Outsourced accounting is when a business engages a business accounting firm to manage its financial functions, including bookkeeping services, payroll management, and financial reporting. In addition to these services, these accounting firms can also offer a wider range of expertise to assist you in areas that an in-house team cannot, such as a dedicated tax accountant who can manage tax compliance and assist with tax planning. Outsourced accounting services can also be cost-effective and efficient, making them an especially appealing solution for small businesses.
In-house accounting is the traditional method that an organisation will use to manage its financial functions, and it usually involves employing at least one person in the role of accountant or bookkeeper. In larger organisations, an in-house accounting team usually consists of a financial director and one or more qualified business accountants and financial specialists.
Outsourced accounting services have become a popular option, especially for small businesses looking to reduce costs and manage their time more effectively. By outsourcing their financial functions, they can leverage the expertise of experienced business accountants to make more informed financial decisions and maintain accurate bookkeeping and payroll processes. With one less thing to worry about, business owners can direct their focus on other aspects of their business.
The key benefits of outsourced accounting
Reduced costs
Recruiting full-time accountancy staff is usually more expensive than using third-party accounting services. The cost of recruitment, office costs, computing and software, human resources, salary package and benefits, tax, and time off, for each member of staff that is recruited, will always be more than using an external service provider for a set amount of time at a pre-agreed cost.
Using an outsourced accounting firm will also give your business access to the accounting company’s resource base of specialist and generalist accountants and financial specialists for specific tasks. It will be virtually impossible for any employee to have a complete grasp on all areas of the accounting and financial mix, however experienced and talented they are.
Increased productivity
Outsourced accounting services can significantly enhance productivity. By delegating financial responsibilities to a business accounting firm, you and your staff can focus on the core activities of your business.
Experienced business accountants can also provide comprehensive reports and analyses of the business's performance, highlighting areas of improvement and ensuring that the business has the financial means to continue progressing towards its objectives.
Time Efficiency
As well as reducing costs, outsourcing your accounting and financial functions will significantly reduce the time and effort that businesses usually need to spend on regulatory reporting and the required financial work on tax compliance, payroll management, bookkeeping services, and creditors and debtors. This will result in business owners and managers having more time to concentrate on the organisation’s key functions and achieving the targets and goals the organisation has set for itself.
Outsourced accounting services can give business owners and managers valuable time back to concentrate on the important organisational and business targets, challenges, and objectives.
A wealth of expertise
If you engage an experienced business accounting firm to provide outsourced accounting services, you will have access to a wealth of financial expertise. These accounting firms usually have dedicated divisions that specialise in particular areas of accounting, from payroll management to international expansion. This means that, in addition to having accurate accounting processes now, you have the financial expertise to support your business as it continues to grow.
Resource when you need them
Outsourced accounting gives businesses a huge advantage when they are experiencing rapid growth and need to increase the amount of financial and accounting resources they need, without the inconvenience of having to recruit more staff. They can usually be easily scaled up or down depending on the needs of a business, avoiding the need to pay idle staff during quieter periods and ensuring the business has the capacity to handle complex accounting processes during key reporting periods. The flexibility of these outsourced accounting solutions is a major benefit, ensuring they always have the resources to meet the changing needs of their growing business.
Related: A Guide to outsourcing your Accounting and Payroll
Some of the downsides of outsourcing are:
Unexpected costs
It is easy for agreed tasks to become bigger, and the need for further analysis goes from ‘must have’ to ‘want to have’. As with any outsourcing, outsourced accounting services are priced based on work done, and what may start out as a specific task can quickly go beyond the initial scope, requiring significantly more time from the external accounting firm.
Equally, a job may require far more technical, or specialist knowledge than originally expected which means more external resources are needed to complete the task. If the business owner or management can keep extra work to a minimum and have a pre-agreed schedule of tasks that are the same every month and can be costed in advance, then additional costs won’t become an issue.
The volume of face-to-face contact
For some business owners and managers, the inability to have a high volume of in-person contact with your outsourced accounting provider is a significant disadvantage over having somebody on-site with who they can chat to whenever the situation demands it.
Business owners and managers will need to agree on the level of contact available to them in the contract of engagement with the outsourced accounting team. If face-to-face contact is important to you and you would like to have regular meetings or all-day availability, this may affect the cost of your package.
The key to working effectively with an outsourced accounting services provider is understanding the limitations of the service, and that may include tempering expectations around face-to-face contact. A good provider will always allocate enough resources to complete your required tasks, however, if you need additional in-person interactions or if you need your accountant to be on call throughout the day, you should always make that known at the start so that your provider can work through options with you.
Loss of control
It is important to be able to trust the accountant or bookkeeper that you are outsourcing these tasks to, as many business owners can feel uneasy about handing over control of your financial information and the confidential data associated with it.
However, if there is trust between you and your outsourced accounting firm, and you are willing to make the relationship work within the agreed financial parameters, then control shouldn’t be an issue. But if the business owner can’t relinquish the day-to-day operational control of the finance functions, outsourcing these services will be very difficult. Again, business owners and managers need to be honest with themselves when assessing the downside of handing a level of control of a key business function to an external organisation, as it can be a difficult transition.
Related: How to transition from In-House Accounting to Outsourced Accounting?
The risk of choosing the wrong firm
There's always a risk of choosing an accounting firm that is not the right fit for your business. It is important to carefully research a range of outsourced accounting services before deciding. Different business accounting firms may specialise in different types of accounting. For example, some accounting firms focus on large-scale businesses, and they may have their outsourced centres overseas. If you are a small to medium-sized business (SMB) that values face-to-face contact and availability, this may not appeal to you.
You need to be able to identify the needs of your business in order to understand exactly what services you need from your outsourced accounting provider. .Accounting firms are usually quite flexible in the solutions they offer, and they may be able to build a package with you that provides all of the services you need.
In conclusion, outsourced accounting can be a great option for most businesses. The time savings, cost reduction, peace of mind, expertise, compliance and more can give businesses significant advantages, allowing them to progress towards their objectives far more effectively.
In addition, the growth in remote working has also put enormous pressure on recruitment. Finding quality accounting staff, managing them, and retaining them has become more and more difficult, making outsourced accounting solutions an even more attractive option for many businesses. The ability to easily scaled and integrate outsourced accounting services is a major advantage, allowing businesses to access the resources they need to complete accounting tasks without investing time and money in a lengthy hiring process.
Outsourced accounting also has the added benefit of being flexible and working for all businesses, regardless of size. It doesn’t matter what the business does, how it is managed or where it is based, outsourced accounting packages can usually be tailored to fit the needs of any business. Some business owners and managers will need to make changes to the way they work in order to maintain an effective working relationship, but the advantage of having a team of accounting experts in your corner is often well worth making the change.
Why Azure Group as your outsourced service provider?
If you’re thinking of making the switch from in-house to outsourced accounting, seek advice and get in touch with us. We are here to help and to make this process as smooth and comfortable as possible.
Azure Group has a specialist Business Accounting team, all located in Australia who can manage the outsourced accounting function for a myriad of businesses. Our team consists of highly talented and experienced accountants led by senior finance executives who each have a substantial commercial background and have worked with various sized businesses across a wide range of industries.
Related: Your weekly Accounting Must Do's and Dont's
Have you noticed our #FridayExpertTips... here's one that relates to #Accounting
“Not dealing weekly, or even daily, with accounting tasks is like piling up the stock in the warehouse and then trying to find the one item you need a month later. Tackling your accounting tasks daily and weekly will make the business financials flow more smoothly, and give you more energy to work on the business instead of in it. Get in touch to find out more about our Outsourced Accounting Services.”
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