What's the draw of outsourcing?
Some of the most important outsourced accounting benefits are known and enjoyed by businesses of all sizes.
An off-site accounting staff provides CEOs, CFOs, and business owners access to experienced accounting professionals that can show them how to run their business more efficiently, grow the business, and even boost ROI and cash flow—typically for much less outlay than a traditional, on-site accounting team.
Some of the greatest reasons why companies turn to outsourced accounting are to save money, focus on the core of their business, and solve space issues. Top companies outsource various tasks and even entire departments to help innovate and improve their overall business outcomes.
Why Businesses Outsource Tasks and Entire Departments
According to Deloitte's 2020 survey regarding outsourced accounting trends:
- 70 percent of companies outsource to save money
- 15 percent of companies outsource to improve business agility
- 20 percent of companies outsource to boost speed to market
A company will weigh the benefits and disadvantages of outsourcing their accounting department before making a decision - as they should. The company must understand if outsourced accounting services are right for their needs.
So, what are the pros and cons of outsourced accounting?
The pros include:
- Saving money
- More time for other aspects of the business
- Less chance of fraudulent activity
The cons of outsourced accounting services include:
- Costs money
- Loss of control
- The outsourced team isn't local
Pro: Save Money
Having onsite accounting staff is expensive. It costs much less to outsource accounting. An off-site accounting department offers the experience of a whole team of accounting professionals, which means reduced risk of being out of compliance or having unreliable books.
Con: It Does Cost Money
Like any service a company may sign up for, the provider's scope of work and the amount of work the company needs may not be the same—one activity can end up turning into three, which can add up quickly add up in fees that the company was either unaware of or simply misjudged or failed to remember. But that's the beauty of outsourcing accounting services with a provider that has the company's best interests at heart. The relationship should be clear from the start, which can minimize snowballing expenses.
Pro: More Time for Other Aspects of the Business
It's always better to prevent an issue than to try to play clean-up after the fact. Most business owners don't go into business to play the role of an accountant. Business owners from small, mom-and-pop shops to multinational corporations have a single goal in mind—to run the business, focus on ways to grow the business, and work to spread the company's vision.
Having to focus on the accounting end of things, too, is a job in itself that doesn't typically leave room for the business owner to get creative with the other aspects of the company. Plus, if a business owner's heart isn't really in the bookkeeping side of things, it's quite possible they could miss a red flag. An outsourced accounting service can spot these issues before they become major headaches and keep the owner updated on upcoming expenses and cash flow health.
Con: Loss of Control
While the above is certainly a benefit, there is a tradeoff—the business owner must relinquish at least some control. For instance, it's not productive for the owner to call up the outsourced account services provider each time a sale is made or a vendor is paid. This doesn't mean the owner can't ever call for updates—calling for monthly or even weekly reports is encouraged. It simply means there must be a relationship of trust between the owner and the accounting services provider.
For some owners, this can be an uncomfortable experience. Begin the process by defining each side's role and the procedures to adhere to—this sets the expected procedures upfront and helps ensure timely communication.
Pro: Less Chance of Fraudulent Activity
Fraudulent activity doesn't happen just to large-scale companies—in fact, 28 percent of all fraud cases are aimed at small businesses. This is especially true if a business appoints just one person to oversee the accounting department. "Cooking the books" is an all-too-common activity involving manipulated bookkeeping. Often, an employee might be going through a rough patch, and a business owner who feels sympathetic would never assume the worst. But blindly trusting employees without oversight and accountability can leave a business open to fraud.
Outsourced accounting services place several sets of eyes on all the transactions occurring in a company, as well as other financial reports. Fraud isn't ever 100 percent off the table, but these internal controls from an experienced outsourced staff are the biggest step toward catching potential issues before they become out of control.
Con: Outsourced Team Isn't Local
Having an onsite accounting team has its benefits, such as having immediate answers to pressing questions. Outsourced accounting services teams are available, but answers might not be as instant as an onsite employee. Not being in the same office—and sometimes, not even in the same town—presents barriers. That said, a great outsourced accounting services provider has excellent communication skills and policies setting forth the availability of your assigned team. It's important to look at this from the standpoint of highest priority: instant answers or correct answers?
Partner With AccountingDepartment.com
AccountingDepartment.com is an outsourced accounting services company. The company’s mission doesn't just include doing your books but helping you control expenses, boost cash flow, and reduce the most typical accounting hassles while using today's cutting-edge technology.
To learn more about our services, reach out today.