Running a business involves crunching numbers. As an entrepreneur, you have to worry about operational costs, taxes, and other financial considerations. But number crunching and business management can become overwhelming as time goes by. For this reason, you need to consider learning how to outsource accounting work.
Most business owners dread crunching numbers. Checking and rechecking figures, performing calculations, and doing analysis can be time consuming. Chief financial officers worldwide spend more than 12 to 15 hours a day doing manual tasks. Such a span of time can be detrimental as it could lead to delays in important decisions or might not be given enough thought. In the end, the numbers could be full of errors or won’t balance.
Erroneous computations could result in fines and penalties from regulatory agencies. As a business owner, you should understand the importance of accounting tasks. If crunching numbers is something you don’t like, consider outsourcing accounting work. This article will guide you on how to get started to offload your accounting duties.
In this article, we shall cover the following:
- Signs You Need To Outsource Accounting Work
- Advantages of Outsourcing Accounting to a Provider
- Which Tasks Should You Outsource
- Steps In Outsourcing Accounting Work
- Finding an Outsourcing Provider
Signs You Need To Outsource Accounting Work
When managing a startup business, it is alright if you want to be hands-on with some of the accounting functions. You want to make sure that you know the inflow and outflow of your money. Eventually, however, as your business expands, accounting tasks can become daunting on your part. Aside from that, there are many intricacies such as accounts receivable, accounts payable, and payroll. But, when is it time to consider accounting work outsourcing? Here are the 5 signs you need to know:
1. You don’t have time to focus on your business
Accounting functions can take up most of your time and you no longer have time to focus on your business. Remember you are the captain of the ship and you cannot take on several roles without getting burned out at the end of the day. Outsourcing can give you more “free time” to use your energy on running your business.
2. You don’t have an in-house accounting staff
Hiring a full-time accountant can be costly and time-consuming. You can delegate accounting tasks to someone who doesn’t need to work 40 hours a week. With outsourcing, you can hire a trained professional knowledgeable in a multitude of areas and that is available when you need them.
3. You are falling behind technologically
You are using outdated software and want to streamline but have no idea how to get started. By learning how to outsource accounting work, you get to partner with professionals who are experienced with new software and integrating various functions such as accounting or payroll.
4. You don’t have financial data that you need to make business decisions
As a business owner, the importance of critical performance data cannot be overlooked. However, you cannot run your business while producing financial reports at the same time. Outsourcing to a provider will ensure timely financial statements tailored to your specifications.
5. You’re worried you’re missing out on tax planning opportunities
Do you find yourself worrying that you are paying too much or will not hit your goal as efficiently as possible? Outsourcing accounting work will not only give you access to financial accounting knowledge but also to strategic tax planning. Most providers are updated with recent tax developments and opportunities.
Advantages of Outsourcing Accounting
Aside from saving you time and resources, outsourcing your accounting functions offers a lot of advantages:
Focus on outsourced task
By outsourcing, you will have an assurance that the provider would prioritize the function you delegated to them. If you have it done by an in-house team, it would be second priority because their focus will be on their main task.
Focus on generating revenue
Accounting work outsourcing gives you an opportunity to focus on revenue generating activities instead of worrying about issues emanating from accounting processes and systems.
Reduced costs for keeping with trends
The accounting industry is constantly evolving. To keep your company competitive, you need to keep pace with technology. Outsourcing companies may be able to update your technology for less than the cost of your old technology. It could even be less than the upgrade costs you would have to invest in.
Outsourcing companies may have more specialized staff than you do. It gives you assurance that there is a small group of experts who can work on accounting projects at crucial times or for complex rules and regulations.
Take away hassles of subcontracting
You may be experiencing some peaks and valleys in your monthly, quarterly, and annual F&A cycles. For this reason, you may need to subcontract during peak workloads. You may be required to set aside some budget for your in-house baseline as well as the cost of subcontracting and insure its cost-effectiveness.
On the other hand, outsourcing can help you make minimum cost commitments for such projects. An experienced finance and accounting outsourcing provider will perform resource management planning and ensure the delivery of per-unit resource cost. The provider will also take into consideration the scalability of your business.
The biggest advantage of learning how to outsource accounting work is minimal risks. When you outsource to a provider, you also shift the associated risks. What will happen if the staff doing the accounting work suddenly gets sick during a deadline? What if the system suddenly crashes?
By outsourcing, the burden goes to the provider. Errors in accounting may range from wrong calculations to faulty accounting. It is time consuming for your in-house staff. On the other hand, an outsourcing company has multiple levels of review built into their F&A process. They have the ability to catch errors on time. It will also most likely have experts with tax regulations thus improving your regulatory compliance.
Which Tasks Should Be Outsourced
Now that you know the advantages of outsourcing accounting work, you need to determine which tasks should you outsource to your partner. Here are some tasks you should consider:
While it is one of the most basic accounting tasks, it is also one of the most time-consuming. Although technology has made it easier to record transactions using the latest accounting software, you are better off doing it manually.
Bookkeeping is one of the tasks you can outsource to a firm so you can assign to them tasks that require closer collaboration between your company and your clients. An outsourced accountant can work on the books while your team can check for accuracy.
Tax preparation is another time-consuming task that requires your undivided attention. As a business owner, you may be hesitant to delegate tax preparation to an outsourced company. However, delegating the tasks to an outsourced professional can reduce your costs by 60 percent. Just look for a partner firm that is experienced and familiar with compliance requirements in your state or country.
Business analytics is another tedious task that is best outsourced to a professional. It requires preparation of management reports, process mining, data collection and interpretation, and other management accounting tasks. The outsourcing firm can help provide you with real-time reports and data visualizations.
Steps in Outsourcing To A Provider
Accounting work outsourcing is growing in popularity. However, some companies are still having second thoughts to take the jump. You need to take the right steps to make outsourcing successful. If you have decided to outsource your accounting, here are some steps to help you get started.
Identify your needs
There are different functions involved in accounting so you need to determine your needs so you don’t overspend on outsourcing. You can categorize the tasks as highly skilled, specialized, or repetitive. For example, you may want experts to provide financial advice on a monthly basis, ongoing IT support for your accounting system, or payable or shipping inventory assistance. Prioritize each task and keep your budget in mind when deciding which tasks to outsource.
Be clear about expectation
Learning how to outsource accounting work can sometimes be frustrating. Most of the time, outsourcing tasks fail because of ambiguous requirements and unclear scope of work. Provide your partner with clear expectations so that they will have a direction in which to work.
Choose expertise over competitive pricing
Once you have clear objectives in place, finding an outsourcing partner becomes easy. Accounting service providers have different levels of knowledge, experience, and expertise. In addition, they may be offering a multitude of services or specializations.
When outsourcing accounting work, don’t settle for less. Remember quality comes at a price. Consider your relationship with the firm as a long-term investment with calculated profits.
Don’t forget security
Another reason why companies have second thoughts with outsourcing is because of concerns with data security. Make sure to check the company and insure that the company meets the basic compliance standards.
Discuss security measures with the firm you are considering working with. What security measures do they implement? What encryption methods do they use on their website and login portals? What is their method for monitoring locations and disseminating data?
Effective communication is vital in any business undertaking. With cost-cutting and improving bottom lines, it’s easy to lose focus on the important thing. When looking for a potential outsourcing partner, get your message across clearly.
Even if you have found the right partner, insure a healthy communication. Relay message from established channels. Make sure that you and your partner are on the same page on all aspects related to your business.
Have regular meetings with your partner. Cultural differences come into play so adopt a proactive attitude in addressing issues.
How To Find The Right Accounting Partner
To be successful with accounting work outsourcing, you first need to understand what you want from them. Here are the qualities you should look for in an accounting firm:
- Certification. If you will be outsourcing bookkeeping and tax regulation tasks, you don’t need professional accountants for such tasks. However, if they will be securing loans or doing auditing work, make sure that the firm employs certified or chartered accountants.
- Relevant experience. Make sure that the provider you have in mind has the experience to help your brand. They should have the expertise in working with a business of your size, revenue, and market sector.
- Proactive about saving money. You should work with an accountant who wants to save money and not just manage it. This means they should have an understanding of cash flow and achieving cash surplus for your business.
- Matched software. Look for a partner that uses the same software as you do. This insures seamless sharing of data as possible.
Tips to ensure the best fit for your business
Here are some more tips for ensuring that the outsourced firm is the right one for you:
- Leverage your personal network. Use your business contacts when outsourcing accounting. They may have worked with a certain provider. You can ask them about their experience. Alternatively, you can also reach out to friends and families for some recommendations.
- Don’t rush the hiring process. The first company you come across is not necessarily the best fit for your business. Take time to interview several candidates.
- Run background checks. You want to make sure that the accounting firm you plan to hire is trustworthy and reliable. You will be entrusting them your business finances so reliability is crucial. Do a background check on your potential partner to ensure reliability.
- Negotiate fees. You may already have a budget in place for outsourcing. However, the firm may be asking for more. If this happens, try and negotiate for a reasonable fee that works best for both parties.
Deciding to outsource your business is not easy. There are many factors you need to consider. Outsourcing accounting work is something you don’t rush. It involves your finances so it requires careful consideration.