In today’s changing global scenario, making the most efficient and aligning the costs is much important for success. An area where many of the companies are searching major advantages is outsourcing the accounting services and bookkeeping services. But the question comes to mind whether its right to give accounts and book keeping services to an outsider and Outsourcing it the right decision for your business. So lets see the pros and cons of outsourcing the accounting service.
Defining Outsourced Accounting Service:-
Outsourced accounting requires handling financial responsibilities such as bookkeeping, payroll processing, financial reporting, invoice payments, sales invoicing to a third party which specialises in accounting and these kind of services. These providers could range from individual freelancer and big firms to major accounting powerhouses. Whereas in place of employing an in house accounting team, an individual or organisations can choose a service vendor for the same.
Advantages of Outsourcing Accounting Service
There are certain advantages of outsourcing the accounting. However cost is an important factor, scalability and expertise are some of primary drivers of Outsourcing accounting.
Cost Savings:- Sometimes it takes the center stage when outsourcing is considered. By bypassing the higher cost which is associated with hiring and managing inhouse accounting staff which includes salaries, benefits, training and software. This eliminates overhead costs while offering flexible service packages which could be scaled to particular needs.
Enhanced Expertise:- Gaining Access to a pool of qualified accountants with different specialisations. All these professional stay on the latest regulations and best accounting practices which ensures that the finances are being handled meticulously and efficiently.
Enhancing Scalability:- As the accounting needs could fluctuate with the growth of business. Outsourcing provides the flexibility for effortlessly scaling up the services, this eliminates the issue of hiring and firing the staff during fluctuating period.
Much Focused:- Being free from accounting tasks allows you and your team in dedicating the energy in running the main business activity which increases growth and profitability.
Decreased Fraud Risk: Outsourcing the accounting adds and extra layer of oversight and accountability which decreases the potential for internal fraud and non intentional error.
Potential Drawbacks of Outsourced Accounting Service:-
As we all know, nothing is perfect. Working with an outsource partner will be different than hiring an employee. Here are some of the top considerations to think about to determine if you’ll be comfortable with outsourcing your accounting function.
1. Loss of Control:- entrusting financial data with an external provider requires trust. While reputed firms ensure security and confidentiality many business owners could be uncomfortable relinquishing control over important aspect of operations.
2. Communication Barred:- Better communication is important for proper and accurate accounting. The time zone difference, language barriers or unclear communications could lead to misunderstandings and delays. Also working with a third party is much different than directing an employee to do what you want right away.
3. Hidden Costs:- Beware of cheap deals. As, these seemingly low cost package could harbour hidden fees for extra services or complexed tasks. This ensures transparency and having a detailed service agreement before committing such is important. Always look for fixed pricing over hourly as hourly billing increases inefficiency.
4. Limited Customisation:- Major Specialised Businesses could require major accounting solutions. And some outsourced provider can lack the expertise or flexibility for catering to particular industry needs and nuances.
5. Potential Security & Data Risks: Data breaches are a concern for any digital environment. Choosing a provider with much secured measures establishes data protection protocols and adequate insurance.
Outsourcing V. Insourcing:- Weighing the Options
Understanding differences between outsourcing and insourcing accounting could help in making an informed decision. Outsourcing is cost effective which provides access to expertise, scalability and ability to focus on growing your business. Whereas in it there is a loss of control, communication challenge, hidden cost, limited customisation and potentia security risks.
But lets take a look on the other side which gives full control, direct communication and a deeper understanding of business. Whereas it also comes with higher costs, Recruitment and Training challenges, limited expertise and less ability to focus on business.
What to do then:-
The decision to whether outsource or insource or choose a hybrid model depends on the unique needs of the business, risk tolerance and budget. Although, remember choosing the right accounting partner is also important.
So look for a service provider with following qualities:-
1. Proven track record: Having a History with handling businesses similar as your shows their expertise and reliability.
2. Strong communication skills: Having clear and effective communication is important to ensure you both have the same understanding and that the needs are properly understood.
3. Transparent pricing: Avoiding hidden fees. A reputable provider provides detailed pricing breakdowns and service agreements upfront.
4. Robust security measures: Your financial data deserves top-notch protection. Look for a provider with industry-standard security protocols and data encryption practices.
5. Genuine commitment to your business goals: Choose a partner who takes the time to understand your unique needs and challenges and who actively works towards achieving your financial objectives.
