Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company.
There are numerous reasons for outsourcing some types of work functions. Business owners and corporations choose this option as a way to save money in company operations, maneuver the company into a more competitive position, and to solve manpower issues without the cost of hiring more employees. The biggest motivating reason for a company to outsource is to save money in view of reducing operating costs.
Based on research done, the top reason for outsourcing (70%) is Reduction in cost of Operation. The second reason is Improving productivity and Efficiency (20%). To meet compliance requirements is important to 7.5% of businesses. Flexibility /freeing up Resources matter to 2.5% of the surveyed.
As businesses struggle with financial and staff shortages, outsourcing can help build on existing capabilities, laying a firm foundation for short-term sustainability and long-term growth. A PR Newswire article says that as small businesses grow, they should prepare to outsource some of their accounting needs. Costs involved in hiring, training staff, setting up infrastructure, and maintaining the entire in-house set-up requires heavy capital investment that can be saved by outsourcing.
As business owners, we are constantly looking to outsource more things. If you outsource your HR and IT, you would probably outsource payroll amongst others as well. Today, let’s talk about some five benefits of outsourcing your accounting and finance functions.
1. Access to finance and accounting expertise
You should outsource your accounting and finance because it allows you to get the specialized knowledge your company needs.
Outsourced firms employ highly trained accountants and finance professionals. They don’t have distractions like other people. They will see a variety of businesses and can then bring the best practices back to you.
Most organizations have a fluctuating need for a bookkeeper, accountant, controller, and CFO levels. You can’t hire all of these. Outsourcing accounting and finance allows you to receive services as needed. Although you need limited expertise and controller services, you may require additional accounting and bookkeeping services. Supervision ensures that all accounts are correctly managed, which allows you to progress faster and more robustly.
2. Avoid turnover and time-off issues
Outsourcing your accounting and finance processes will also allow you to avoid turnover problems and staff time off. When you are a smaller organization, each team member is vital to the success of the company. When a team member is sick or on vacation, or in the worst-case scenario, they leave, it causes stress for the remaining employees. When you outsource your accounting and finance to an external company, that becomes the company’s problem.
That’s not your problem. If the person assigned as contact is out, their team will help you instead if necessary.
And the cost of turnover is substantial when someone leaves your organization. Sometimes you need to pay a recruiter fee, and it may take longer than usual to find the best candidate.
Then you want to train them. If they are not the right person, you will need to start over again, which can be an unnecessary headache. Outsourcing accounting and finance shifts those responsibilities away from you so that you can focus on generating more revenue.
3. Cost savings
Another significant benefit of outsourcing your accounting and finance is cost savings. When it comes to employees, all of the costs must be considered. These include salaries, benefits, taxes, and unemployment.
Because labor costs are one of their highest expenses, business owners are looking for ways to cut down on them. So, looking at the benefits of outsourcing in terms of cost effectiveness, there are efficiencies to be gained. When companies outsource accounting and finance work that needs to be completed, they’ll have access to expertise and quality and additional cost savings.
Look at the possibility of outsourcing accounting and finance tasks as a means of cutting down on costs and gaining expertise altogether.
4. Gain Flexibility to Meet Business Needs
The fourth benefit of outsourcing your accounting and finance is having more flexibility within the organization.
If your team has only 2 or 3 people, you need to ensure they are always busy. On the other hand, if they have too much to work on and not enough time, it can be problematic. They don’t have the flexibility to take on new things as your business grows or matures. It can be frustrating, and you’ve got to wait.
Business owners who outsource their accounting and finance can relax, pivot, and plan without thinking of the other responsibilities.
We can increase the number of people working on your project, and because we’re not bound by time or cost constraints, we’ll be able to deliver what you want when you need it. Flexibility is the reason why you should outsource your accounting and finance function.
5. Achieve Time Savings for the Business
Business owners can save time by outsourcing the accounting and finance function. Many of us are focused on the marketing, sales, and operations of our companies. The outsourcing of accounting can free up time so that you don’t have to manage accounting and finance employees. You don’t have to provide your employees with guidance. The outsourced staff are experts and capable of helping both the company and themselves. This leads to a higher level of resources among you as an owner and other parts of your company.
They know what will have the most significant impact on you, and their goal should be to save you time by giving you the information that helps you make better choices to grow your business.
As much as there are great advantages to the company that outsources its services, there are also some drawbacks which must be taken into consideration when entering an outsourcing contract ranging from security risks, reduction in quality control, and hidden costs. But these all can be managed to a very limited effect so long as the choice of the contractor is done based on previous reports of the same.