Is Accounting Outsourcing Right for Your Business?
Accurate accounting is necessary for every business, regardless of size. If you do not have the internal resources to perform your accounting activities in-house, you can bring in an accounting outsourcing services firm. Outsourcing allows you to pass your company's bookkeeping responsibilities onto experienced professionals so you can concentrate on growing your business.
Outsourced accounting features: Bookkeeping, reporting, and tax services
With accounting outsourcing services, you relieve yourself of the responsibility of learning all the tax codes that change year to year. Outsourcing firms can also find creative - but legal - ways to help your company save money and get considerable tax breaks. They can customize reports, manage ledgers, post quarterly tax payments, and provide financial analysis. And they can provide these services at a more cost-efficient rate than having full-time on-sight employees.
Oftentimes a business or corporation will consider the accounting process and employees as an expense versus a revenue-generating department or area. In order to save money in the short term they will use part-time help. This strategy can and does backfire because these casual part-timers are not fully educated professionals. A true professional will look at the big picture and offer ways to save money that can be added to the bottom line. The money that an outsourcing firm can help you save in the long run will outweigh the cost of their service fees.
Costs to using alternative methods
According to the 2012 Robert Half Benchmarking the Finance Function Report, businesses with less than $25M in annual revenue spend an average of 3% on their internal finance staff each year. So a company that generates $10M in sales would expense about $300,000 on their full time employees. This would include all company benefits such as payroll taxes, unemployment contributions, vacations, sick leave, insurance and any other benefits.
Many outsourced accounting firms make it their mission to provide the same physical services for no more than 1.75% of gross revenues. For the $10M company, the most they would spend would be $175,000. There would be an immediate yearly gain of $125,000 to the bottom line.
Another factor to consider is that the outsourced accounting firm would be on watch for ways to save the company revenue in the long haul rather than keeping all practices status quo.
A CEO or president should consider the fact that outsourced accounting is not a one-size-fits-all solution. An accounting outsourcing service may offer in-depth support for:
- Accounts payable outsourcing. Reduces the burden on administrative staff; provides monthly, quarterly, and annual accounting/bookkeeping in accounts payable.
- Monthly bookkeeping. Can cover bill pay, receipt recording, payroll computing and preparation, payroll tax deposit preparation, bank reconciliation, and trial balance and financial statements.
- Quarterly analysis and reporting. Quarterly review and analysis of financial progress, as well as payroll tax return preparation, when applicable.
- Annual tax services. Preparation and management of W-2s, 1099s, W3/state reconciliation, payroll tax returns, and federal and state corporate tax returns.
All these services negate the necessity of hiring additional accountants at year end, thus saving even more money.
Why bring in accounting outsourcing services?
A key benefit to accounting outsourcing services is that the professionals are not on your payroll. You do not have to provide benefits which can raise the actual salary of a full-time employee by 25%. Keep this in mind when you are weighing the pros and cons of using outsourcing versus hiring a full-time certified bookkeeper or a CPA.
Yes, outsourced accounting can be economical since there is no necessity to employ a full-time accounting staff. It can also provide related benefits to boost productivity, like:
- Prevent employee burnout by sharing administrative tasks with outsourced accounting professionals.
- Delegate mundane work to a third-party service so that employees can focus on higher pay-back projects.
- Promote junior staff members to higher-level positions by outsourcing routine accounting tasks.
- Make accounting, bookkeeping, and tax preparation more cost-effective to boost profit margins.
- Greatly increase accuracy in payroll and accounting, up to 99.95% (as quoted by some outsourced accounting services).