soday’s small firms frequently rely on third-party providers for accounting, bookkeeping, and controller services. This trend is expected to continue. Why? The benefits, which were earlier primarily understood and appreciated by organisations in the mid-market and enterprise segments, are increasingly being recognised and appreciated by smaller enterprises.
CEOs and business owners have access to experienced and trained employees who are trying to help their company function more efficiently, grow at a faster rate, and generate more money when they utilise a remote accounting team based in the United States. Typically at a large cost savings when compared to constructing an internal accounting services provider.
Why Do Companies Outsource?
The key motivations for outsourcing are cost reduction, the consolidation of essential corporate functions, and the resolution of capacity constraints. Successful businesses often outsource in order to accelerate organisational transformation and boost bottom lines.
You should consider the benefits and drawbacks of outsourced accounting, just like with any other major decision.
Pro #1: More Cost Effective
When compared to hiring full-time employees, the cost of using an external accounting firm is typically lower and more efficient. When you outsource, you save money in the long run by avoiding the expenditures associated with benefits like paid time off, health insurance, retirement, vacation, workers’ compensation, and sick days. For newer, smaller organisations, the danger of non-compliance and unreliable financials is particularly high; having the experience of a full team rather than just one or more internal people can help mitigate these issues.
Con #1: Hidden Costs
Scope creep is a problem plaguing all paid services; it occurs when a single activity expands into several, and it often leads to unexpected costs (or forgot about). Make sure your month-to-month arrangement is crystal clear and that both parties understand what expectes of them from the get-go to reduce the likelihood of any misunderstandings. In case you have any questions about how the onboarding procedure works, we’ve laid out a detailed 5-step procedure for you to refer to.
Pro #2: A Proactive Approach
You didn’t become a chief executive officer because you wanted to keep the books. You want to direct the company and think strategically about its future. This is why it’s beneficial to hire an external accounting team; they can keep an eye out for warning signs and keep you updated on things like spending and cash flow. Having an expert keep an eye on your money can provide you a lot of peace of mind and the assurance to make sound choices.
Con #2: Less Control
However, there is a catch to the proactive nature of an outsourced team: you can’t just walk down the hall and inquire about every single financial transaction that takes occurred. You’ll have access to a dedicated account manager and regular reports and updates via email and phone but outsourcing also necessitates a degree of trust on both sides.
Turning over financial management responsibilities can be unsettling for business owners. An in-depth onboarding process that establishes roles, regulations, and processes, as well as sets expectations and guarantees timely communication, is a good place to begin.
Pro #3: Reduced Fraud
For many small and medium-sized organisations, fraud occurs because just one person is responsible for the books. This is because it’s simple to falsify records or let a phoney outlay of funds go undetected for a long period of time. There are a variety of red flags that may point to fraud, and this is typically the case when an employee is under extreme financial duress and has nowhere else to turn. Don’t assume your staff is honest unless you verify it, and don’t let them off the hook if they commit fraud.
Increased internal controls can achieve through the use of outsourced accounting services due to the use of multiple reviewers for all financial transactions and reports. When compared to a single person who often overburdened and overloaded with work, a specialised staff with specific knowledge in accounting best practises will be significantly more likely to notice an abnormality.
Con #3: Not Local
Naturally, having an on-site worker who can respond quickly to inquiries is preferable. The availability of an outsourced workforce does not guarantee a lightning-fast response time. Not being in the same office together could cause some barriers. However, if you choose a reputable outsourcing company for your accounting needs, they will have solid communication procedures in place to make sure your team is always reachable. It’s necessary to think carefully about whether getting an immediate answer or following the proper procedures to find the truth is more important.
An outsourced partnership will be cloudy and difficult to manage if you and your provider do not set a clear schedule for communication and a clear division of duties. Make sure you and your outsourced team take the time to outline your expectations and how you want to achieve them.
A Dedicated Outsourced Accounting Team, & a Virtual Accounting Machine
Your outsourced accounting service is built to supplement your personnel and revolutionise your finance department, from the highly trained accountants to the specialised management reporting and controller services. It’s not only about keeping the books in order; it’s about giving a foundation on which to increase revenue, streamline expenses, and expand your enterprise.