Many of the most significant outsourced accounting advantages are well understood and appreciated by companies of all sizes. CEOs, CFOs, and company owners can now access experienced accounting experts who can show them how to run their business more efficiently, develop it, and even increase ROI and cash flow—typically for a lot less outlay than a traditional
Some businesses choose to outsource accounting in order to save money, increase efficiency, and focus on their core business. Leading organizations outsource various activities as well as entire departments in order to improve and innovate their overall company results.
Why Businesses Outsource Tasks and Entire Departments
According to accounting trends, 70% of firms outsource to save money. 15% of companies outsource to accelerate business agility. 20% of businesses outsource to improve product development time.
Before choosing whether to outsource their accounting department, a business must consider the advantages and disadvantages. A company must determine if outsourcing its accounting department is appropriate for its needs.
What are the advantages and disadvantages of outsourcing accounting?
Here are the advantages and disadvantages of outsourcing your accounting team:
Advantage: Save money.
It is not only costly to have onsite accounting staff; it’s also expensive to outsource it. Offshoring accounting is considerably less expensive. Offsite accounting services provide the expertise of a complete team of accountants, reducing the chance of being out of compliance or having untrustworthy books.
Disadvantage: It still costs money.
The quantity and type of work needed by a company may not be the same as any service it signs up for; one activity might end up being three, which can rack up fast in costs that the firm was either unaware of or simply misjudged or neglected to remember.
Advantage: Saves your time.
It’s generally preferable to prevent a problem than to try to repair it after the fact. Most company owners do not set out to be accountants. Small, family-owned businesses to multinational corporations all have a single aim in mind: running the firm, focusing on how to develop it, and working toward the company’s mission.
Accountants often have to focus on the accounting side of things, which leaves little room for entrepreneurs to be innovative with the rest of their companies. Plus, if a company owner’s heart isn’t in it, they risk missing a warning sign. An external accountant can detect potential problems before they become serious headaches and keep the business owner informed about upcoming expenditures.
Disadvantage: You have to give the outsourced team control.
While this is certainly a positive, there’s a tradeoff: the owner must cede at least some control. For example, it’s not useful for the business owner to contact the outsourced account services provider every time a sale is made or a vendor is paid. This does not imply that the owner cannot call for updates on a regular basis.
This may be a frightening experience for some owners. Begin by detailing each side’s responsibilities and the procedures to follow – this lays down the ground rules up front and helps guarantee timely communication.
Advantage: Prevent fraudulent activities.
Fraud is a worldwide problem that affects everyone, regardless of size or industry. Many small and medium-sized businesses are targeted by fraudsters every year, and according to the Association of Certified Fraud Examiners (ACFE), 28% of all frauds occur in such firms.
Outsourced accounting services provide a variety of eyes on all company activities as well as other financial reports. Fraud isn’t ever 100 percent impossible, but internal controls from an experienced outsourced team are the most important step towards detecting and preventing potential problems before they get out of hand.
Disadvantage: Outsourced teams cannot provide instant answers.
Having an onsite accounting staff has several advantages, including the ability to get quick answers to pressing issues. Outsourced accounting services teams are accessible, but responses from them may not be as immediate as those from a local employee. The inability to be in the same office—and sometimes not even in the same city—poses obstacles.