Companies of all sizes, from tiny startups to behemoths like Walmart, have discussed the advantages they've enjoyed after outsourcing their accounting and finance functions. But even as the practice of outsourcing has grown somewhat commonplace, there are still a lot of myths floating around regarding what outsourcing means and how it can impact your business.
To get a handle on some of the most common myths about outsourcing your accounting, check out the list below. In addition, we’ve included one big truth that you can take into account as you navigate the outsourcing world.
Myth 1: People Will Lose Jobs If You Outsource
The word “outsourcing” tends to strike fear into the hearts of many staff members, because they often think it means their jobs are being eliminated. But in many cases, that doesn’t happen at all. Let’s take a look at a few examples of how a business’ accounting function might be operating today and how that could change if you outsource:
Example 1: The founder handles all accounting functions. This is the case for many startups, when the company founder or CEO takes care of all of the accounting responsibilities, from paying bills to sending out invoices to financial reporting and beyond. But no matter how much a company founder enjoys handling the accounting work, chances are strong that they would be better suited spending their time on revenue-generating responsibilities. By outsourcing accounting, the founder can focus on things like sales, new product development, marketing and inventory management.
Example 2: One accountant handles everything. Suppose you have an accountant on board who’s responsible for everything finance-related at your business. That person would love to take care of your firm’s statutory compliance and is interested in creating new accounting frameworks to project future cash flow, but can’t because they’re bogged down with day-to-day tasks like paying bills and reconciling credit card statements. If you outsource your accounting to a specialized firm, your accountant can focus on the more high-level accounting responsibilities that can shape your company’s future growth, while the outsourced firm does the minutiae.
Example 3: You employ an accounting team that handles everything, but they are stressed. Many accounting tasks can be mentally taxing for your accounting team members, such as reconciling account balances. These types of monotonous responsibilities can create stress among your accountants, who would prefer to be working your internal audit files or creating financial projections. You can outsource some of the more stressful responsibilities to an accounting firm, giving your in-house staff members the opportunity to focus on more high-level responsibilities. In fact, robot process automation (RPA) could be adopted by your outsourced firm to bring further efficiency to the process.
Myth 2: Outsourcing Is Expensive
When some people picture outsourced accounting firms, visions of expensive consultants jetting across the country often come to mind, but the reality is that you are likely to save a significant amount of money if you outsource. You’ll have access to expert accountants, finance professionals and bookkeepers at a much lower cost, without compromising on quality. You also save on infrastructure fees, employment taxes and other overhead costs since these experts won’t be on your payroll, but will instead be employed by the outsourcing firm. You can pay for the time and services that you need, and you can change that if your business grows.
You’ll also save time since someone else will be handling your finances. This will allow you to focus not just on financial projections and taxes, but on scaling your business. In addition, you can save money by only using the outsourced firm as much or as little as you need, rather than hiring a new team of employees to handle tasks that come up as your business grows.
Myth 3: It’s Risky from a Cybersecurity Standpoint
The thought of handing over your financial information to another company can be daunting. However, outsourced finance and accounting services can put measures into place to handle the serious data security threats that exist, and they typically invest in impenetrable and expensive security systems. This can help mitigate the odds of data breaches and compromised security programs.
In addition, these firms invest in cutting-edge technology and software to be competitive, and if finance is not your core function, this type of investment does not make sense for you to take on by yourself. With an outsourcing partner, you can benefit from having access to the latest technology at no additional cost.
Most importantly, the technical side of outsourced accounting services ensures that your data is available on the cloud for you to access at any time. That means that although your financial information is well protected and secure, you won’t ever have any problems accessing it, no matter what time of day you need to see it.
Myth 4: If You Face a Down Economic Period, You’ll Still Have to Pay the Outsourced Company
The truth is that with outsourcing, you only pay for the services you actually use.
As situations change economically, companies tend to shift their workforces, which can be a challenging and resource-intensive process. But since the responsibility of managing the talent assigned to a project lies with the outsourcing company, you do not have to make any decisions regarding its internal workforce or pay to retain that company's staff members, nor will you have to pay for staff members who don't have any work to do.
If you require fewer hours from the outsourced accounting team, you simply need to ask them to scale down the services and you will be able to pay them a smaller amount. As soon as you’re ready to scale back up again, give them the word and you’ll be ready with a fully functional team once again.
Myth 5: Managing the Outsourced Firm Will Take Time Away from Growth-Generating Activities
You may picture yourself having to spend hours on the phone training an outsourcing firm, but in actuality, you'll truly free up a lot of time by outsourcing. With reliable back-office support, you can stay focused on value-added, revenue-generating tasks such as business development and making strategic business decisions. As the outsourced company takes care of your financial needs, you can handle the tasks more important to growing your business.
Many companies say that they see sales soar when they start outsourcing, because their internal employees are able to focus on responsibilities besides handling the accounting tasks.
Truth: You’ll Gain Compliant Practices
A specialized outsourcing company will remain updated with the latest financial and compliance policies and other accounting rules. That way, you won’t miss important tax or accounting updates, compliance regulations or potential changes on the horizon. You won’t have to sift through each day’s financial news to find this information — the outsourced firm will do it for you.
In addition, if you are ever under the scrutiny of an auditor, your outsourced accounting firm will have the ability to manage the audit, generate the appropriate records and follow through to completion.
Overall, outsourcing your accounting function can deliver new benefits and strengths to your company, while ensuring that you have time to complete the revenue-generating responsibilities necessary to keep your company growing.