Accounting is a key process that helps in keeping a track of the finances of the organization. These financial accounting processes offer valuable information that can be utilized to make essential business decisions.
Therefore, accounting activities hold great importance in the functioning of every business.
Although many organizations prefer hiring an in-house expert for accounting, several opt outsourcing accounting. Delegating multiple accounting activities outside business has multiple benefits over in-house accounting, especially for small businesses. Let’s explore how outsourcing accounting services for small businesses can benefit you.
How Outsourcing Accounting Improve Company Growth?
Businesses today are surrounded by multiple challenges, and one of these challenges is the accounting and related bookkeeping activities. When you outsource this activity, the burden of the organization reduces automatically.
Think about it, isn’t it hard to find just the right person to take care of your accounts? You need the correct HR team to start with, then you need proper funding to sustain this team or employee.
Of course, accounting is important. This is why outsourcing accounting presents itself as an alternative route, which gives similar quality services only at a lower price and less hassle. This contributes to the growth of your organization because your accounts are managed and you are not spending too much time and money on it.
Even if you ignore the above challenges and still decide to hire someone of an average experience and reasonable knowledge, how long can you manage?
That’s a question most businesses fail to comprehend before hiring someone. If you hire a resource, even 2 resources, it is hard to match the quality and efficiency of the team, which we get with outsourcing accounting.
Since the team of outsourcing partner knows what they are doing, they are able to better manage your accounts. This improves the efficiency of your books and accounts, which allows your team to make the right decision at the right time.
Keeping the importance of outsourcing in mind let’s explore the benefits of outsourcing accounting functions.
Why You Should Outsourcing: Benefits of Outsourcing Accounting
Multiple organizations are receiving considerably great results through outsourcing accounting without hampering the workflow of both in-house and off-shore teams. Let’s dive in and explore the advantages of outsourcing accounting services.
1. Professional Guidance
One of the most important reasons for outsourcing accounting is professional guidance. Imagine that you have hired an average employee who has some knowledge of accounting. Do you think this employee will be able to guide you and counsel you in case of emergency accounting or financial situations?
It is highly unlikely. This ability to counsel and guide the team comes with experience. Something, which you can easily get with an outsourced team.
Further, more than this, your outsourcing partner has a team. This team has varied experiences, skill sets, and areas of expertise. It is not possible to hire so many people in-house for accounting. You can hire a maximum of 2 or 3 employees, but these people won’t be able to match the efficiency and effectiveness of a full-fledged team.
2. Reduced Cost
Reducing cost and improving money-efficiency is our topic of concern since the starting of this discussion. It is indeed the most important factor.
When you have just started your business or you are still a medium-sized organization, it is hard to take out funds for an accounting team. Hence, in order to save money, improve budge management, and maintain proper cash flow, many entrepreneurs and small business owners manage to account on their own. This process doesn’t work well for a long time. At some point in time, the owner needs to focus on other activity and then, accounting is side-lined.
Therefore, a better option to reduce the costs of accounting is to outsource it. You only have to pay for the services you acquire. Most of the time, the outsourcing partner lets you customize your package according to your unique needs.
3. Improve Bandwidth
When you handle accounting in-house, a lot of your bandwidth is trapped in these activities. Many of your employees start working partly on accounting and partly on other activities. In fact, the management of these activities by the admin team is the most time consuming and hectic task.
When you outsource accounting, you end up freeing this bandwidth for multiple other essential tasks. For example, the owner can focus on more strategic decisions or innovation-based activities.
This is possible because you don’t have to consistently think of the consequences of the accounts and how you are managing it. In fact, you don’t have to spend any amount of time in managing major and minor errors that arise in the system.
Usually, while preparing taxes and legal documents, the documents are first prepared in-house. Then, these are sent to a certified accountant for audit. This means that your team and you may have to re-work on the documents again.
However, when outsourcing, these documents are prepared under the guidance of a CPA from the start. Thus, the need for rework is reduced, which leads to faster execution and proper tax-readiness.
Whenever you need to pay taxes or you require details of financial documents, you are ready to execute activities without delay. This improves the overall efficiency of the organization and reduces the risk of non-compliance and penalties.
5. Minimized Risks
This is related to the previous point. Tax readiness gives you the power to avoid tax mistakes, which reduces risks of the system.
When the accounting team of the organization makes payroll, tax, and accounting mistakes, the consequences are grave. Sometimes, even the smallest mistakes prove very costly to the whole organization.
Not only you stand a chance to face severe penalties but also lose your reputation in front of employees. When you suffer such penalties and non-compliance punishments, your employees lose trust in the organization. This poses an additional reputational risk which makes it harder for the organization to hire effective employees in the near future.
6. Enhanced Data Security
When you are managing accounting and bookkeeping in-house, your data sources are dependent on two factors:
- Firstly, the software you are using.
- Secondly, the servers of the organization.
In a small or medium-sized organization, both the factors can be breached and your data can be stolen. This reduces your accounting efforts to zero.
One of the easiest ways in which your software poses a data security risk is when you fail to update it. This happens in small organizations, where the budget is tight for the accounting department.
Most of the outsourcing accounting organizations have the right funding for proper setup. In fact, they are expected to have the top-notch security in place, for both the server and the software. This helps your outsourcing partner keep your data save inside the organization.
In a way, your outsourcing partner can better manage and secure your data than you. This is because they have the right resources and funding to do so.
Outsourced Accounting in Different Industries
- In the pharmaceutical industry, outsourcing accounting can help the organization secure data. Further, the outsourced team can manage the receivables and payables without much hassle.
- In manufacturing units, outsourcing accounting can help the organization place regular quality checks. You can keep a track of the budget, reduce costs of manufacturing, and limit regulation issues.
- In the food industry, this outsourcing service can be utilized to gain updated insights, every time.
Outsourcing accounting is beneficial for small and medium organizations that can’t hire a full team for the effective execution of accounting. For these organizations, outsourcing offers a feasible and viable method that not only reduces the costs of accounting but also improves the quality and efficiency of execution.