Second, automation speeds up processes, meaning less time working in your business and more time working on it. The automation of time and expense tracking and labor cost allocation makes life easier on your employees and allows you to better determine profitability. However, as the business grows, most owners find that their time becomes more valuable doing other things. The finite hours in the day are better served by focusing on building the core business, not overseeing day-to-day bookkeeping. Small businesses are realizing the benefits of time and money to outsource the areas they … If you do decide to pay a third party to handle your accounting, be aware of the potential for scope creep.
Instead, think carefully about the non-core business functions that slow you down and drain the largest portion of your resources. To get the most bang for your outsourcing buck, begin with outsourcing these areas. Small business owners born in the Millennial Generation are also likely to have the psychographics to embrace outsourcing. Growing up surrounded by technology, they believe outsourcing has a strategic advantage and a positive effect on employees, their number one business asset. When a business owner is no longer able to be involved in every aspect of a business, that is when the business begins to need more than bookkeeping. Most bookkeepers only know how to handle billing, collections, payroll, deposits, sales taxes, bank account reconciliation, and basic financial statements.
Should You Outsource Your Accounting?
You usually need an accountant for less time than a bookkeeper, but when you do need one, they’re invaluable. An accountant is an important resource, not only at tax time but also for regular financial planning and forecasting. While most small businesses don’t need to hire an accounting professional full time, that doesn’t mean you should do it yourself. So if you’re considering outsourcing the bookkeeping or accounting services of your small business, take a look below at what you need to know before making a decision. Moreover, for modern-day accounting needs, you’ll also need to invest in advanced accounting software. However, you save up on this investment when you outsource to an accounting firm that already has such technology in place.
- Flexibility is the reason why you should outsource your accounting and finance function.
- Don’t underestimate the power of the balance sheet when you are looking at your books.
- So you must have top-notch finance and accounting professionals as well as advanced accounting solutions to carry out these duties.
The primary benefits include improved productivity, cost savings, time savings and better use of resources. Outsourcing non-core business functions can also allow companies to tap into vast wells of expertise outside of their industry. Additionally, outsourcing reduces the number of positions needed to fill in-house, helping to ease the hiring burden. Essentially, an outsourced accountant is someone that works with you on a part-time basis to do your bookkeeping and accounting.
Benefit #5: Gain Flexibility To Meet Business Needs
We’ve got a comprehensive 5-step process that you can follow to gain clarity on how the onboarding process works, if you’re unsure. The cost of your accounting will depend on a few factors, including the number of transactions your business completes each month and the complexity of your business’ financials. You’ll also likely have several individuals working on your account, so for smaller companies, outsourcing can provide extra sets of eyes on the financial inner workings of your business.
Without a well-structured process, organizations can quickly lose sight of all the types of reconciliations, who should perform them and when, levels of risk and complexity, responsibility for approvals, etc. As a result, open items are often left sitting on the books for months, and write-off policies are undefined or not managed carefully. Many F&A Departments experience a delayed, overly painful journal entry process that triggers bottlenecks and inefficiency during the month-end close.
Why should you outsource accounting?
But if you choose to have your accounting outsourced, you will need to project manage and assist with coordination between the two departments. Consider all your possibilities, then choose wisely whether this works for your conditions and requirements. Instead, give your outsourced team a decent timeline to analyze your business and understand its complexities. accounting system explained in simple words It’ll allow the vendor to devise customized solutions for your needs and ensure success in the longer run. Additionally, you should compare your budget with the cost of maintaining a full-time accounting team and the required technology stack. It’ll not only help you see the cost advantages of outsourcing but also prevent you from overspending.
The Complete Guide to Outsourced Finance and Accounting Services
But as your business grows and your financial needs evolve, it’s common to find that your initial approach to bookkeeping is no longer delivering the results you need. Without strong bookkeeping, it’s impossible for business owners to understand the financial position of their business, forecast budgets, or understand their cash position. A firm can look out for things like tax credits, specialized loans, and other financial activities that a self-serve software won’t be able to provide guidance on. When you use an accounting service, you also save money on hiring staff who would have done your accounting in-house.
As a small business owner, you might be tempted to handle all business operations with little outside help, especially when first starting out. However, it’s often beneficial to outsource some of the more daunting, time-consuming tasks — like accounting. We can increase the number of people working on your project, and because we’re not bound by time or cost constraints, we’ll be able to deliver what you want when you need it. Flexibility is the reason why you should outsource your accounting and finance function. The fifth benefit of outsourcing your accounting and finance is having more flexibility within the organization.
A manufacturer of personal computers might buy internal components for its machines from other companies to save on production costs. A law firm might store and back up its files using a cloud-computing service provider, thus giving it access to digital technology without investing large amounts of money to actually own the technology. In addition to cost savings, companies can employ an outsourcing strategy to better focus on the core aspects of the business. Outsourcing non-core activities can improve efficiency and productivity because another entity performs these smaller tasks better than the firm itself. This strategy may also lead to faster turnaround times, increased competitiveness within an industry, and the cutting of overall operational costs. The sixth benefit of outsourcing your accounting and finance is the ability to scale up or down quickly.
This helps ensure that the relationship goes smoothly and that the outsourcing partnership is successful. For example, it’s essential that you understand how the system works, have a clear plan for communication and understand what your business needs to do to ensure outsourcing success. In addition, the automation of the billing and collection process saves time and expenses invoicing and improves cash flow by faster collection.
Look, business growth can come in lumps, and if you’re growing a newer company, it can get ahead of you. Therefore, considering cost efficiency and the standard accounting or bookkeeping fees of these services is a vital aspect of knowing when to outsource. If you’re losing money on this service, it could be in your best interest to pass on external hiring. However, if you can find accounting or bookkeeping services that can save you time, stress, and overall resources, it could be a perfect fit. The first question you have to ask yourself is whether outsourcing your accounting needs realistically works for your business. Hiring a large accounting firm to cover the full service of all accounts can take a considerable amount from your small company’s net profits.
