5 Reasons to Outsource Your Accounting

If you want to meet compliance regulations, reduce overhead costs, improve business performance and focus on core business operations, you should outsource your accounting functions to third-party CPA firms. Outsourced accounting functions are the best way to access modern tech solutions for your business’s financial health.  

In this guide, we will discuss five reasons you should outsource your accounting. 

Reasons You Should Outsource Your Accounting

Access to Finance and Accounting Expertise

Bookkeeping, preparing audits and financial reports, and conducting financial statements analysis require skill, expertise, and access to advanced tools and technologies you may not have. Outsourcing your accounting allows you to engage a team of professionals. Top accounting firms employ professionals that specialize in different functions. 

Outsourcing your accounting allows you to tap into a wide range of expertise. Your in-house accountant may have limited skills. You may not be able to hire a bookkeeper, auditor, analyst, and chief financial officer (CFO). Outsourcing your accounting functions to a third-party CPA firm gives you access to different accounting experts with different skill sets. 

These experts work together and choose the best accounting solutions and processes for your organization. They also plan and strategize your company’s financial future to guide you in 

meeting your business goals. Furthermore, accounting firms stay updated on new developments and trends in their field. To stay afloat in a competitive market, outsourced accounting service providers must upskill and improve their proficiency and certifications

When you outsource your accounting functions, it gives you confidence and peace and mind. You are assured that a reliable, knowledgeable, and professional organization is handling your confidential and sensitive financial data. You can also leverage their experience and resources to gain expert advice. 

Save Costs, Time, and Resources 

Your employees’ valuable time may be spent on in-house accounting. The cost of running an accounting department may be more than you think. The time spent on bookkeeping and accounting functions could be spent on improving the business performance, billable client hours, or securing a business deal or customer relationship.

An in-house financial department requires 3-6 staff with different functions. Depending on the size of your business, your company might need an accounting department with roles like a bookkeeper, sales data analyst, staff accountant, accounting manager, controller, and CFO. Maintaining a full finance department requires you to pay salaries, benefits, overtime, office space, health insurance, and paid time off (PTO). 

The cost of running an accounting in-house is not always financial but can affect your overall business performance. There are also the costs of interviewing, hiring, onboarding, training, and retaining staff. Most accounting tasks do not generate revenue for the company; this is where outsourced accounting comes in. A major way outsourcing your accounting functions can help your business is that it eliminates all the time spent on such tasks, reduces business costs, and allows you to focus on business growth. Accounting firms allow you to choose the specific accounting services you need. Some offer monthly payments, and others charge hourly. It is a cost-effective option. 

Outsourced accounting professionals have the expertise and use automated and advanced technologies, tools, and processes. These tools help them to execute financial tasks faster. It also reduces the risk of human error and sends in deliverables before deadlines. Because of their level of expertise, outsourced accounting service providers do not need you to supervise them. It allows you to channel time and resources into other important business areas. You can also train and onboard your former accounting staff to learn and work in other areas that need more hands within the company. 

Minimize the Risk of Fraud and Theft

Small and mid-scale businesses are more at risk of financial mismanagement or fraud than larger organizations. Small businesses often have two to three in-house accounting staff, presenting a higher risk of financial misconduct.  In small companies, it is common for accounting to be managed internally in the hands of one or two people, posing a higher risk of fraud. Outsourcing lowers the risk of fraud and makes room for more internal controls and security by giving responsibility to a third party. 

When companies outsource their accounting functions to an independent unbiased expert, a new set of eyes will review all records and transactions while handling your data. These experts can spot patterns in data to spot fraudulent activity or negligence. 

Outsourced CPA firms minimize the risk of fraud through the following methods.

  • Separate the duty of authorization, record keeping, custody of assets, and verifying transactions. One person should not have control of all three functions 
  • Using automated/electronic payroll systems to prevent payroll fraud
  • Using electronic checks in place of paper checks
  • Granting only the owner or manager access to bank statements and canceled checks. 
  • Reviewing approved vendors list
  • Matching invoices to the purchase orders by scanning bills and linking them to the matching transactions in accounting software

Avoid Penalties During Tax Filing

Tax preparation is a time-consuming and difficult process. It requires compiling all invoices and related documentation for tax computation and comprehensive analysis of an organization’s financial activity for a stated period. Tax preparation requires precision and must be error-free. When businesses prepare their taxes, they require highly qualified and experienced accountants, often charging high fees. Outsourcing your accounting services helps your company with accurate and inexpensive tax preparation and filing. 

The CPA firm will ensure that all information on your tax returns complies with federal and state laws. Additionally, your tax filing would be done timely and submitted to the appropriate tax authorities before the deadline elapses. Late or non-filing of tax returns can put your business in trouble with the law. It can incur penalties or lawsuits which affect the reputation of your company. 

Improve the Company’s Focus and Business Performance

Outsourcing your accounting functions allows business owners and their employees to focus on business development and customer relationship and leave the accounting to professionals. Helping companies manage their accounting and bookkeeping requirements allows them to direct resources and concentrate on the core business activities and spend less time handling numbers and drafting financial statements. This method profits the business and the third-party CPA firm. The reason is new technology tools improve the accuracy of data and require less time and resources; this gives financial consultants more time to address your financial drawbacks. 

The scope of CPA firms and financial advisors goes beyond collecting and analyzing financial data. They also advise you on potential risks, problems, and opportunities after they must have analyzed and interpreted your data. Instead of just helping you through financial challenges after they have occurred, they take proactive measures to prevent problems from arising. 

CPA firms help you develop smart business strategies, identify growth prospects, and establish market recognition and long-term value appreciation that best suits your business model. 

Taking Everything Into Account

Outsourcing your accounting is incredibly beneficial to your business in the long run. It is cost-effective, increases business profitability, and helps you find proactive measures to prevent financial crises. It also reduces the risk of human error, fraud, financial misconduct, and fraud. Outsourcing accounting functions is cost-effective, so whether your business is a small, mid, or large organization, it is practical, accessible, and efficient.  

Interesting Related Article: “ 10 Ways Accounting Helps Your Business