Is your company struggling to tackle all its accounting needs? Companies that have lost a CFO, outgrown their bookkeeper, changed their offerings or experienced high growth can have a hard time finding the right accounting expertise—at the right price—in today's tight labor market.
Outsourcing is a possible solution. Here are eight benefits this option can provide your company and its bottom line.
1. Access to Top-Notch Expertise
It can be challenging to recruit and retain talented professionals, especially for smaller businesses with limited resources. When you outsource, you have ready access to highly experienced accountants who are up to date on best practices. Outsourcing firms have qualified team members with expertise across the entire spectrum of accounting roles—from bookkeeper to CFO—as well as specialized niche knowledge for you to tap as needed. That means they're likely to perform your work correctly the first time, and in a cost-effective manner.
2. Access to the Latest Technology
Outsourcing provides ready access to sophisticated, updated accounting and tax software and other technology tools. Smaller organizations frequently lag behind their larger competitors on the adoption of such tools, which might be cost-prohibitive until they've been on the market for a while. Reliance on outdated systems could put you at a disadvantage. Outsourcing firms can spread the costs of early adoption across multiple clients so you needn't wait for prices to drop.
3. Reduced Staffing Costs
Business owners sometimes regard outsourcing as just another cost. It may be more accurate to view outsourcing as an opportunity to cut your accounting costs while maintaining the quality of the output. After all, staffing is often one of a company's largest expenses. By outsourcing your accounting function, you can avoid paying staffing-related expenses, including:
Unemployment benefits, and
Outsourcing may also allow you to avoid the high cost (and frustration) associated with recruiting and managing staff. While you still have to pay outsourcing firms, their charges are usually much lower than employing full-time staff.
4. The Ability to Scale Costs as Needed
Many businesses have fluctuating accounting needs during the year. For instance, they might be busier at year-end and tax time or when pursuing a major capital investment project, such as a merger or public offering. Outsourcing allows you to pay only for what you need, when you need it.
In effect, you can convert fixed staffing costs into variable outsourcing fees. With outsourcing you can dial your level of service up or down on demand. And you don't have to worry about keeping full-time accounting staff busy in slow times to head off layoffs—or scrambling to bring on new hires or pay overtime when the workload is heavier.
5. Smarter Resource Deployment
Outsourcing frees up time for your management team to focus on growing the business through marketing, operations, networking and relationship building. In addition, lower-level accounting staff with extra bandwidth can be assigned to work in other areas that could use more manpower, such as procurement or customer service. This can translate to better service, increased customer satisfaction and higher profits. Moreover, you won't have to worry about critical accounting employees calling in sick, using leave, quitting or otherwise leaving a gap.
6. Enhanced Decision Making
External accountants who work with multiple clients across industries obtain a higher level of business intelligence than those who have worked solely for one company. You can leverage this expertise to make better, more timely business decisions. Plus, outsourcing firms usually can answer your questions and provide analytics faster than in-house staff that have fewer resources available to them.
7. Reduced Exposure to Compliance Risk
In-house accounting staff typically have their hands full keeping up with the day-to-day tasks, such as journal entries, invoicing, bill payment and account reconciliations. They often find it difficult to stay on top of the latest tax, accounting and regulatory requirements. Inadvertent mistakes can leave your company vulnerable to legal judgments, penalties, fines and unwelcome media attention. Outsourcing firms, on the other hand, closely monitor such developments and promptly respond by adjusting their processes and procedures.
8. Improved Fraud Prevention and Detection
The Association of Certified Fraud Examiners estimates that organizations lose 5% of their revenue to employee fraud every year—and 12% of frauds occur in the accounting department. Financial reporting scams are the least common type of fraud, but also the costliest, with a median loss of nearly $600,000, compared to roughly $100,000 for asset misappropriation schemes.
Using external accountants who aren't in a position to profit from financial misstatement cuts your risk of the fraud by company insiders. External accountants also are more likely than employees to immediately flag objectively suspicious activity, and they may have fewer opportunities to collude with others to commit fraud.
Accurate, Timely Financial Reporting Is Critical
Accounting isn't necessarily the most glamorous part of running a successful business, but it's essential. If you can't find or afford to hire well-qualified professionals to handle your financial reporting needs, it may be time to consider outsourcing as a temporary—or permanent—solution. Contact your SSB advisor to determine what's right for your situation.