The global market for accounting and finance is expected to grow at a compound annual growth rate (CAGR) of 5.9% to reach a gigantic sum of $56.6 billion.
So what’s with this growth? Why is accounting and finance outsourcing getting the hype among businesses? Is it worth outsourcing when you can hire a bunch of certified accountants to handle it in-house? What problems can outsourcing accounting operations solve for you?
Let’s answer all these questions in this article – starting with what accounting outsourcing is.
What is Accounting Outsourcing?
An outsourced accounting and finance operation is one in which a business hires a third party (a company like IBNTech) to handle its financial and accounting needs.
For small businesses, bookkeeping has many challenges, but certified accountants hired by the outsourced firm handle the outsourcing company’s financial activities, including bookkeeping, financial reporting, payroll, management accounting, taxation, accounts payable, accounts receivable, debt collections, and other account-related services.
The outsourced company often has dozens or hundreds of certified accountants in-house that they can allot to the outsourcing company in order to streamline the finance operations.
Let’s find out.
4 Challenges With In-House Accounting
Although having everything under control by doing your bookkeeping in-house and self-managing your business’ accounting may give you the impression that things are in control, it usually isn’t the smartest choice.
Here are four reasons why in-house accounting isn’t the smartest choice:
1. Higher Accounting Cost
Employing an accountant or bookkeeper in-house on a full-time basis is costly. Recruiting, screening, and onboarding a new employee takes a lot of time and money. Depending on how quickly you employ a recruiter, your recruiting and onboarding expenses will be 20 to 30 percent of the new employee’s salary. Furthermore, you must pay the employee’s salaries every week or month.
The average annual salary for an accountant is above 60K. You also have a legal, financial and contractual relationship with the employee—you cannot simply fire them without incurring a certain financial obligation.
In this regard, outsourcing bookkeeping can be a cost effective approach.
2. Accounting and Bookkeeping Mistakes
Having one or two individuals handle your day-to-day financials brings some loopholes. Human beings are fallible, so it’s not uncommon for people to make bookkeeping mistakes, especially if they are inexperienced or just tired.
In a favorable world, your bookkeeper or accountant will identify any mistakes and correct them promptly.
However, the worst-case scenario is that an error will go unnoticed. This may result in incorrect reporting or audit and tax preparation, which is the last thing you want. Your company, both financially and fiscally, may suffer substantial consequences as a result of a single mistake.
3. Frequent Training Requirement
When you hired your in-house accountants, you must have taken great care to verify that their certifications were valid and up-to-date. Unfortunately, even the finest training becomes outdated over time.
Accountants must stay familiar with current accounting trends and not only about new accounting software and integrated apps for greater efficiency but also about things like updated regulations, tax rules, and other significant developments that affect their field.
Generally, when your in-house bookkeeper or accountant has a lot on their plate, staying up to date on these issues—let alone taking any professional development courses—can be difficult. Unfortunately, that means that before long, the quality of your in-house bookkeeping and accounting operations will suffer.
4. Potential Internal Fraud
Small businesses don’t have the required resources to perform all of the checks and audits needed to detect and combat fraud, such as payroll fraud and skimming, so they are more susceptible to this issue.
In larger companies, having different people handle different financial responsibilities and authorizations can ensure internal controls; but there can be loopholes too.
There is no way to ensure that your accountant or bookkeeper will notice all signs of fraud. Even worse, they might be the ones committing it.
How the Benefits of Outsourced Accounting Help You
1. Cost Effectiveness
There are various ways that outsourced bookkeeping saves organizations money, including minimizing the cost of hiring an in-house team and allowing you to focus on the core business.
As stated earlier, outsourced accounting service providers tend to have a lot of resources in-house, which means they can utilize them efficiently. For you, as an outsourcing firm, this means a lesser cost of accounting operations.
2. Expert Accountants and Bookkeepers
In order to remain competitive in the market, outsourcing service providers constantly increase their skills and certifications. Which means they can provide you with higher-quality expert services at a lower cost.
Working with an outside accounting firm can benefit you, especially if you are unfamiliar with your industry’s tax structure or if you need financial advice that is otherwise unavailable. This will allow you to strategize effectively for your company.
Imagine working in the same office where 100 people discuss and exchange new accounting trends, solutions, and tools – That’s what an accounting outsourcing service provider’s offices look like. Furthermore, accounting firms like us have access to continuous training, courses, and participation.
3. Fraud Reduction
When you outsource your accounting, you gain increased internal controls thanks to the presence of bird eyes on your transaction processing and reports.
Furthermore, an accounting team with exceptional accounting expertise will likely detect an anomaly rather than someone who is likely overwhelmed and overloaded with work. Even though fraud can never be ruled out 100%, this approach will provide better internal controls.
4. Access to Exceptional Software Systems
Accounting service providers use the best-in-class software solutions to help you streamline your finances, allowing you to open new doors. As a result, you and your accounting firm are able to access your information at any moment because it is in the cloud.
The accounting firm may input expenses and/or income immediately on the software itself. Consequently, you can view your financial information, including new transactions, with a single click. Centralizing financial information will help keep things organized. The outsourced accountants handle daily operations, while anyone in your organization may view or modify this information.
5. Insightful Reporting and Analysis
The most significant advantage of employing an accounting outsourcing firm is that it provides meaningful and insightful financial accounting reports that help you in decision-making. You may access the financial report that offers comprehensive financial information about your firm’s well-being at any moment.
Because virtual accountants record this information meticulously, it is simple and quick to examine. You may see your cash flow history, profits, and losses, or the balance sheet right from your computer.
Having sufficient data to back up your gut instincts and business development choices can provide financial intelligence to support your decisions.
6. Accurate Tax
Keeping things simple during tax season is a great way to avoid unnecessary stress. Outsourcing accounting can simplify tax preparation and ensure full compliance to help you handle everything in one location.
Outsourcing service providers can assist you as tax season progresses in preparing for it rather than panicking to get your numbers right. When the moment arrives, they will be able to assist you in filing right away and taking advantage of any potential tax reductions.
In addition, outsourced accounting ensures that there is no question about the data, whether the business owner needs to provide financial statements to the bank, satisfy investor reviews, or inform the IRS.
Smaller businesses often start with less extensive accounting small business bookkeeping services; however, as they expand, they need a complete set of similar services.
Here, even if outsourced accounting service providers and their plans do not provide your required level of services, that doesn’t mean you’re locked into a strict agreement.
In such cases, you can always partner with outsourcing service providers like IBNTech to keep accounting and finances in sync with your business scale.
Are Outsourced Accounting Services For You?
Smaller businesses and organizations can now benefit from outsourced accounting, thanks to technological advances and the world’s increased familiarity with remote workers.
Businesses of any scale can opt for accounting services, whether they’re startup, small-mid-scale, enterprise-level, or non-profit.
If you’re looking for an accounting service provider, your hunt ends here. IBN Tech is a renowned accounting service provider. We have certified accountants and bookkeepers who can bring intelligence to your payment receipts.