Why Do Companies Outsource Bookkeeping and Accounting?

Outsourcing has gained far more recognition from many industries today, especially bookkeeping and accounting. Many small businesses often find the means of creating enough time and cost savings to effectively manage finances as a reason to outsource. Let's explore reasons why companies outsource bookkeeping and accounting services and brainstorm some ideas for small businesses looking to get this done. 

What are the benefits of outsourcing bookkeeping and accounting? 

Before we try to explain why it is advisable to outsource to companies, let us first define what outsourcing entails. Outsourcing bookkeeping and accounting simply refer to contracting a third party or agency to handle your financial records, tax preparation, payroll, accounts payable, and any other financial tasks. 

Benefits to outsource accounting and bookkeeping services 

After establishing the primary benefits, we will consider which benefits make outsourcing accounting and bookkeeping more specifically advantageous to companies. 

• Focus on core competencies. When businesses outsource, their time is concentrated on strategic activities, such as product development, marketing, and customer service. Financial tasks quickly become too much for small business owners to deal with, distracting them from the bigger picture of what's going on in their business. 
• Access to advanced technology and tools: Most outsourced accounting firms utilize the latest software applications such as QuickBooks, Xero, or FreshBooks. These applications do not only make bookkeeping faster but can also provide real-time financial analysis.
• Reduction of financial risk: The financial risk is minimized with outsourced accounting services since professionals will manage your financial statements, taxes, and payroll. They ensure no costly errors nor missed deadlines that may result in hefty fines or penalties.
• Data security: Outsourcing accounting firms are usually equipped with adequate security levels when dealing with financial information. These will help reduce the risks of fraud, data breaches, and cyber threats.
• Effective management of cash flow: It will get optimized cash flow by ensuring timely issuance of invoices, efficient processing of payments, and follow-up of late payments right away while a company entrusts professional accounting services. 

How popular is outsourcing in accounting and bookkeeping? 

More and more small and mid-sized businesses opt for outsourcing bookkeeping and accounting. Its main reasons are: 

• Ease of access: it is easy to hire a professional located anywhere in the world, often at a lower price. 
• Cloud-based accounting: modern tools for accounting, such as Xero, QuickBooks, and Sage, make teamwork easy and convenient for business owners with outsourced accountants. 
• Flexibility: Business gives scope to scale up or scale down services according to their needs and have no long-term commitments. 
• Demand Expertise: Smaller businesses do not require a full-time accountant but may need expert advice on tax planning, payroll, or bookkeeping at times. Outsourcing allows them to have such services on demand. 
• Remote Work: The Covid-19 pandemic only hastened the trend towards remote work, but outsourced accounting services make the service even more practical and cost-effective. 
• Compliance: Outsourced bookkeeping providers are updated on the latest tax regulations, and therefore it is an extremely popular choice for the prevention of costly mistakes by small business owners. 

Is accounting and bookkeeping outsourcing for you? 

Here are some questions you might like to ask yourself if you are considering outsourcing: 

• Are you spending too much time on books? If bookkeeping is taking up too much of your time, it's probably time to outsource. 
• Is hiring a full-time accountant too expensive? In many cases, outsourcing is much cheaper, particularly for small businesses. 
• Do you need someone else to do your books in-house? Outsourcing offers a way you can acquire expertise from a range of specialized fields and disciplines, such as tax law, payroll management, or financial planning. 
• Do you find it difficult to maintain compliance? Tax laws may become taxing to explain and navigate. Outsourcing will ensure that your business stays in line and up to date on local and federal requirements. 
• Do you want to use high-end accounting tool utilization but cannot afford to put the money into it? Many outsourcing firms also offer the utilization of premium software through them, thus saving the cost of purchasing or otherwise maintaining it. 

If you need to expand your business, then outsourcing will be flexible enough to allow you to scale up or down based on your growth curve and direction of your business or your needs. 

Practical ideas for small businesses considering outsourcing 

• Determine your needs: Identify which financial tasks are taking too much of your time and can be outsourced-this could include bookkeeping, payroll, tax filing, and accounts receivable or payable. 
• Test the waters by outsourcing a smaller percentage of your accounting tasks: Just try doing it. Evaluate how your outsourced firm will actually perform for you before completely entrusting them. 
• Find the right partner: Find firms that specialize in small business accounting and bookkeeping. Read reviews, ask for referrals, and make sure they really understand your industry. 
• Implement cloud-based software: Have a discussion with firms that implement cloud-based accounting software so you may view your financial information in real-time. 
• Define channels and expectations: When outsourcing to a firm, clearly communicate channels and expectations as it relates to deadlines, reporting, and deliverables. 
• Monitor performance: Periodically check the performance of the outsourcing partner for whether they are meeting the requirements of your business and adding value to your business. 

Conclusion 

That game-changer in businesses of any size is bookkeeping and accounting outsourcing. It can offer flexibility to zero in on core activities, scale when required, and reap professional expertise without the additional costs of carrying employees in-house. From trying to cut down on wasted time from a small business to moving on to a more substantial one striving to follow up with improved financial management, outsourcing will always help you keep competitive in an ever-changing market. By choosing a suitable firm to share your business activities with, you will have the access of most sophisticated tools and data security and also optimized operations; hence a business that would follow an excellent way to growth and eventually success. 

FAQs 

1. Will outsourcing bookkeeping save me money on my small business?  

Yes. Outsourcing bookkeeping will save you money based on the money you do not pay for hiring, training, and paying an in-house accountant. Pay only for services used. No costs associated with employee benefits or payroll taxes. 

2. How can a person be assured that their financial information is safe when outsourced? 

Data in a reputable firm is always kept behind secure systems. Probe the company about how it keeps hackers from accessing your data through encryption, who has access controls to enter its systems, as well as how it approaches data backup and recovery. 

3. Should I outsource locally or globally?  

Local/Global outsourcing is good in its own term. For example, local firms give ease of communication and better understanding of your local market while international firms may offer less rates. That would depend on your specific business needs and budget. 
 
4. What tasks can I outsource?  

The following are some tasks that you can outsource: 

• bookkeeping 
• payroll 
• tax preparation 
• financial reporting 
• accounts payable/receivable 
• tax compliance. 

5. Who do I choose to be an outsourcing partner?  

First and foremost, checking expertise, the company's experience with industries, the type of software used, and client reviews sometimes will be useful to ask for recommendations from other small business owners. 

6. Will the outsourcing affect my control over finances?  

No. There is no losing control with outsourcing. You will get all the finance reports and data and be in a position to make very informed decisions. Many outsource firms offer real-time reporting so you can keep updated on the health of your business finances. 

7. Can I outsource bookkeeping if my business is new?  

Absolutely. You can even do this for your start-ups. It gives you a decent opportunity to stabilize your growing business with the surety of professional handling of your books.