Outsourcing Your Accounting: How It Can Benefit Your Growing Business
- AALIGN Accounting
- Sep 28, 2024
- 6 min read
Updated: Oct 28, 2024
Navigating the complexities of financial management can be daunting for a startup or growing business. Outsourcing your accounting needs is an excellent alternative as virtual accountants offer extensive benefits to help propel your business forward. Hiring a virtual accounting firm will help you identify areas to reduce expenses, gain access to a robust set of skills and expertise, and get countless work hours back to focus on your core business activities.
Outsourcing your accounting and bookkeeping also ensures you stay current with the latest financial regulations and compliance requirements, which can vary significantly across different industries.
Understanding Outsourced Accounting Services
Businesses have increasingly turned to outsourced accounting solutions, reflecting a notable shift in financial management practices. Rather than maintaining an in-house accounting team, approximately 37 percent of small businesses outsource accounting tasks like bookkeeping, payroll, invoicing, tax preparation, and financial reporting.
By outsourcing these accounting functions, companies benefit from reduced overhead costs, access to advanced accounting technology, and the skill set of seasoned accounting professionals — while ensuring their financial records are handled efficiently and accurately.
5 Key Benefits of Outsourcing Your Accounting
Outsourced accounting has emerged as a practical solution for companies looking to streamline operations while ensuring accuracy and compliance in their financial reporting. By leveraging the expertise of professional remote accountants, organizations can save on costs while gaining valuable insights from customized financial data to drive informed decision-making.
The myriad benefits of outsourcing your accounting tasks can support your business’s trajectory and allow you to concentrate on your passion. These key benefits include:
1. Cost Savings
Maintaining an in-house accounting team can be expensive when considering salaries, benefits, equipment, and ongoing training expenses. By partnering with an external accounting firm, you can significantly reduce the overhead costs of hiring full-time staff by 15 percent to 30 percent. This also includes the costs associated with investing in accounting software like QuickBooks.
Reduced Overhead: Save on expensive software, hardware, office space, and equipment costs necessary when hiring full-time accounting staff.
Pay Only for What You Need: Many virtual accounting firms offer flexible pricing models, allowing you to pay for only the services your organization requires.
When you outsource an accountant, you convert fixed costs into variable costs and pay only for the accounting services you need when you need them.
2. Efficiency and Accuracy With Advanced Technology
Professional accounting firms use advanced technology tools and efficient processes designed to streamline administrative tasks and reduce human error. This results in more accurate financial records and reporting that meet financial compliance regulations.
Minimized Risks: Virtual accountants are trained to handle the complexities of financial reporting and compliance, reducing risks associated with errors or oversights.
Timely Reporting: Advanced tools allow remote accountants to provide timely and accurate financial reports that equip business leaders with quicker decision-making.
By removing the burden of day-to-day accounting tasks, your internal team can focus on the tasks at hand without getting bogged down in administrative processes. The combination of expert oversight and advanced technological support promises precise financial management with quicker turnaround times on financial reporting and analysis.
3. Access to Expertise
Outsourcing your accounting gives you access to a team of seasoned accounting professionals with a wealth of knowledge and experience. You benefit from their expertise without the overhead of hiring them as full-time accountants.
Specialized Knowledge: Outsourced accountants are typically well-versed in the latest accounting standards and regulations, ensuring compliance and minimizing risk.
Industry Insights: Many remote accounting firms specialize in specific industries, offering tailored advice and best practices relevant to your business.
Experienced accounting professionals continue to stay updated on industry standards and best practices. By leveraging the expertise of virtual accounting firms, you can ensure that your financial management is in capable hands.
4. Focus on Core Business Functions
With an outsourced accountant managing your financial tasks, you free up valuable time and resources so they can be redirected toward growing your business.
Increased Productivity: Employees can concentrate on their primary roles instead of accounting tasks.
Strategic Growth: More time means you can dedicate efforts to strategic initiatives that drive business growth such as marketing or product development.
Outsourcing an accounting firm means having more time to focus on what matters most: driving sales, serving customers, and improving your product or service offerings.
5. Scalability and Flexibility
Virtual accounting services can easily adjust to your business’s changing needs, allowing you to scale operations up or down without the constraints of hiring or laying off salaried employees. This flexibility provides companies with the right level of support during periods of growth, stability, or uncertainty.
Adaptability: Outsourcing accounting allows organizations to modify their level of service as their business evolves, providing the flexibility to manage changing demands.
Access to New Services: Many outsourcing firms offer a wide range of services, including financial forecasting and strategic advisory — which you can tap into as your needs increase.
Whether you need more comprehensive financial analysis or additional bookkeeping support, outsourced accountants can easily scale their services to accommodate your changing requirements.
Types of Outsourced Accounting Services
Some common types of outsourced accounting services will typically include:
Payroll: Managing payroll can be time-consuming and complex, particularly with varying regulations. Virtual payroll services handle employee compensation, tax calculations, and compliance with employment laws.
Bookkeeping: Remote bookkeeping allows businesses to maintain accurate financial information without the hassle of day-to-day management. Outsourced accountants will handle routine recording of financial transactions, managing accounts payable and receivable, and ensuring that financial records are up to date.
Financial Reporting: Virtual accounting firms can provide detailed financial reports that offer insights into your company’s performance. This includes balance sheets, income statements, and cash flow statements.
Cash Flow Management: Effective cash flow management is vital for the sustainability of any business, and outsourced accounting and bookkeeping solutions can help you monitor and optimize cash flow. Cash flow management includes tracking incoming and outgoing funds, forecasting cash requirements, and identifying potential shortfalls before they become problematic.
Accounts Payable and Accounts Receivable: Outsourcing accounts payable and accounts receivable functions streamline the process of managing a company’s liabilities while maintaining a healthy cash flow. Monitoring outstanding payables includes taking advantage of early payment discounts and avoiding late payment penalties. Virtual accountants can improve cash flow predictability, reduce the risk of bad debts, and enhance customer satisfaction through efficient billing practices.
How to Choose the Right Outsourcing Accounting Partner
Follow these steps to learn how to choose the right outsourcing accounting partner for your company:
Step 1: Evaluate Experience and Expertise
With a growing number of virtual accounting firms available, selecting the right outsourcing partner can significantly impact the efficiency and accuracy of your financial management.
Check out the firm’s background and experience in your specific industry.
Evaluate the team’s qualifications and expertise in the various accounting services it offers such as bookkeeping, financial reporting, and payroll.
Ask for references from past or current clients for a better understanding of the accountant’s level of service.
Step 2: Understand Service Offerings
Different outsourced accounting firms offer various services, so it’s essential to understand what they can provide. Some companies specialize in specific areas, such as bookkeeping.
Inquire about the external accounting team’s service offerings.
Ask about their experience working in your industry.
Find out if services can be customized to meet your specific accounting needs.
Step 3: Assess Technology Capabilities
With all the latest advancements in digital tools and automation for accounting, you should work with a firm that uses the latest technology capabilities to optimize your accounting processes.
Ensure the accounting firm uses modern and secure accounting software that can integrate with your existing systems.
Step 4: Discuss Data Security Measures
Outsourcing accounting means sharing confidential financial data with a third party. Make sure to discuss data security measures to protect your sensitive information.
Inquire about their data protection and security measures to ensure the safety of your financial information.
Learn about the accounting firm’s cybersecurity protocols.
Find out if the virtual accounting team maintains employee confidentiality agreements.
Step 5: Understand Communication and Collaboration Processes
Effective communication is key to a successful partnership with an outsourced accounting firm. With the distance between your business and the outsourced team, it’s crucial to establish clear channels of communication and efficient processes for information sharing, updates, and questions.
Find out who your main point of contact is and how you will communicate.
Lay out your expectations for financial reports and updates.
Step 6: Review Pricing Structure
Opt for an accounting partner that provides a transparent billing structure with a breakdown of costs and services. Beware of pricing that sounds too good to be true, as well as pricing asking exorbitant rates. While outsourcing your accounting needs offers significant advantages such as cost savings, you can strike a balance between cost and quality by vetting each accounting provider’s offerings.
Hourly rates: Some accounting firms charge by the hour which may be a good option if you have a small business with simple financial needs. But for larger organizations or those with more complex finances, hourly rates can quickly add up and become quite expensive.
Flat fees or packages: Other accounting firms offer fixed fees or packages for specific services such as tax preparation or bookkeeping. This can provide more predictability in your budget, but make sure to clarify what is included in the flat fee and if there are any additional charges for extra services.
Hiring an Outsourced Accounting Firm
Outsourcing your accounting processes means partnering with a team outside of your organization. Be sure to look for a virtual company that aligns (no pun intended) with your business and understands your values, culture, and communication style.
