What are the Benefits of Working With an Outsourced Accounting Company?
Recent studies estimate that nearly 40% of all accounting tasks are outsourced (Dautovic, Fortunly). Do you currently outsource accounting functions? If not, now might be the right time to reevaluate your current procedures to be a part of the 24% of small businesses that outsource to improve efficiency. Cost-effectiveness, scalability, freedom, and ancillary support are all benefits your business can take advantage of by working with an outsourced accounting company.
Improved Cost-Effectiveness
One of the major benefits of working with an outsourced accounting company is cost-effectiveness. It’s no secret that labor shortages are plaguing every industry, meaning competitive pay and benefits need to be offered to secure qualified talent. The average cost of hiring an entry-level in-house accountant is around $58,000 (Salary.com). Keep in mind this amount is before payroll taxes and benefits. Utilizing a free true-cost worksheet helps you get to the bottom of the actual cost of hiring, not just an accounting team, but for any employee. Can your small business afford this?
A solution many small business owners turn to is an outsourced accounting company, which usually charges a fraction of the cost and comes with an entire team standing behind the work output. Instead of hiring an employee for accounting roles, you should be diverting your attention and money towards hiring people who help build what you sell. This includes direct laborers or sales personnel. Moreover, there are accounting and bookkeeping alternatives to remember when deciding on the right move for your business.
Greater Scalability
The small business realm makes up 99.9% of all businesses in the United States, yet most of these businesses only see a 2.5% growth rate from year-to-year (Oberlo). Surpassing the average growth rate takes multiple factors working in conjunction, from maximizing internal control safeguards to ensuring proper accounting procedures. Hiring an in-house accountant leads to concentration risk when one person is handling all functions. The Association of Certified Fraud Examiners detail that businesses lose an average of 5% of their revenue due to fraud and small businesses have a 28% heightened risk of fraud compared to large enterprises (Business Fraud Prevention).
However, with an outsourced accountant, you're not delegating the tasks to just one individual. Instead, an entirely independent team is working in the background, ensuring accuracy and improved segregation of duties. The reduced concentration risk and expanded expertise an outsourced company provides give your business the tools to surpass the average growth rate. Moreover, the flexibility and fractional team approach of an outsourced company easily adapts to your business needs, which a full-time employee cannot provide. Finally, surrounding yourself with a team of experts helps you properly understand how to forecast revenue and growth and make more informed business decisions.
Added Freedom
Freedom is an area that many business owners struggle to maintain. Statistics show that 45% of business owners handle the entire bookkeeper and accounting function by themselves (Brown, OnPay). Accurate management of your accounting function takes a high level of due diligence to stay informed on the latest accounting regulations your business is subject to. Unfortunately, due to the complexities of accounting, many business owners who do their own accounting often do so incorrectly and will require cleanup once the financials are used externally. This leads to trouble with regulatory agencies, banks and stagnant business growth.
One way to mitigate this issue is to bring on an outsourced accounting company. By focusing on what you do best and outsourcing the rest, you can free up time in your schedule, all while ensuring your accounting function is being maintained. Maybe your free time will go to finding new customers and improving your products or negotiating with suppliers and growing your business.
Whatever the next item on your to-do list is, you will have the freedom to tackle it, making an outsourced accounting company beneficial to work with.
Timely Ancillary Functions
Completing the ancillary bookkeeping functions of your business takes away from other scalable activities, especially it you are the one who is completing these tasks. The time it takes you to send customer invoices, deposit payments, process payroll, and review financial reports will be based on your transaction level. However, as your business begins to grow you can expect the hours to add up. The benefits of outsourcing your bookkeeping ancillary functions can reduce this burden.
Accounts receivable and accounts payable are vital areas since they control the inflows and outflows of your business. Working with an outsourced accounting company leads to faster sales invoicing, timely payment remittances, efficiently timing payables for cash flow management and checks and balances within your cash accounts. These are not only important to produce accurate financial reports, but to also minimize the risk of fraud within your organization.
Furthermore, many business owners don’t hire employees when first starting out. This results in the need to set up payroll when you finally have grown to the point of bringing on additional help. An outsourced accounting company has the knowledge to assist you with the setup procedures and processing of your payroll, producing timely year-end reports and properly classifying employees and contractors. In addition, the ability to streamline your payroll with accounting software is key to maximizing productivity and efficiency within your business.
Summary
Outsourcing a portion or all of your accounting function is a key consideration as a business owner to improve cost-effectiveness, provide greater scalability, give back freedom for the business owner to focus on building their business. Finding the right outsourced accounting company doesn’t have to be a hard decision. With Basis 365 Accounting, you can be sure our team of experts will find a customized solution for your accounting department, ensuring you aren’t overpaying for services you don’t need. Reach out to set up a free consultation to see if outsourcing is right for you.
Sources
Business Fraud Prevention. “Fraud Statistics.” Business Fraud Prevention, 2021, https://businessfraudprevention.org/fraud-statistics/#:~:text=The%20small%20businesses%20have%20ranked,at%20a%2022%2D26%25. Accessed 5 June 2022.
Brown, Elliott. “2019 Small Business Finance and HR Report.” OnPay, 2022, https://onpay.com/hr/basics/2019-small-business-finance-hr#:~:text=significantly%20over%20time.-,Back%20office%20finance%20and%20software%20benchmarks,30%25%20do%20everything%20in%20house. Accessed 5 June 2022.
Dautovic, G. “15 Must-Know Outsourcing Statistics for 2022.” Fortunly, 9 February 2022, https://fortunly.com/statistics/outsourcing-statistics/#gref. Accessed 5 June 2022.
Oberlo. “How Many Small Businesses Are There In The US In 2022?” Oberlo, 2022, https://www.oberlo.com/statistics/number-of-small-business-in-the-us#:~:text=The%20increase%20in%20the%20number,period%20from%202017%20to%202021. Accessed 5 June 2022.
Salary.com. “Entry Level Staff Accountant Salary in the United States.” Salary.com, 2022, https://www.salary.com/research/salary/alternate/entry-level-staff-accountant-salary. Accessed 5 June 2022.
