Outsourced Accounting Services: The Pros and Cons

Should you outsource the accounting services for your business?

Some things are tough to let go. Childhood toys, that couch you had at your first apartment, the kids as they head off to college… But there comes a time to relinquish that hands-on control and move on.

The same can easily be said for your company’s accounting function. You’ve nurtured your business from its beginnings, and to this point, your finances are doing well. But your business is also growing—and along with it, your accounting needs. Unless you have a licensed, experienced CPA on staff, you’re probably not giving your books the attention they need. This is where outsourced accounting services can take your business to the next level.

What is outsourced accounting?

Outsourced accounting services (sometimes called OAS) generally means a third party is responsible for your accounting operations. They pay your bills, reconcile your deposits and provide financial statements and monthly reports on your activities.

In other words, they’re essentially your off-site accounting department. They can also help you analyze your accounting operations for efficiency.

OAS services can be limited to certain functions, or they can cover all accounting needs. As long as you (or someone in your company) can handle the daily activities of coding invoices and deposits, all other duties are handled for you.

The pros of outsourced accounting

Your company could realize a number of benefits from outsourced accounting services.

Get financial expertise without employee expenses

Outsourced accounting services are more cost-effective compared to hiring, training and maintaining an internal department. By having knowledgeable consultants with expertise in your industry, you’ll get comprehensive solutions to the complex hurdles you face.

Yet you won’t have to worry about the expenses of employee benefits and training.

Let financial experts handle finances…

It’s challenging to find and retain staff with knowledge and expertise in all areas of your accounting and finance function. It’s also hard enough to juggle the responsibilities of running a business and managing staff. Outsourcing ensures your financial records are accurate and up to date.

…while you and your employees focus on your business

Outsourcing your day-to-day activities, such as billing, payroll and month-end close, frees up valuable time for you and your staff to focus on business goals and growth. Rather than chasing after unpaid invoices or manually cutting checks, you can offload these processes and streamline your operations.

Enjoy access to a high volume—and vast range—of expertise

When you hire an outsourced accounting firm, you’ll have access to professionals with a vast array of knowledge. This includes accountants experienced with multiple client sizes and industries. However, it can also mean professionals in other areas that affect your financial well-being, such as data analytics and human resources.

The benefits are numerous. The greater the number of accounting professionals (and the wider the range of their expertise), the more robust solutions your firm can create to help you. They’ll also do more than read the numbers; they’ll paint the overall picture of your financial health.

And as your business grows, your services can grow with you. It’s a scalable, long-term relationship built entirely around your needs and circumstances.

Reduce your risk of fraud

Maintaining proper internal controls to protect against fraud, theft and human error is required for any accounting and finance function. If you’re leaning on just a few people to fill multiple roles, this puts your business at higher risk due to overlapping responsibilities and overworked employees.

Outsourced accounting solutions provide a clear separation of duties and greater oversight to mitigate these risks.

Outsourced accountants don’t take PTO

Well … individually they do. But you don’t have to worry about covering their work with an outsourced accounting service.

If you have one in-house accountant and they get sick or go on vacation, someone else from your company has to step in. And if that person doesn’t have the right knowledge, it could be disastrous for your business.

With a well-staffed firm performing your accounting function, absences are covered by the firm you hire. So you never have a gap in service.

Have greater peace of mind regarding your finances

Picture it: Your accounting and finance operations are in order, risks of potential threats are low, and information on your company’s financial health is readily available.

Sounds good, doesn’t it?

This is a reality of a quality outsourced accounting services solution. When your mind is at ease, you can focus more on your overall business strategy.

The cons of outsourced accounting

Despite the benefits of outsourced accounting services, there can be disadvantages if you don’t plan well. While they can be easily prevented, they’re important to consider.

Mismatched abilities and philosophy

Hiring the wrong firm makes for a rough start and will likely result in failure. A firm that doesn’t specialize in your industry or lacks experience in a client your size creates a mismatch between your company’s needs and the services they offer. They’re also probably not familiar with your risk tolerance when it comes to tax strategies and accounting principles.

Communication barriers

An established workplace often has a familiarity between people and departments. There’s a rhythm of when to expect emails, how to conduct meetings and whether a quick text message will suffice.

Outsourced accounting services generally aren’t part of that routine. Your accountants work in a separate location and might have different hours/habits. They might have a different work culture, which affects how they communicate. And if they don’t have much experience with your type of business (or industry-specific terminology), important matters can get lost in translation.

Technology gaps

You might have preferences for different software brands and applications—from accounting software to general office systems. This can create disruptions in workflow, difficulty sharing files, etc.

This con could also apply to your general approach to technology. For example, you might prefer using electronic file transfers to submit and receive documents while your chosen firm is still working with paper hard copies.

Incremental costs

You’ll probably pay a set monthly fee for outsourced accounting services. This fee is generally determined at the beginning of your relationship with a firm.

As companies grow, however, their needs also grow—requiring new accounting tasks. This is sometimes referred to as scope creep, and it can lead to added costs you didn’t anticipate.

Loss of control

With your books being handled by someone off-site, you don’t see the work being done every day. That can be unsettling for business owners used to having that access. It also means your company’s financial information could be at greater risk since it’s visible to more people and being transmitted electronically.

The good news? These drawbacks can be easily avoided by taking the following steps when seeking an outsourced accounting services firm:

• Fully research any firm you’re considering hiring. Review their website to make sure they offer the services you need and have experience in your industry. Read client reviews to find worrisome trends (like “I never hear from them” or “Our monthly statements are always late”).
• Have an initial consultation to get a feel for the firm and its accountants. A clash in work culture (such as hours on duty, communication methods, etc.) can quickly lead to disaster.
• Only consider firms that use document encryption, secure portals and other methods to keep your financial information safe.
• Once you choose a firm, review your contract carefully and know what you’re getting for the fees you pay. It should also outline how additional charges are handled (when they occur, how pricing will be determined, etc.) to avoid surprise fees.

Outsourced accounting services can help you increase profits, make better-informed decisions and improve your strategy for the future. The key is to find the right provider and engage in a long-term, trusting business relationship with them.

Get help from accounting professionals

The outsourced accounting services team at James Moore can fill that role to give you confidence in your company’s future. Contact us today to see how we can help.