Accounting & Finance

Pros and Cons of Outsourcing Your Accounting

  • 5 min Read
  • August 20, 2020

Author

Escalon

Table of Contents

As a startup owner, you may be trying to single-handedly take care of every aspect of your business – but did you know that multitasking could be taking a toll on productivity? Research from the American Psychological Association says that even brief mental blocks that result from repeatedly switching between tasks can cost more than 40 percent of a person’s productive time.

Wouldn’t it be nice if you had the option of spending more time on growing your bottom line and less time on administrative tasks? Many businesses do this by hiring a specialized accounting outsourcing firm for all their finance and accounting needs. This allows them to enjoy such benefits as cost savings, access to the latest tech tools, security and confidentiality, among other features.

Check out a few of the pros and cons so you can make an educated decision on whether outsourcing your accounting function is the right choice for your business.

First, the Pros:



  • Significant Cost Savings

    : Outsourcing allows you to cut overhead costs because you don’t have to spend on salary and such benefits as retirement, vacation time and health insurance. In addition, you won’t need to spend money on software and the equipment essential for handling the accounting processes.

  • Access to Experts

    . Accounting mistakes can have disastrous repercussions on a business, such as penalties, cash flow issues and even an investigation by the Internal Revenue Service (IRS). Outsourcing the accounting functions gives you access to a team of highly qualified and trained professionals, who use the latest technology and processes to ensure that your data is accurate and secure. Since accounting provides a platform for improving cash flow, driving profits and growing your business, it can also have an effect on such things as the number of employees you need to — and can — hire, identifying the most and least profitable product lines to your future expansion plans, and so on.

  • Improved Internal Control

    : According to the Association of Certified Fraud Examiner’s study from 2012, the most common victims of fraud are small businesses that employ fewer than 100 employees, and the median fraud amounts to an astounding $147,000. This is because most small businesses don’t have access to a controller or CFO who could spot abnormal activity in the transactional and billing data. Outsourcing accounting helps you reduce the possibility of fraud, as you’ll have a dedicated team of accounting experts who will accurately check your books and transaction reports. It also lowers the risk of having your books manipulated.

  • Enhanced Data Security:

    Outsourcing accounting firms are aware of the serious data security threats that exist and usually have robust, impenetrable and expensive security systems in place. This takes care of issues that come with data breaches and security compromises.

  • Flexibility and Scalability:

    By selecting an outsourcing company that specializes in finance and accounting, you can benefit from a solution that is tailor-made for you. You can also add or remove financial and accounting processes depending on your needs.

  • Access to Latest Tech

    : A finance and accounting outsourcing firm invests in cutting-edge technology and software in order to be competitive. And if finance is not your core function, this type of investment does not make sense for you. With an outsourcing partner, you can benefit from having access to the latest technology at no additional cost.

  • Round-the-Clock Service:

    When you outsource your accounting services to a third party, you can operate 24/7 with a time-zone advantage. You can be assured that all important tasks will be taken care of in the scheduled manner and on time.

  • Protection in Down Economic Times:

    As situations change economically, businesses 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 can scale up or down in terms of staffing with ease.

  • Security and Confidentiality:

    Because finance and accounting are their core functions, outsourcing partners make sure that your information remains confidential and secure. You can ask them to sign a non-disclosure agreement for your peace of mind.

Now, the Cons:



  • Less Control:

    When you receive finance- or accounting-related queries, it can sometimes be easier to communicate with an in-house accountant. This may not be the case with an outsourced team handling your accounting function, because you may not have direct control over how things are being handled. However, this issue can be resolved by setting up policies and procedures during the initial stages of the partnership itself.

  • Additional Costs

    : Sometimes, there may be hidden costs when dealing with an outsourced accounting firm. These costs may be in the form of additional tasks that weren’t specified in your arrangement and so on. To avoid this risk, you can ask about any hidden or additional fees and anything else you may have concerns about, and settle the cost of service right at the beginning.

  • Risk of Selecting the Wrong Company

    : When outsourcing a job function, there’s always a risk of things not going your way, and in the case of finance and accounting, errors being made. To avoid this from happening, ask your chosen outsourcing firm for references and contact those companies to get their opinions.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

Financial Compliance in the Decentralized Era: What Web3 Startups Need to Know 

As the world leans into the decentralized era, Web3 startups are at the forefront, exploring the possibilities of blockchain, cryptocurrencies,...

Read More
People Management & HR

Payroll Services: Streamlining Processes in High-Turnover Consumer Goods Settings 

  Managing payroll can be complicated in any industry, but it becomes especially challenging in the consumer goods sector, where...

Read More
Accounting & Finance

Navigating Payroll for Nonprofit Organizations: Staying Compliant with Grant Funding Rules 

Nonprofit organizations often rely on grant funding to carry out their missions, whether that involves community development, education, healthcare, or...

Read More
Media & Entertainment

Compliance in the Media World: Navigating Intellectual Property and Contracts 

In today’s hyper-connected media landscape, safeguarding intellectual property (IP) and expertly managing contracts are indispensable for success. Media companies—from traditional...

Read More
Accounting

Introducing C3: Your All-in-One Financial Management Platform

Managing your business’s finances can often feel like juggling too many tasks at once, especially when you’re trying to keep...

Read More
Startups

Sourcing Passive Candidates: Strategies for Expanding Your Talent Pool with Outsourcing 

  One of the most valuable sources of talent for startups is the pool of passive candidates—individuals who aren’t actively...

Read More
Startups

Managing Cash Flow in SaaS: Leveraging Outsourced Accounting to Scale Faster 

Cash flow is the lifeblood of any business, and this holds especially true for Software as a Service (SaaS) companies....

Read More
People Management & HR

The Advantages of Outsourcing HR for Nonprofits with Limited Budgets

Nonprofits play a vital role in addressing societal issues, but managing the intricacies of human resources (HR) within the constraints...

Read More
People Management & HR

The Benefits of Partnering with Experts: Why Startups Should Consider Recruiting Outsourcing

When you're leading a startup, your time is precious. Every decision, every action needs to be focused on growing your...

Read More