Accounting is an area that requires optimum attention. In addition, most business owners think of their financial services as an essential part of their business strategies.
However, the accounting functions tend to get sidelined by numerous business owners just because they don’t have enough time to focus on them. This is the reason why 71% of financial service executives hand over their operations to external service providers. In addition, it is projected that the finance and accounting outsourcing market will cross the mark of US$ 51 Billion by 2026.
Tasks like digging into the books, accounts receivables, handling taxes, and other accounting responsibilities can feel monumental. Hence, company founders usually plan to “take care of them later.” But this mentality can harm your business cash flow because, in the absence of a serious commitment and approach to your company’s financial standing, you may end up hurting for cash.
Many business owners have realized that they save time and resources by shifting from an in-house accounting department to an outsourced solution. According to them, this shift has improved quality, reduced the processing time, and saved expenses significantly, among other benefits.
Outsourcing Accounting is Becoming the Hottest Trends in Market
In the period of recent years, many organizations have tried to think differently and hand over their accounting operations to external accounting services providers. However, once you have attained an understanding of the future of the outsourcing industry, you will quickly realize and decide whether outsourcing is the right decision for your company or not. Look at the following stats to get on better grip on this.
Key Statistics on Outsourcing Accounting:
1. The accounting and finances outsourcing industry will reach US$51.5 billion by the year 2026.
2. It is rising at a compound annual growth rate of 4.9%.
3. The processing time has been reduced by 50%.
4. Four-fifth of participants states that now they have more time to concentrate on their business as external experts are handling their accounting operations.
5. More than 75% of organizations claimed that they would refer their outsource accounting services providers.
6. 68% of companies said that accounting has become easier and more effective through an outsourced solution.
7. Half of the CAs state that now clients worry less regarding any mistake after taking assistance from outsourcing services.
8. Around one-third of companies that have opted for outsourced accounting services received helpful advice from their services providers.
To make an informed decision regarding whether your firm needs an online solution or not, let’s go through the following details about utilizing outsourced accounting services that all business owners should consider before opting for them.
PPP loans management:
The details regarding loan forgiveness under the PPP can be confusing for some. In addition, you can only get partial forgiveness on your loan. Loan reduction can take place by the dollar if you utilize the loan in ways other than how lawmakers have prescribed it.
Accounting firms have great expertise in handling the terms of PPP Loans as they manage these loans for numerous businesses and stay up-to-date with all the regulations.
Cash flow management:
Financial recovery demands planning and spending strategically. An accounting firm will have a set strategy of handling operating costs, overhead, sales, assets, liabilities, and other related things. By monitoring the recurring expenses and projected income, while evaluating in KPI threshold and preparing as per different scenarios for the upcoming months, they will seamlessly create financial projections and set specific spending limits on items with low priority.
Building tax strategy:
You should definitely not miss out on relevant tax credits in 2021, especially those tax credits that are related to COVID-19. The FFCRA issues tax credits to businesses so they can cover costs incurred in administering sick leaves and expanded family medical leave to employees for reasons related to COVID-19 from April 2020 to December 2020.
Besides this, increasing scrutiny over tax disclosures and account balances has enhanced pressure on businesses to ensure everything is at the right place. Meanwhile, so many companies that don’t have a tax advisor with them are not able to take full advantage of certain tax deductions that are present for their benefit.
The urge to get done with filing taxes by April 15th (or later if you are filing for an extension) can cause distress. A CPA firm or tax preparation firm ensures that your business returns are filed timely and correctly and that you also claim all tax benefits that your business is eligible for.
Timely financial advice:
Leaving most of your accounting functions to tax season can result in a period of 11 months without financial advice from an expert. Handing over your bookkeeping to an external service provider will give you a customized bookkeeping process designed as per your business needs and a team of professional bookkeepers to handle your daily finances. In short, you will be well equipped with valuable financial data for making rewarding business decisions.
Enhanced financial data accessibility:
Today’s cloud-based accounting software allows access to financial data and records online. This provides up-to-date access to information on cash balance at any place at any time. With the timely availability of accurate accounting records and reporting, you have a clear picture of your business’s financial health and allows you to make informed decisions.
Better Finance Management
With a team of expert accountants providing round-the-clock support, your staff gets more time for other essential aspects, for instance, budgeting, investment planning, financial reporting, etc. Outsourcing accounting for your business enables you to save time and resources that you can utilize according to your needs, and that’s probably one of the most significant advantages. What else would you do better than having complete control of the overall financial performance of your firm?
While accounting outsourcing brings a number of advantages, it also raises a few concerns that must be addressed and resolved before starting a deal. Therefore, read further and find the answers to questions that might have come up in your mind too.
When should you outsource?
You may consider outsourcing:
If you are unable to retain a stable and sufficient workforce
If you are looking to kickstart a new business (cost-savings)
If your in-house staff is overburdened
If you need to operate round the clock.
However, if you are yet to give it a thought, you need not rush into making it happen. Instead, you can start slow by outsourcing a few of your back-office accounting functions that consume significant time and resources. And since these solutions are easily scalable, you can upgrade as you experience the need over time.
Why should you consider outsourcing financial accounting?
Finance and accounting are the fundamental, most important functions of any firm. Outsourcing these allows you to save both time and money. For example, you might use the time you spend managing your business accounts to focus on other aspects of your business, such as developing financial management strategies or building and maintaining long-term connections with current clients.
The outsourced accounting model has developed over time, and the benefits of partnering with a reliable service provider are countless. Outsourcing to a globally trusted firm allows you access to a pool of experts available for guidance and support on your demand.
What are the costs involved in outsourcing?
Outsourcing helps you save costs in both direct and indirect ways. You can find various providers offering FTEs – full-time equivalent resources at a price almost 50% less than an onsite employee will cost you.
When you outsource, you do not need to purchase more computer systems or pay for the external team’s perks and benefits such as health insurance and various allowances. Moreover, you can cut management costs as the team will be managed entirely by your partner. This will not only ensure clear guidelines on responsibilities but also optimized accounting operations and on-time reporting.
Another way you can save money by outsourcing is that you only need to pay for the selected services you are receiving or the accounting work done for you. Customized service packages are always better than a full suite.
How can you be assured of accuracy?
First things first, you would obviously compare a few providers and then shortlist them according to their capabilities and your requirements. While doing this, do not forget to check their reviews on review websites such as Trustpilot or BBB (Better Business Bureau).
In case there’s no review available online, you may ask them to provide references, which they would be happy to share with you. Talk to them and inquire more about the services you are looking for. That way, you will get to know if they had satisfied their previous clients in terms of service delivery.
Next, while negotiating upon terms, keep a document prepared that establishes a basic service level agreement, in which you can include all your needs like accuracy, turnaround time, etc.
Doing this will ensure you and your partner are in sync, which is essential to work efficiently in collaboration.
Why should you consider trusting a provider?
As a business owner, you might have a whole lot of concerns regarding the storage and security of your data. You might also be worried thinking, what if someone from your partner’s staff uses your data for their benefit. This is natural, but you need to get over this by ensuring your partner follows all security measures and monitors their consistent implementation.
Consider a partner who:
Is GDPR compliant
Takes client data confidentiality and security seriously and a responsibility to safeguard it against all odds
Has a specialized team for IT infrastructure and disaster recovery
Adheres to data and cyber security standards
Keeps information security at the top priority
What would be the communication criteria or process?
The most reliable outsourced accounting providers will provide you a common platform where you can be updated about the progress of your outsourced projects. If not that, they might provide you a phone line number through which you can connect with the project manager, team leaders, or other associates.
In today’s digital world, communication gaps are bridged, and clients can now feel more in contact with their service providers using digital meeting platforms, and most outsourcing firms manage client meetings using the same. Therefore, communication is no more a significant point of concern when it comes to managing your outsourcing contracts.
What can be an additional advantage of outsourcing for your business?
Having an external team of accounting experts work for you gets you an unbiased view of and approach to your current accounting processes. For instance, you might not be able to provide your existing accountants with advanced pieces of training to upgrade their skills due to having a workload or a lack of funds. Regardless of anything, outsourcing allows you to bring a fresh, new perspective that is sometimes essential to improve those functions.
Additionally, you get a team of qualified and experienced professionals who would not only crunch numbers for you but also provide (on your demand) insights that can help you make better decisions for financial management.
Should you consider outsourcing for your small business?
It is always recommended to outsource when in need, regardless of the size of your business. Accounting outsourcing has a lot to do with your accounts management, cash flow, reporting, payroll, etc. As you grow, you will realize you need to perform more accounting practices in order to comply with regulations. At that time, you can easily scale up, wasting almost no time that also at pocket-friendly costs. Thus, it is a win-win situation in any case.
There are significant benefits for business owners who decide to opt for outsourcing services for their accounting operations. To begin with, cost-effectiveness and flexibility with respect to terms of contracts or upscaling or downscaling the number of functions. Accounting and bookkeeping are a crucial part of business, but they can also be complex. Hence, it requires time, specific knowledge, and effort. However, without experience in accounting, one might make many errors which can further lead to a decrease in your business or even make you go bankrupt. Therefore, consider getting in touch with a competent accounting service provider and reap as many benefits as you can.