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Tax, Outsourced Accounting Services

The Pros and Cons of Outsourced Accounting and Bookkeeping

Small businesses are increasingly turning to outsourced accounting and bookkeeping services, recognizing the benefits that were previously only available to mid-market and large businesses. CEOs and business owners have access to educated, qualified employees working to help their company run better, grow faster, and increase revenue with a remote, U.S.-based accounting team.

When compared to establishing an internal accounting department, there is often significant cost savings. However, this is only the tip of the iceberg when it comes to understanding the pros and cons of outsourced accounting and bookkeeping services. Read on to learn more about why companies outsource accounting services and if it’s a good choice for your business.

Why Companies Outsource

Working remotely with outsourced accounting services is primarily motivated by cost reductions, a desire to focus on core business tasks, and the need to address capacity constraints. The four key outsourcing trends are:

  1. Cost-cutting: This is at the top of the priority list for most businesses. Many industry leaders say that cost reduction is an auxiliary benefit to goals such as enhancing agility or improving the quality of service.
  2. Cloud and robotic process automation (RPA): Cloud and RPA technologies are becoming an increasingly important part of most new outsourcing plans and transactions for businesses of all sizes.
  3. Underpowered supplier management: To get the most out of their service provider ecosystem, businesses invest more in developing their supplier management capabilities through outsourcing.
  4. Agility: Changing business conditions, visa limitations, and higher client demands are factors forcing businesses to become more adaptable. As companies learn to work in a world where speed, quality, flexibility, and affordability are more essential than geography, outsourcing will accelerate.

Bottom line: Outsourcing services can generate a revolutionary change and improve business results. But is it for you? As with any smart decision, it all starts with analyzing the benefits and drawbacks to see if outsourced accounting is best for your company.

Pros of Outsourced Accounting and Bookkeeping Services

Here are the top three benefits of outsourced accounting services.

1.     Higher Cost-Effectiveness

Recruiting an outsourced accounting service is typically less expensive and more cost-effective than hiring in-house financial experts. Businesses can avoid the related overhead costs of hiring an employee, such as PTO, health insurance, retirement, vacation, workers’ compensation, and sick days.

There is also the cost of hiring teammates who need specific equipment. Accounting tools are necessary for any accounting professional to complete their job—and they can be expensive. The cost of these tools is usually rolled into the operating expenses of outsourced accountants. However, it can be avoided by outsourcing.

2.     A Proactive Approach

Another advantage of having an outsourced accounting team is that they can notice red flags ahead of time and inform business owners. Understanding potential problems with expenditures and cash flow can help make the right business decisions. Moreover, having a set of eyes on finances provides peace of mind, as well as the confidence to make sound financial decisions.

Additionally, having a full team, rather than just one (or more) internal persons, reduces the danger of non-compliance and incorrect financials. This is especially true for small firms and startups.

3.     Reduced Fraud & Errors

Fraud and errors may be an undesirable effect in small to medium-sized companies with only one person in charge of accounting. It is easy to overlook erroneous calculations or tamper with the books on purpose. Fictitious expenses can go unnoticed for months, if not years.

With outsourced accounting services, you have many sets of eyes on your transaction processing and reports, which increases internal controls. A committed team, with specific knowledge in accounting and best practices, is significantly more likely to notice an abnormality than a single person or a very small team.

Potential Cons of Outsourced Accounting and Bookkeeping Services

Here are some potential disadvantages of outsourced bookkeeping services.

1.     Hidden Costs

Scope creep can occur with any paid service. One job can end up snowballing into several tasks, resulting in additional costs business owners were not aware of (or forgot about) at the outset.

Making month-to-month relationships clear and setting the right expectations from the start can reduce the chances of this happening. It is also essential to work with reliable and reputable service providers to avoid any hidden costs.

2.     Less Control

It can be difficult for business owners to relinquish control of their financial records to a third party. While they can always contact the account manager to receive updates and weekly/monthly reports, trust in the outsourced connection is important.

It is advisable to start with a thorough onboarding process that clearly outlines responsibilities, policies, and procedures, establishes expectations, and guarantees timely communication. In this way, business owners can have more control over the engagement.

3.     Accessibility Issues

There are certain advantages to having an employee on staff who can respond to inquiries quickly. While an outsourced workforce is readily accessible, responses are not always immediate. Physical distance may be constraining.

However, a good, outsourced accounting firm will have solid communication procedures in place to guarantee that your team is always available and ready to help. Establishing a communication schedule and dividing responsibilities with the outsourced provider can also help.

Windes: A Dedicated Remote Team for All Accounting & Bookkeeping Services

Outsourced accounting services are meant to supplement your team and transform your finance operation. From advanced bookkeeping and accounting to customized management reporting and controller services, Windes can help you with every need. It is not just about keeping your books in order, but providing a platform to increase profitability, enhance cash flow, and expand your company. Connect with Windes today.
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