Pros and Cons of outsourced accounting services
Pros and Cons of outsourced accounting services
Outsourcing the accounting and bookkeeping function of your business brings many benefits and advantages to the table compared to hiring an in-house accountant to manage all these functions. There are a few downsides to this as well.
A dilemma is whether to outsource the accounting function or hire a full-time employee. To resolve this, you have to analyze the need of your business, the business lifecycle stage of your company, and the support needed in decision-making. Parallelly, adequate weightage should be given to the benefits and disadvantages of choosing one, the cost attached, etc.
This article briefly discusses the pros and cons of outsourcing your business’s accounting services, helping you make the right decision.
Pros of outsourcing accounting function of your business
Here are a few pros that you experience if you decide to outsource your accounting needs.
1. Competitive costing and access to a qualified, experienced team
It is one of the most apparent benefits of having your accounting function outsourced to the experts. Hiring an in-house full-time employee will compel you to spend first on the hiring process, then on the training and development of that employee, along with the monthly retainer benefits. While on the other hand, if you outsource the accounting function of your business, you have to pay a minimalistic and fixed price to seek their services. Additionally, you do not have to pay for any training as it is the outsourced agency that would spend on the training and development of that personnel.
Plus, the employees of the outsourced agency are already well-experienced experts since they have worked with multiple clients operating across the industries having a competitive edge over others.
2. Adopts a proactive approach and business focus
As a business owner, if you invest time in looking after your books of accounts, you will not be able to concentrate on the core aspects of the business. But if you have outsourced all these services already, you will get enough time to focus on all essential business aspects.
This way, you will save your energy and get ample time to make vital business decisions, not responsive to the situation but with a proactive mind and approach.
3. Reduced probability of fraud
The employees working in your business may sometimes indulge in unethical practices within your organization that can potentially cause irreversible effects. It usually happens because the in-house employees have access to all the confidential information related to your business, making it easy for them to steal the company’s assets and manipulate the data to conceal the same.
While the outsourced accounting service provider will not have any manipulative or ill intentions or interest in your business. Even if someone has that kind of intention, they will not be able to materialize as they neither have access to the assets of the company nor to the highly confidential and sensitive information of your business.
Cons of outsourcing accounting function of your business
Here are a few cons that come with outsourced accounting services.
1. Might have hidden costs
The possibility of hidden costs is minimal as outsourced accounting service-providing agencies lay down the pricing terms before signing the contract to avoid chaos and help the company build trust in them. Even the payment modes, time, billing cycles, accruals, etc., are discussed beforehand to avoid misunderstandings later.
While most service providers do not entertain any hidden costs, there are quite a few who do. Hence, it becomes more crucial for you to communicate clearly with the outsourced agency and get the detailed bifurcation of the pricing policies included in the final contract before signing.
2. Reduced control
As the team works from a remote area, you would not have any powers or even authority to control their working system. If you need any help, you will be assisted by the manager and get monthly or quarterly updates, but you will not have any say in the working style and approach of the consultants. All you need to do is trust your outsource agency for authenticity and legitimacy.
You might need to control things in your business to maximize the returns on your efforts and reduce the scope of fraud or any casualties. The control in outsourced accounting services reduces as you cannot physically go and take the reports related to the business’s current financial position.
3. Separated by location
Most businesses outsourcing their accounting function to an agency, experience distance or lack of physical proximity. Having your outsourcing partner away from your geography invites trouble in time-sensitive situations like the tax season or when the companies require insights about their current financial position to take a few critical decisions in favor of business growth and expansion.
Sometimes, the change in language and time zone differences may also be an obstacle to timely and effective communication. Inefficiencies in data exchange would ultimately impact the core business task outsourced to a third party.
But these are not something that you cannot manage. For instance, to promote accessible and effortless communication, you can implement a communication schedule that mentions weekly or monthly meetings, SOS meetings with a definite scope, emergency helpline numbers, etc. For the control-related issue, you can restrict their access to your business’s confidential data and promote a sense of transparency so that you are always in the loop for any conversation around your business.
Final Words
Now, the ball is in your court, and you must determine whether the pros of outsourcing accounting services outweigh the cons for your business. If yes, you can leverage the benefits mentioned here and others. However, the cons of outsourced accounting can be minimized if you approach an outsourcing company through the reference of their existing or past clients.
You can trust experienced firms CFO UAE if you want to minimize the risk of reduced control, hidden charges, or the probability of remote working being inefficient.
