more true when you factor in the years of experience. Some outsourced accounting solutions can offer decades (if not centuries) of collective accounting experience for less than the cost of a single entry-level hire.

Businesses typically spend 2 to 5 percent of revenues to properly train and staff internal accounting departments.

While it might not seem like a lot, outsourcing your accounting can actually lower your total costs by eliminating expenses related to employee benefits, training, accounting software, hardware, and office supplies.

In addition to the time and overhead costs you’ll save, a team of professional accountants has more small business accounting experience and can catch errors and provide foresight into potential implications down the road. Accounting mistakes are an expense no small business owner wants to worry about. The longer they go unnoticed, the more expensive and time-consuming they are to fix.

Pro: Outsourcing means you can allocate more resources to activities that add direct value to your core competency.

Every business owner is motivated to run an efficient business. When it comes to hiring, increasing efficiency means connecting additional headcount to additional revenue. As niche business service companies become more common, there are more opportunities to look outside your internal team to scale operational efficiencies. This should liberate you and your team to focus on more activities that generate sales.

There are also the added costs of hiring teammates who require specialized tools. Any accounting professional that you hire will need accounting tools to do their jobs—and those aren’t always cheap. Outsourced accountants typically roll the cost of these tools into their own operating expenses. Avoiding this cost helps you streamline your suite of tools and eliminate even more overhead costs that don’t directly create more value for your customers.

Pro: Improve Processes. One of the hidden benefits that many businesses don’t realize is that outsourcing your accounting function provides an opportunity to upgrade and improve your current financial accounting processes. Outsourcing vendors instill best practices and controls that can help improve efficiency and timeliness of data. In addition, companies have found they can reduce the cycle it takes to close books, and they can develop better benchmark and baseline financial processes to help them meet regulatory requirements.

Whether it’s having access to the latest accounting software or improving your payroll processes, implementing up-to-date accounting procedures can help improve service levels, reduce costs, create better cash flow and position your company for growth.

By spending less of your day overseeing bills and payroll, you’ll free up valuable time that can be redirected back into managing and growing your business. As an expert in your field, it’s critical that you use that expertise to focus on business goals, growth and managing your day-to-day operations.

Pro: Access to Expert Accounting Resources. If a small business is doing its own accounting, chances are good that the person in charge of the task isn’t a master accountant. If you’re lucky, someone on staff may have a background in accounting but it’s not their core competency.

By outsourcing you’ll have access to a team of skilled accountants having a wide range of experience in the area. This ensures that your books are always up to date, payroll is done on time and you’re not at risk of being subjected to penalties due to inaccurate paperwork and underpayments

Pro: Save on Technology Costs.

By outsourcing, there is no need to buy extra hardware and software for your accounting needs. A provider will have access to leading accounting software and will have the experience and know-how to properly use it to help your business.

Pro: Improve Processes.

One of the hidden benefits that many businesses don’t realize is that outsourcing your accounting function provides an opportunity to upgrade and improve your current financial accounting processes. Outsourcing vendors instill best practices and controls that can help improve efficiency and timeliness of data. In addition, companies have found they can reduce the cycle it takes to close books, and they can develop better benchmark and baseline financial processes to help them meet regulatory requirements.

Pro: Reduce Risk.

More than one in five small businesses will have money stolen from them by trusted employees (an average loss is $200,000). It can be hard to enforce a strong checks and balances system without making honest employees feel distrusted, which reduces company morale. Thankfully, outsourced accounting offers the perfect solution.

When you hire an outsourced accounting service provider, you not only save money, time, and stress by having experts handle your financial reporting, you also have a third party to audit your money trail. You’ll decrease your risk of internal fraud by having an impartial standard of checks and balances, which will also help improve compliance.

Pro: Be Proactive and Scale.

When you outsource your accounting you can expect to minimize large investments in human resources, technology, and infrastructure and maximize your production, thereby giving an opportunity to scale and react to change more quickly. For example, outsourcing gives an organization the ability to more efficiently handle the surges in activity that may be seasonal or based on business cycles. Rather than having internal resources that are too busy at times and slow at others, companies can instead hand those concerns over to the outsourcing provider. Outsourcing can help you shift your focus and redirect energy from peripheral activities towards work that serves your clients more efficiently and helps grow your business.

Pro: Automate and Reduce Paper.

Did you know that outsourced accounting decreases your carbon footprint and reduce wasted paper, space, and time? Think about it: it’s easy to take for granted how much paper and toner costs as well as what you pay to maintain your fax machine, printers, and/or copiers. Imagine how much less paper and storage space you would need if all of your financial information was available electronically instead. Less paper, means that you’ll be more organized and spend less time filing and storing hard copies.

Pro: Anytime, Anywhere Access to Financial Data.

Today cloud-based accounting applications allow you to access financial data and records online, giving you up-to-date access to your information such as cash balances, at any time, from anywhere. With timely, accurate accounting records and reporting at your fingertips, you have total visibility into the financial health of your business allowing you to make more confident and informed decision

Pro: Confidence and Peace of Mind .

With timely, accurate accounting records and reporting, you’ll gain total visibility into the financial health of your business giving you greater peace of mind to make more accurate and informed decisions. By outsourcing your accounting you can be assured that your financial information is correct, you avoid any potential threats of fraudulent activity, and have access to a team of experienced accounting professionals who you can count on. No matter the size of your company, outsourcing just makes good business sense. It gives you confidence and security you need that your financial operations are in order so you can focus on growing your business

Pro: You can relax with peace of mind that you're getting the most reliable, responsible support.

When it comes to your business, it’s your responsibility to provide a high-quality product or offering based on your industry standards. Likewise, an accounting services company is operating under even more pressure to ensure compliance with business and tax laws.

If you’re outsourcing your accounting with an outsourced provider or firm, you can rest assured knowing that they are well equipped with legal knowledge and advanced knowledge of the always changing small business tax and accounting laws. It’s likely that with multiple accounting professionals with various backgrounds on staff that they have someone who even specializes in your industry.

Pro: You are paying based upon the average number of transactions throughout the year.

Chances are that some points throughout the year will be quieter than others. This means your full-time in-house accountant will be less useful than they are during the busy periods, resulting in high costs but low benefit at these times. By outsourcing these services you are paying based upon the average number of transaction throughout the year, therefore, not incurring unnecessary costs.

Pro: Not being responsible or hiring and monitoring of skills and progress.

If you have little knowledge of accounting, it could be much harder to recognize the perfect candidate to hire. Opting for outsourcing with a good firm ensures you get to work with experts and you are not responsible to the firing and monitoring of skills. New business often do not have the budget to hire an experience bookkeeper or accountant and usually have to pay for the learning curve. If the accountant you choose is fresh out of school, don't be surprised if there are constant revisions in the first years. And without experience, chances are revisions will not only be improvements. We only hire experience people and our people are professionally managed by supervisors that have vast experience.

Con: Having to perhaps learn newer technology, such as working with and uploading documents through a secure portal.

While we will require some information to transmitted to us via fax or preferable an upload to our secure portal, it is a minor inconvenience over the traditional in-house accounting

Con: You may feel like you’re losing oversight of business spending and activities when you stop doing it yourself.

Some business owners who have been holding accounting closer to the chest tend to worry that out of sight will mean out of mind. After all, your financial performance is a great place to uncover insights that have broader implications for your business’s efficiency.

This is why it’s good to maintain transparency with regular meetings with your accountant or CPA. We recommend scheduling a check-in each month, or at the very least each quarter. The goal of outsourced accounting and bookkeeping is to relieve you and your team from the manual data entry and report building, which is ultimately not the best use of your time. It’s not to keep you in the dark. An experienced small business accountant should be even better at identifying key business takeaways from your company’s financials and bringing them to your attention.

Con: There are limits to your ability to communicate with and control someone outside your company.

While remote teams and work-from-home policies are increasingly popular, there is something special about having team members physically in the office. It also makes sense that availability would be high on a list of priorities when it comes to your financial information. However, there are ways to build a communicative relationship with those outside of an organization.

Client-vendor communication tools are getting more and more robust—especially for smaller and more flexible businesses. Some companies invite contractors and freelancers to be part of their chat systems (like Slack and Hipchat). Others choose accounting providers who build live chat systems into their tools to make back and forth communication accessible right from a dashboard interface.

As you’re deciding what’s right for your business, be sure to ask both potential teammates and outside vendors or contractors about communication styles.

Con: Specialized or unique accounting.

Your accounting needs may be very specific, specialized or unusual. If this is the case, outsourcing may cost you more than hiring your own specifically trained accountant.

Con: Services tend to come in a package.

When you hire someone, you're free to set the tasks they perform. Outsourced services usually come within a package that may not always fit your needs if they are very specific. In most cases, we can customize your engagement to meet most if not all your needs

Con: Lack of control over how processes work.

When external accountants work, they might follow a process that may not be the same as yours or even fit with the way your business operates. By choosing an in-house accountant, you also (to some degree) choose the way things work.

Con: Lack of proximity.

Proximity is your main ally! A few steps to the office next door is much easier and faster than an email or a phone call to someone at the opposite end of the country or even a continent away. And someone who's in the same building as you will be available in a few minutes, if not instantly.

Con: Lack of multitasking.

Multi-tasking is a must in growing companies. External workers will either not be keen on offering this or won't have the time or skills to meet your needs. Having someone in-house means the function can evolve in a similar way to the business and quickly and easily adapt to fulfil your company’s new needs.

Choosing the Right Accounting Solution for Your Business

The right accounting provider will help your business thrive, and there have never been more options for outsourcing your accounting, taxes, payroll, and other back office duties. Before you jump into a contract with the first business accountant you meet, take the time to research all your different options to identify what will work best for your specific business.

Once you’ve narrowed things down a bit and are ready to make a decision, you’ll want to prepare for what an outsourced accountant will need to know about your business to get started. The sooner you can get an accountant up to speed on your business, the faster you will be able to see results.

For small businesses, outsourcing can be a blessing, cost-wise. But after your revenue passes a certain point, you may be better off with a full-time bookkeeper. How do you work out if that's the right solution for your business?

These are questions you can ask yourself :

What is the most cost-effective solution for my business?
What are the reasons why I should hire someone instead of outsourcing?

I’m going for outsourced accountancy, what you need to be aware of;

If you think that outsourcing is the best solution for you, there are may things to take into consideration before you make your decision.

First of all, it could be more than just the quality of their services that influences the reputation of an accounting firm. Some accounting firms are more susceptible tax controls and draw more scrutiny for some reasons. Choosing a company like this puts your business in the crosshairs of tax inspectors, which is always very stressful.
Along with that is the way the accounting company works. Some have chosen to keep up with the times and offer online tools and process your documents digitally, so they can get the work done every week. Some others have decided to stay old-school and will be able to do your accounts much less frequently.
It's also important to know the extent of the services that are being offered. Will they advise you or are they just there to "do the work you can't do yourself"? A good piece of advice is priceless and can win you ten times what it's cost you. Accounting is the key function, but expertise in taxes is highly recommended too.
Speaking of costs, price is of course determining. Some companies won't hesitate in charging you 3 or 4 times the amount others do, so it's really important to know if the investment is worth it. If you own a small business, you should consider a contract with fixed fees - it'll protect you from unforeseen expenses. Keep in mind though that they will probably limit their services to what's normally inside the work package.
And finally, what's your relationship with them like? If you find the person can't handle the tasks you give them with the necessary calm and flexibility, check other firms before you settle for one and see who you feel best with. You can also call their current clients and get their opinions.

It takes a lot of hard work, time and skills to keep a business running smoothly. There are so many tedious tasks that take time away from the important work that needs to be done when you run a small business. Even if you have all the brains and brawn to wear all those different hats, trying to take care of everything yourself could soon become very overwhelming. When you add bookkeeping errors to the mix, it could also become pretty costly to a business. Wouldn’t you rather focus on the more important aspects of your business?

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