Keeping the books properly saves a business from many problems and gives a true picture of its operations. To do this, a manager can hire an experienced accountant or even a team of specialists — economists and accountants. That, however, means paying all of them salaries plus payroll taxes, which cuts into overall profit and can end up turning it into a loss.
There is another option — hand the bookkeeping to a specialist outside firm and pay only under a service agreement, which works out cheaper in the end. This arrangement is called accounting outsourcing, and it is used more and more by businesses whose managers understand the numbers and want every part of the business to pay its way.
In short, accounting outsourcing means handing over all accounting records and functions to another company that specialises in accounting services. Such firms employ experienced, knowledgeable staff who can step in at any stage to put your accounts in order, and who can also help you develop a sound accounting policy, prepare the balance sheet and handle banking paperwork. They can take over your accounting entirely or only for a period — while your accountant is on leave, off sick or after they have left.
Useful as it is, accounting outsourcing has its pros and cons, which we look at below.
Price
Outsourcing lets companies focus all their efforts on core operations and key business tasks without spreading themselves thin on secondary functions. Analysts estimate that paying for quality, professional bookkeeping costs 20–30% less than keeping an in-house accounting team. Skilled specialists will do the work more professionally and faster, without needing expensive software. Used properly, accounting outsourcing pays for itself in full, and you can rest easy about the state of your accounting records and timely reporting.
Professionalism
Outsourcing firms deliver professional bookkeeping because they focus on a narrow field. This lets them follow global and domestic trends in accounting closely, keep improving their staff’s skills and regularly upgrade to more modern, efficient equipment. All of this raises the quality of the services and keeps the standard of their work high.
Savings
Outsourcing lets you save on salaries for an accounting team while still getting the full range of accounting services:
- preparing reports for higher-level and state authorities;
- accurate calculation of tax payments;
- timely filing of various reports with government bodies;
- restoring lost accounting records, and other work.
Choosing the right company
For outsourcing to work well, do not rush to hand your documents to the first firm you come across: you know nothing about its capabilities, or about the integrity and professionalism of its staff. Try to find out what the company you have in mind has achieved and how many clients it has.
Still, as we all know, nothing is perfect, and bringing in an outsourcer has some drawbacks:
- there is no certainty that the outsourcer’s staff member knows your line of business well enough, in which case the accounting they set up may not be entirely correct;
- primary documents may be partly or completely lost when handed over to the outsourcer;
- there is no ongoing control over the work of the outsourcer’s staff member.
Of course, most of these drawbacks can be addressed and, as a safeguard, covered by separate clauses in the contract. Only the head of the business, as the person legally responsible for its results, can decide whether to keep the books in-house or bring in professionals.
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