What Is Outsourced Accounting?
Do you have the in-house skills and resources to take care of your business's bookkeeping and financial management? If not, then outsourced accounting can give you access to a whole accounting department experience for a fraction of the cost.
What is Outsourced Accounting?
In the past, the main question would be how to hire a bookkeeper or accountant to handle your financial operations. Nowadays, the notion of outsourcing business functions has become much more prominent, encouraging a different approach to handling accounting needs.
With the cost advantages and the time savings, more and more companies are choosing to outsource instead of hiring internally. For more details on why to outsource instead of hiring internally to handle the bookkeeping needs, check out our detailed blog on the matter.
In this article, we’ll explore what outsourced accountants can do, how to choose a partner and some benefits of strategically outsourcing financial operations.
What Do Outsourced Accountants Do?
Outsourced accountants can cover a wide range of financial tasks. Generally speaking, these external partners can take that work instead of hiring an accounting team to handle all financial tasks. Outsourced accountants could be a team within a CPA firm, an independent contractor, or an organization of accountants focusing on financial operations, like Decimal. Outsourced accountants are here to track, organize, compile, and communicate the finances of a business.
A good outsourced accountant will become an extended part of your team, constantly monitoring your numbers, providing real-time insights, and giving you financial advice to help you achieve your goals.
You can tailor the service you receive from an outsourced account to meet your needs. They can help you process your day-to-day transactions and handle:
- Real-time transaction processing
- Sales invoicing
- Payroll processing
- Bill payment
- Management reporting
- Budgeting, forecasting, and KPI trending
- Year-end reporting and preparation for audit
The big difference between outsourced accounting and an outsourced bookkeeper is that rather than just processing and recording your business’s financial transactions, outsourced accountants help you understand the numbers that are driving your growth and can identify ways to improve.
By producing management reports and tracking key performance indicators (KPIs), you can gain insight into specific parts of your business, focus on the areas that are proven money earners, and make informed investment decisions.
What Are the Benefits of Outsourced Accounting?
Most small businesses outsource at least one of their back office functions, such as HR, IT, or marketing, so you’ll probably be familiar with some of the benefits. However, outsourced accounting also offers plenty of others.
No entrepreneur starts a business dreaming about how much time they can spend on account reconciliation, payroll processing, and budgeting. Outsourcing your accounting frees you up to focus on the core areas of your business that you’re passionate about and can add the most value to.
Real-Time Access from Anywhere
You might think that using an outsourced accountant could create a distance between you and your business’s finances. However, often it’s the opposite that’s true. At Decimal, we process your transactions in real-time so you have up-to-date data at your fingertips. Your accounting data is also stored securely in the cloud, so you can access it at any time, wherever you are.
Access to Experts
Outsourced accountants are specialists who can generally provide a more efficient and knowledgeable service than business owners and in-house teams who are not accounting experts. Their experience of working with all sorts of small businesses can add significant value, both in terms of the insights they can provide and the time it takes to perform routine tasks. Additionally, working with a team that has exposure to a broader range of solutions can identify more efficient technologies to ease the process.
Outsourced accounting can easily be scaled up or down as your requirements change. You can simply add more hours or a new service to your monthly package to suit your business model. Switch to an in-house team, and you face a lengthy delay and the recruitment costs associated with hiring a new team member, or worse still, the prospect of redundancies if you need to downsize. Beyond the recruitment challenge, there is also the obstacle of training the new hire. In an outsourced environment, processes are documented and defined. It’s purely a matter of bringing on additional help behind the scenes to handle the increased volume of accounting activities.
Better Business Continuity
Losing key employees who know your accounts inside out can cause huge disruption to your business. Using an outsourced accounting provider ensures the business can continue as normal and mitigates the risk of knowledge loss when a valued employee works out the door. With the right outsourced accountants, there isn’t a concern over lack of coverage because the team will have the process and resources to tackle any challenges.
When budgets are tight, you might see the cost of outsourced accounting as something you can do without. However, that’s not the complete picture. The costs associated with recruitment, office space, computer equipment, employment taxes, pension contributions, benefits, and training typically make an outsourced provider far cheaper than hiring an in-house accountant. A big mistake we often see is hearing that, to save money, the team would do the bookkeeping themselves. Distracting from strategic initiatives to spend time on an easily outsourced activity often costs more than expected.
Who Uses Outsourced Accounting Services?
Businesses of all sizes and sectors choose to outsource their accounting and bookkeeping for some of the reasons we’ve discussed above. However, it’s a particularly popular option for smaller businesses, which have the most to gain from the time, cost efficiencies, and expertise that a specialist team can provide.
The assistance you need is completely down to your budget, your skill levels, and your business’s goals. If you have no in-house accounts team or knowledge of accounting yourself, you may look for a trusted partner who can work with you closely and take care of everything. On the other hand, you might have a CFO or controller but need more hands as you grow or specialist assistance in a particular area, such as bookkeeping or payroll processing.
How to Hire the Right Outsourced Accountant
There’s clearly a lot to gain from outsourced accounting, but there can also be downsides if you don’t choose your provider very carefully. The service quality can fluctuate, and some providers communicate badly. Some also insist on rigid contracts, making it difficult to scale your service up and down appropriately. That’s why it’s so important to do your due diligence beforehand and consider how much flexibility you need before you sign.
Here are a few other things to look for when choosing an outsourced accountant.
The Scope of Services
Before you talk to any providers, be completely clear about your business’s needs and the financial services that will support your goals. Whether it’s simple bookkeeping support or a full-service solution including bookkeeping, accounts payable, and invoicing, finding a team that can tailor a solution ensures you won’t waste money on services you don’t need. One person’s impression of what bookkeeping is can differ from another, so it is vital to be on the same page.
Every accounting and bookkeeping firm has its own payment structure and some even take retainers and bill for extra hours. Before signing any deal, make sure the agreed fees are transparent and set out in black and white. Fixed fee providers can provide peace of mind, particularly for small businesses, as you know you’ll get all the support you need without any nasty surprises at the end of the month. Unfortunately, some outsourced partners lean on hidden fees and surprise charges, so choosing carefully and reading the contract’s fine print is important.
Manual bookkeeping and accountancy means wasted time, stacks of paper, and endless data entry. You should look for a provider that automates these manual jobs so they can spend more time on the tasks that really add value to your business. Purely leaning on technology is the wrong approach, there should be a person in the mix that coordinates this.
An Understanding of Your Business Environment
The type of services larger corporates want from an outsourced accounting provider differ greatly from those that smaller businesses need. If you run a startup or small to mid-sized business, it makes sense to choose an outsourced provider that specializes in clients of that size. Additionally, specific industries have very nuanced accounting rules that might not be familiar with people outside the space. Understanding the intricacies of each sector and how those impact businesses are crucial.
As an agile small business, the last thing you want is to be tied into an agreement that doesn’t grow with you. So, make sure your provider gives you the flexibility to scale your service up and down and add new services or more hours.
When you need help with accounting questions, you want to work with accountants that respond in a timely manner. Even if it is to touch base and confirm that they are looking for the answer, that communication is necessary to have a great working relationship.
An outsourced accounting partner can take over the existing processes and continue the status quo or they could proactively look for better ways to tackle each challenge. Consider whether the external partner is incentivized to make improvements or if they actually benefit from longer, more manual processes. A CPA firm with outsourced accountants might benefit from an hourly rate and longer hours compared to an operational partner that offers a fixed rate.
Transform your Finance Operations with Decimal
You didn’t start your business to solve your accounting challenges, so let us take that off your plate. We provide a dedicated small business accounting service to take care of your bookkeeping, payroll, bill pay, invoicing, and tech setup and support.
We use technology to write checks, submit expense reports, and enter data into your accounting system in real time. That frees us up to spend more time unlocking insights and focusing on the numbers that really matter to your business.
You can also check in with your dedicated Decimal team whenever you like. We're here whenever you have a question or need something done. And with our Actually Fixed Price, you’ll always know how much you’re paying in advance.