Business outsourcing is the new ‘in-thing’. And the trend is raging, catching up with small scale business ventures and startups.It’s like, whatever be your business need, a third person is always there! What’s surprising is the high demand, especially for outsourcing of accounting, HR and legal functions. While outsourcing of HR and legal functions may not raise eyebrows, accounts outsourcing is surely a sensitive issue. Most companies are nervous to share insider information on their financial details and thus wince at the thought of taking accounting services. But are accounting services really risky? Do their disadvantages outweigh their benefits and vice versa? A definitive answer to these questions isn’t possible because it all depends on the kind of service provider, the relationship with the client, contractual issues and ethical considerations. What we tackle here are some benefits and potential risks of accounting services that may benefit those who are at the fence or have already decided whether or not to go for accounting services.
Most often, companies need some form of accounting aid, especially if they are startups or small scale enterprises. That’s because devoting their entire machinery (they have a small workforce and few resources to start with) to matters such as accountsis not an option. And neither can they set up or maintain a separate division for accounting.Therefore, outsourcing their accounting services gives them one less non-core internal function to worry about.
Steven M. Braggs, author of popular books such as Accounting Best Practices and Bookkeeping Essentials argues that most accounting functions such as payroll and transaction processing are subject to automation and therefore are nonstrategic. Because they are of no importance to the strategic direction of a company, these functions should be outsourced so the company can focus on important strategic tasks that directly influence its position and profitability in the marketplace. Some benefits of accounting services include:
Going light on the pocket
By outsourcing all or some bookkeeping tasks, companies surprisingly save up on costs. They save on manpower requirements and infrastructure such as office space, hardware, and software. Taking accounting services from other providers alleviates the need to train or hire trained workforce. What’s more, the expertise and knowledge of financial professionals helps you find tax deductions, avoid late fees and other such financial liabilities that could have been missed by you or your in-house staff.
Chipping off more time
Taking accounting services helps you and your staff save up on time. Rather than spending hours managing books, you’ll have more time to focus on the strategic goals of the business. Moreover, you will also escape other tasks such as hiring, recruiting and overseeing the work of the accounts staff.
More staffing control
In the case of small businesses, one worker may double up as an accountant and an executive or a customer support officer or what not! Sometimes, businesses need more workers and sometimes they need to lay off workers. By outsourcing business functions, you will have more control over your staffing requirements as you only use the services as and when required, without worrying about hiring and maintaining specialized workforce.
Higher competency and expertise
There’s no doubt that third party service providers have more competency and expertise in the work they do. Moreover, to keep up with the competition, they update their skills constantly. That implies that by taking their services, you are bound to get good quality work and better expertise than what you could expect from your in-house personnel. These service providers take the work more responsibly. Accounting service providers hire their employees after extensive screening. So, you are guaranteed with better workers for whatever service you are seeking.
Minimizing downtime and maximizing business growth
Taking accounting services for auditing and bookkeeping helps in avoiding nonproductive downtime. Letting professionals handle these tasks ensures that business owners have more resources at hand to work on the core functions and growth of the business.
The financial and confidential nature of company accounts make it only logical to assume that sharing such information is risky. And for sure it is. However, making smart choices with regard to service providers and contractual agreements ensures you are insulated from these risks:
Trust and security issues
By taking accounting services, you are required to share insider information on valuable aspects of your finances. This kind of data is sensitive. Even if the service provider is trustworthy, other parties may sometimes be inclined to hack into such data.
Lesser managerial control
Outsourcing accounting functions to other service providers and contractors gives you lesser control over those aspects of your business. Moreover, as the services are provided by other personnel outside the company, there is lesser managerial control over them.
Increased dependence on others
Another disadvantage of taking accounting services is that after a point of time, you may become so dependent on third parties that it may be difficult to withdraw later on.
The Ultimate Question – To Take or Not To Take
Taking accounting services has both pros and cons. While the advantages outweigh the risks, it is always a good idea to be careful. Choose the firm wisely and make sure the contractual agreements signed are clear to you. Because of the sensitivity of financial data, such service providers have sufficient security protocols in place and hijacking by other parties may not be much of a risk. With the right approach, business functions outsourcing could spell tremendous growth for your business.