Posted by Carol Mahamedi
March 4, 2022 | 3-minute read (548 words)
Outsourcing is a feature of remote working environments across the globe. Rather than building an internal accounting department, many small and medium-sized businesses enlist experienced professionals from elsewhere.
Creating an outsourced finance department presents an opportunity to take advantage of the most effective accountants while benefiting from significant cost savings.
So, should your business invest in outsourced accounting services? Here is a complete guide to outsourced accounting and how your company may benefit from these services.
What is outsourced accounting?
The concept of outsourced accounting is simple enough to understand. Rather than hiring an accounting team to manage your business’s affairs, you hire a third-party company instead.
Anyone can outsource accounting services and take advantage of functions like payroll, accounts receivable and financial reporting.
Take note; outsourced accounting services don’t necessarily have to pertain to hiring a foreign company. It simply means that you hire an independent contractor to do it on your behalf rather than managing your own accounts.
Why companies outsource accounting?
The move toward remote working has been a driving force in the desire for more companies to outsource financial services.
Outsourcing also finds itself entangled with the “offshoring” concept, whereby businesses will hire cheaper foreign companies and need to comply with fewer regulations.
Cost-savings and more focus on core business functions to increase business capacity are the two primary reasons why companies outsource accounting.
Five benefits of outsourced accounting services
Why should your business outsource accounting services to a third-party provider?
Several business benefits can enhance your business while fulfilling your accounting obligations.
1. More cost-effective
Third-party firms manage their affairs, such as paid time off, health insurance, and workers’ comp. Many companies aim to reduce employee overheads by outsourcing their accounting functions.
2. Shorter onboarding
Building an internal accounting department requires training and time to increase cohesion between team members. Outsource, and you have a team that’s equipped to plug into your company.
3. Better quality
Entrepreneurs can muddle through their accounts, but outsourcing gives you immediate access to trained, knowledgeable accountants. Outsourcing is a simple way of adding expertise to your firm.
4. Fraud protection
Accounting fraud comes with a higher risk when one person is at the helm. Reputable accounting firms have multiple checks and balances to protect against fraud. Outsource accounting to defend yourself against fraud.
5. Personalized approach
Many accounting firms specializing in outsourced services provide a tailored approach for each client. Get the solution you require and pay for only what you need with accounting outsourcing.
The drawbacks of outsourced accounting services
It should be no surprise that there are also disadvantages to an outsourced finance department.
Here’s a brief breakdown of the disadvantages you’ll need to take into account:
• Hidden costs
- Scope creep happens, and that can lead to you inadvertently paying more than you expected.
• Less control
- Ultimately, outsourcing any type of business function always means less control. You lose precise control when you outsource.
• Lack of communication
- Third-party accounting firms will have a schedule. You cannot simply walk down the hall to ask questions or receive immediate answers.
Determine your business needs and what you want to get out of your accounting department. While there are disadvantages to outsourcing, most entrepreneurs find the pros outweigh the cons.