Unless your company can afford to have an internal accounting department run by experienced accountants, you may find it difficult to keep up with all the demands regarding your financial and budgetary needs. Government compliance and financial transparency are a must for a successful business, and there are no shortcuts to get there except hard work and expertise. You need to either be on top of everything accounting-related or hire professionals who live and breathe accounting and its related regulations. And since not many business owners are overly happy with the idea of having to add accounting to their list of responsibilities, more than 1/3 of small businesses have decided to give outsourced accounting services a chance.
What is outsourced accounting?
Outsourced accounting means hiring a third-party service provider – a company or an individual – to handle and manage the accounting responsibilities of your business. The collaboration is based on a contract that states both the services provided and the expected fee which can be either fixed or variable. The good news is that there are many accounting experts in the US ready to take on the mission of providing bookkeeping services, preparing financial statements, and helping you make the best business decisions in terms of taxes, financial reports, and cost reductions.
Why do businesses choose outsourced accounting services?
Accounting is one of the main outsourced services due to the benefits in working with an accounting firm or a professional accountant who has a high level of expertise. Many small businesses prefer to have their accounting outsourced to avoid having to spend money on in-house personnel and training costs.
Moreover, it is often very hard to find someone who excels at accounting and has the necessary skills, time, and resources to handle financial transactions such as managing accounts receivable and payable, analyzing the company’s financial situation, preparing financial statements and has the necessary skills to assist with tax and reporting compliance. Outsourced accounting is a strategic decision that helps businesses save money, ensure accurate and complete financial documents, and assists with managing a growing company that requires accounting expertise.
Working with an accounting partner allows businesses to keep up with the changes in regulations and legal requirements while having access to advanced technological tools that speed up the bookkeeping process. Furthermore, thorough and complete financial reporting is always an advantage if a company is looking to get financing from a bank.
What are the benefits of outsourced accounting services?
Outsourced accounting services come with numerous advantages for companies looking to increase their performance and reduce costs. It also is a great strategy if you want to reduce the amount of paperwork you handle daily, or you simply can’t get your head around all the details that make financial reports flawless and ensure business continuity. Hiring a third-party firm or an individual with accounting expertise can help you with your accounting activities so that you can make informed decisions. Some other benefits include:
Access to expert accounting services
Collaborating with an outsourced accounting service provider offers businesses access to expert advice. Your company can rely on an expert who has a vast knowledge of accounting principles, tax codes, and accounting laws to ensure that the books and financial reporting are always up to date, accurate, and complete. Outsourcing accounting operations allows business owners to focus on their business goals while having peace of mind knowing their company’s financials are in trustworthy and reliable hands. Owners and managers will be working exclusively with accounting experts who can help run a cost-effective company.
Reduced business costs
Outsourcing accounting services allows businesses to pay exclusively for the services that are needed. It reduces the cost and worry around recruiting personnel and training them to perform according to the company’s goals. Within-house accountants, businesses have to cover the costs of a monthly salary, benefits, as well as sick and parental leave and holidays. An external service provider will get paid based on what they are providing without any additional financial burden for your business. Thus, outsourced accounting is a cost-saving strategy for any business owner who prefers to work with experts based on a set fee. Moreover, outsourcing the company’s accounting functions allows you to scale your accounting efforts as needed without worrying about unemployment claims or healthcare packages.
Businesses know the workload is constantly changing, and there may be periods like the end of the year when an in-house team may simply be insufficient to cover everything required. An external accounting firm can handle any volume of work and allocate additional resources if accounting tasks proved to be more time-consuming than initially predicted. If you run a small business, outsourcing accounting and bookkeeping can improve your productivity and allow you to focus your resources on the business’ mission-critical operations instead of trying to understand the intricate ways of GAAP.
Lower risk of fraud
Handing your company’s financials to a single employee is a risky move, especially when you don’t understand accounting principles and exposes your business to fraud. While most professional accountants are trustworthy individuals, we can’t ignore the fact that small businesses with less than 100 employees have a median fraud amount of $164,000. This happens because privately owned small businesses do not have the level of internal controls necessary to ensure all their transactions are in order and accounting issues are detected. The lack of a controller or CFO means there is no one there to keep an eye on KPIs and notice irregularities in the transactional and billing data. Internal controls and external audits are the best way to detect and prevent fraud. Outsourced accounting firms can provide the services of professionals who have an eye for accounting errors and inconsistencies.
Better accounting systems
Accounting firms focus exclusively on the world of accounting and are up to date with the latest technologies that allow for a better, faster, and more accurate accounting process. Outsourced accounting services can recommend accounting systems and help you implement them or help you migrate your financial records to a new platform. The latest software can perform complex functions like revenue recognition, inventory management, cloud storage, and adjust according to your business needs. Scalability is important, and outsourced accounting will never be an obstacle when you need to expand your business or cut down on spending. With the help of cutting-edge technology, accountants can provide feedback and recommendations to increase your profits and get access to information regarding loopholes and exemptions that may help your business avoid overpaying for taxes and reach its long-term goals. Moreover, accounting technology helps you save time, reduces risks, and offers peace of mind due to its ability to reduce human errors and provide real-time reports.