Pros & Cons of Outsourced Accounting - mersano/Article GitHub Wiki
In recent years, a large number of businesses have sought to outsource their accounting responsibilities to specialists that are more familiar with the accounting process. The choice to outsource is often made by small businesses that are beginning to grow, companies that are hoping to streamline accounting processes, and various other sorts of enterprises.
Naturally, whether it makes sense for your business to outsource its accounting tasks will depend on the specific structure of the business itself. Variables such as size, current employment status, financial objectives, and industry will all need to be considered when making this important decision.
Some businesses will stand to benefit much more from outsourcing their accounting systems than others. In order to make sure that your business is making a decision that is objectively in your best interest, it is a good idea to examine all of the pros and cons of outsourced accounting firms before you make any permanent commitments.
What are the pros of outsourced accounting?
A significant portion of businesses have made the decision to outsource their accounting processes and, perhaps even more importantly, recent polls indicate that more than 80% of firms that made the decision to do so would personally recommend their accountants. In light of these industry trends, it is important to examine why an increasing number of businesses outsource their accounting services each year.
- Expertise and Professional Help
As is the case with most sources of outsourcing, many businesses choose to use a professional accounting service because it offers them an exclusive level of expertise they would be unable to access on their own. This is especially important when it comes to things such as making sure that all tax forms are done correctly, looking for additional savings opportunities, and helping illustrate the financial status of the company to potential investors.
Furthermore, even if you only work with an outsourced accounting firm for a portion of the year, having access to a reliable and knowledgeable resource is certainly quite valuable. This way, as accounting questions and problems inevitably emerge, your business will be able to move forward with ease.
- Opportunity Costs
Even if you are able to teach yourself the principles of accounting on your own—which is certainly a big “if” for a lot of business owners—engaging in the accounting process is still something that will require a considerable amount of time. Every minute you spend focusing on accounting tasks is a minute that could be spent doing something else.
Suppose that, by focusing on growth and getting new clients, your business can effectively increase its revenues by $100 per hour (on average). If hiring an accountant only costs $60 per hour, then choosing to focus on accounting instead of growing your business will cause you to effectively lose $40 per hour—this is even assuming that you can operate as efficiently as a professional accountant.
- The Possibility of Saving Money
In addition to the amount of money that your business can potentially save from an opportunity cost perspective, there are other ways that an outsourced accountant can help you save as well. For example, there may be numerous opportunities for small business tax deductions that only a professional accountant is likely to be familiar with. Furthermore, by closely examining your books, they may also find new ways for you to improve your monthly cash flows.
What are the cons of outsourced accounting?
Inevitably, because not all businesses have chosen to use an outsourced accounting service, it is important to consider the cons of such a choice before making any commitments.
- Upfront Costs
As is the case with many things, the upfront cost of hiring an accountant makes some business owners hesitant to do so. If they have very manageable books that they believe they could handle on their own, some business owners fail to see the reason to pay someone else to manage them.
If, even after consider the opportunity costs of doing accountant tasks on your own, the cost of hiring an accountant seems to outweigh the benefits, then outsourced accounting may not be in your best interest. However, many businesses that remain undecided prefer to use an outsourced firm for some tasks (reviewing their tax returns, for example), while maintaining the bulk of this work within their own business.
- Letting Go of Control
Perhaps the main reason that many firms refuse to outsource their accounting services is that, usually, making the choice to do so can cause them to lose a considerable amount of control of their business. For owners who prefer to do everything themselves, letting go of control may end up creating more stress than it removes.
The amount of “control” that will need to be surrendered will vary tremendously by specific accounting firms. While some will be very transparent and ask for your personal input throughout the entire process, others will prefer to use pre-established systems.
Conclusion
Accounting is an essential part of the annual business cycle that your business—regardless of the industry they may operate in—certainly needs to take seriously. By considering both the pros and the cons of outsourcing your accounting tasks to a group of certified professionals, your business will ultimately be able to make a decision that is objectively in your best interest.