The Top 6 Benefits of Outsourcing Your Accounting
- Tian Arthurton
- Nov 8, 2022
- 4 min read
Outsourcing is a well-known practice and an essential element of business strategy. When a company wants to focus its resources on its core capabilities, the decision is usually taken to outsource some of the activities that are not directly related to revenue generation. Non-core activities such as accounting which can be confusing and a perpetual headache for some business owners is usually outsourced to save resources for more critical tasks.
Accounting outsourcing is done remotely by qualified professionals of third-party companies who are responsible for the accuracy and timeliness of all accounting reports. These professionals will also give reliable advice not only in the field of accounting but also in strategy, human resources, government regulations, operations and marketing matters as accounting over the years has evolved from merely month-end reporting or record keeping and is now vital to every aspect of business and competitive advantage in the market.
While it is commonly believed that accounting should be done in-house, you should ask yourself if you have the necessary skills, experience and relevant knowledge to advance your business. If the answer is no, then I recommend that you partner with a qualified professional to promote the growth of your business.
The top six (6) benefits of accounting outsourcing are outlined below to help you determine if this is the most effective way to manage your company's accounting process.
1. Reduce or control operational and labour costs
Most business owners see outsourcing as an additional or unnecessary cost; however, a robust accounting system MUST be implemented to achieve longevity and competitiveness in business. Full-time accounting staff with the right qualifications, knowledge and skills will be a significant cost, not just recruitment and salary expenses but also other costs associated with vacation and sick leave, allowances, employee taxes, insurance and other benefits.
There are also costs associated with the maintenance of workspace for the accounting staff- office equipment, stationery and other consumables. Accounting outsourcing reduces these costs to the business, which some micro and small businesses are not ready to or cannot bear.
2. Free up the business’ resources to focus on profitable core activities
What value is added to your customer experience or other revenue-generating activities when you spend time on bookkeeping or accounting?
The outsourcing of accounting to a qualified company gives you the ability to direct all of the resources of your company to activities that will ensure that the business is competitive and successful. Examples of such activities include strategising, increasing cash flows, profits and revenues, as well as networking and building relationships with your customers.
3. Avoid the difficulties or risks associated with recruiting skilled accounting staff
Let us be honest, when hiring an accountant or other accounting staff, how easy is it for you to fully assess their expertise and professional qualities?
In hiring accounting staff, there is a risk that you recruit a low-skilled employee into your company who cannot provide the support that small businesses, start-ups and entrepreneurs need to advance and grow their businesses. Outsourcing to a highly qualified professional with extensive training and experience can help advance and grow your business without any significant investment.
Exhibit 1: Summary of the top benefits of accounting outsourcing
4. Access management expertise that is unavailable internally
Accounting is often referred to as the language of business and plays a vital role in companies gaining and maintaining a competitive edge. However, many businesses lack the expertise to apply accounting information to operations and decision-making based on the current economic environment. The right professional accountant will bring industry knowledge to your company and best practices for every aspect of your operations and in turn will provide you with plans and options to reach your business and financial goals.
5. Flexibility in using the services only as you need
When it comes to outsourcing, you can engage these professionals only as needed, and they will provide as much or as little support as necessary. Once engaged, services can be scaled up or down based on demand or the seasonal needs of your business. You can also easily terminate the contract without difficulties.
This is particularly valuable for micro and small businesses, start-ups and entrepreneurs who do not have enough work to take care of on a daily basis and also tourism-related and entertainment businesses who experience seasonal demand.
6. Minimise the risk of regulatory fines and penalties
Errors in financial data or missed regulatory deadlines and obligations can result in hefty fines and penalties, especially when filing returns and taxes. A professional accounting outsourcing company will ensure that your financial reports and returns are well prepared and filed on time and in accordance with local legislation, thereby minimising the risk of penalties and fines and relieving you of the pressures of keeping track of deadlines and changing legislation.
P.S One of the risks of outsourcing is poor selection of service providers; this can be avoided by partnering with experienced professionals who have the relevant qualifications, experience and reputation in the market as one who can deliver high-quality and consistent results.
References
Jayabalan, Jayamalathi, Murali Raman, Magiswary Dorasamy, and Noreen Kong Ching Ching. "Outsourcing of accounting functions amongst SME companies in Malaysia: An exploratory study." Accountancy Business and the Public Interest 8, no. 2 (2009): 96-114.
Panigrahi, Ashok and Joshi, Vijay, Outsourcing – The Modern Trend of Accounts Management (November 21, 2020). Wutan Huatan Jisuan Jishu, Volume XVI, Issue XI, November/2020, ISSN:1001-1749, Page: 268-283
Dinu, Ana-Maria. "The risks and benefits of outsourcing." Knowledge Horizons. Economics 7, no. 2 (2015): 103.
Junaydullaevich, Abdulloev Asliddin. "Today's Development of the Benefits of Outsourcing Accounting Services." International Journal on Economics, Finance and Sustainable Development 3, no. 3 (2021): 275-279.
Comments