The most common financial challenges small business owners face are usually related to accounting: unforeseen expenses, poor cash flow management, filing taxes, upholding current laws, errors in financial records, or outdated financial reporting.
Accounting outsourcing allows companies to manage their accounting and finance functions effectively, reduce their overhead expenses, enhance productivity, and free up resources and time for revenue-generating activities.
In this guide, we’ll cover the key accounting services businesses can outsource and explore the pros and cons of accounting outsourcing and the important tips to keep in mind.
Don’t miss the opportunity to improve your financial performance and achieve your business goals. Read on to learn more about accounting outsourcing and how it can benefit your business.
What Accounting Services Can Be Outsourced?
According to a Clutch report, just over a third of small businesses outsource at least one business process, and of those 37% opt for outsourcing accounting to increase efficiency and improve their finance and accounting functions.
The accounting services that can be outsourced include:
Accounting operations improvement
This accounting function involves analyzing a company’s accounting processes, identifying areas of inefficiency or risk, and making recommendations to improve accounting operations and financial reporting.
Accounts payable process solutions
The purpose of account payable process solutions is to keep track of invoice data and streamline the payment processes. By leveraging the expertise of an outsourced accounting professional, businesses can automate routine workflows, such as invoice processing and payment approval, and improve payment disbursement, which can result in faster payment cycles, reduced errors, and improved cash flow management.
This can free up internal resources, enabling companies to focus more on core business activities that contribute to revenue generation.
Outsourcing this process means allowing an outsourced accounting firm or professional to handle auditing expenses, ensuring compliance with company policies, and analyzing expense data to identify cost-saving opportunities. By doing so, businesses can optimize their expense management processes, reduce costs, and improve compliance.
Budgeting and cash flow planning
Budgeting refers to developing a financial plan that sets out the expected income and expenses for a given period. Cash flow planning refers to managing cash inflows and outflows to ensure businesses have enough cash to meet their financial obligations.
Outsourcing accounting professionals for this helps develop accurate and realistic budgets and cash flow forecasts and identify cost-saving opportunities. As a result, businesses can make informed decisions about their financial future and improve their financial planning.
Fixed asset management
Fixed asset management is a financial management service that involves recording and tracking fixed asset acquisition, depreciation, and disposal, ensuring compliance with regulatory requirements, and analyzing asset data to make informed decisions.
Digital accounting assessment and implementation
This service refers to assessing a company’s current accounting practices, identifying areas for improvement, and implementing digital tools and solutions to improve the efficiency and accuracy of accounting processes.
Financial consulting and analysis
This accounting function involves performing financial statement analyses, forecasting, and budgeting to increase shareholder value and improve capital efficiency.
Payroll process consulting
Payroll process consulting includes reviewing payroll policies and procedures, implementing automated payroll systems, and ensuring compliance with legal and regulatory requirements. Outsourcing this service can help businesses optimize their payroll processes, ensure compliance with regulatory requirements, and reduce the risk of errors and fraud.
Outsourced lease accounting
Outsourcing lease accounting activities means hiring a professional to handle tasks such as lease data collection, lease abstraction, lease accounting calculations, and financial reporting. In turn, these expert accountants will help overcome the hurdles related to those activities and successfully comply with ASC 842 lease accounting standards.
Should You Outsource Your Accounting?
Below, we list some benefits and drawbacks of accounting outsourcing and provide insights into whether it could be the right choice for your business.
Pros of outsourcing accounting services
- Lower salaries: One of the main advantages of outsourcing accounting services is that you can often find talent in regions where labor costs are lower than in the US. For example, Latin America (LatAm) is a popular outsourcing destination due to its pool of highly skilled professionals willing to work for lower salaries than their US counterparts.
- Hourly hiring: Outsourcing also offers flexibility in terms of the level of support you require. In other words, you can hire per hour and get support as and when you need it, rather than having to pay for a full-time employee who may not always be required. This can be particularly cost-effective for smaller businesses.
- Industry expertise: Outsourcing allows you to find talent that has worked for companies or clients in similar industries and understands your specific accounting requirements. This can be particularly useful for businesses with complex accounting needs operating in niche industries. Read this case study to learn how the hyper-niche B2B software company Dura Software found their skilled accountant with sales operations experience and an analytical mindset in just two weeks.
- Advanced knowledge of accounting tools: Outsourcing can open up your options for finding talent with advanced knowledge of accounting tools such as QuickBooks, NetSuite, or SAP, which can save you the time and effort of teaching these tools to in-house accountants.
- Global talent pool: Outsourcing can give you access to a larger talent pool. Instead of focusing on only US university graduates, you can easily expand your search to find talent from top universities worldwide, providing you with a wider range of skill sets and experiences to choose from.
Cons of outsourcing accounting services
- Knowledge of US GAAP: Not all talented accounting professionals from outside the US will have knowledge of US GAAP (Generally Accepted Accounting Principles). If compliance with US GAAP is essential for your business, make sure you check whether any candidates have the required knowledge.
- Long-term bond: Outsourcing may not provide the best conditions for forming a long-term bond with the accounting team as hiring directly does. Without the daily interaction that comes with having an internal accounting department, your outsourced accounting team may feel more like suppliers than team members. So you may want to put in extra effort to build a long-term bond with outsourced accounting professionals—we discuss why below.
Important Tips When Outsourcing Accounting Services
Outsourcing accounting services can be a smart business move for many companies. However, it’s imperative to approach this choice with careful consideration and planning. Here are some tips to keep in mind:
1. Secure accounting information online
One of the best ways to secure your accounting information online is to use cloud storage or migrate to a cloud-based accounting system. This technology allows you to keep all accounting records, reports, statements, and other sensitive financial data on a secure server that can only be accessed with a login and password.
The backup process will be easier, and your accounting data will always be safe and accessible in case of a system failure or other disasters. Moreover, if you’re working with a remote team or are outsourcing to a provider in a different location, a cloud system will make it easier for them to access the data they need.
2. Use accounting management software
Using accounting management software can help you keep track of your financial records, simplify the accounting process considerably, and save you time and money in the long run. When you’re outsourcing your accounting services, it is also useful for:
- Streamlining processes. Streamlining processes such as bookkeeping, billing, and financial reporting makes it easier for outsourced accounting service providers to manage financial data. It also reduces the potential for errors.
- Data security. Outsourcing accounting services can increase the risk of data breaches or theft. However, using accounting software can provide additional layers of security, such as encryption and user authentication, to protect sensitive financial information.
- Cost-effectiveness. Accounting management software reduces the need for manual labor, reducing the hours the outsourced team has to put in.
- Improved communication. Real-time access to financial data can enable better collaboration and decision-making, leading to improved financial performance.
- Scalability. Most accounting management software can easily scale up or down to accommodate changes in business size and accounting needs. This flexibility benefits particularly fast-growing companies or those undergoing significant changes.
3. Build long-term relationships with outsourced accounting professionals
Hiring a new accounting team every time you lose one can be expensive and time-consuming. Developing a long-term relationship will help avoid these turnover costs. You won’t have to spend time and resources training new accounting teams on your company’s accounting processes and procedures.
A long-term relationship with your outsourced accounting team allows them to be familiar with your business and understand your unique accounting needs. As a result, they will be able to tailor their services to meet those needs and even spot trends and potential issues easier, saving you both time and money.
4. Separate treasury from accounting
When outsourcing treasury functions to a third party, you may expose your company’s financial information to potential security risks.
By keeping the treasury in-house and allowing access only to the most trusted team members, you can maintain the financial security and confidentiality of your organization and reduce the risk of data breaches, financial mistakes, and fraud or embezzlement.
5. Don’t outsource invoicing
Outsourcing invoicing to an accounting firm can be more expensive than necessary; it may not add much value to your business either.
While invoicing is related to accounting, it is not strictly an accounting function. It’s a relatively simple process that does not require specialized accounting knowledge; therefore, it can be handled by most business owners or administrative staff.
Outsourcing accounting services can be an effective way for small and medium-sized businesses to improve their accounting functions and optimize their financial operations. By outsourcing, companies can save money on labor costs, access industry expertise, work with talent with advanced knowledge of accounting tools, and take advantage of a global talent pool.
If you are planning to outsource your accounting, Near can help you find the top accounting professionals from LatAm. We have a database of over 15K pre-vetted candidates with outstanding English communication skills on which you can rely to take care of your accounting needs. Fill out this form and get a list of the best pre-screened candidates that meet your business needs and interview them for free. You won’t pay anything unless you make a hire.