Advantages and Disadvantages of Outsourcing Your Accounting Services

Outsourcing Your Accounting Services

Managing your finances effectively at every stage of your business journey should be at the top of your priority list. As your company grows, it can be hard to keep up with demand and the question of outsourcing your finance department will inevitably pop up.

Building an in-house accounting team can be time-consuming and expensive while bringing many added responsibilities, such as upskilling or recruiting, that you will need to stay on top.

Creating a partnership with a trusted external provider can help to bring out the maximum of your business. As the global accounting outsourcing market is projected to reach $53.4Bn by 2026, outsourcing is undoubtedly a popular option. But what are the pros and cons of working with an external financial partner?

Let’s unpack them below.

The Benefits of Outsourcing

1. Increased Efficiency

Recruiting highly skilled and efficient talent in the current market takes a lot of work. For example, in the case of SMEs, efficiency is the number one reason business owners decide to outsource. Working with an external financial partner can give you peace of mind while expanding your organisation.

Companies focusing on outsourcing services have access to the latest software and tools on the market which can provide a competitive advantage to you. You will be able to focus more on the core of your business without continuously looking to upgrade your tech stack or investing in upskilling your in-house employees.

2. Maximised Accuracy

As part of the collaboration with your vendor, they will help you identify the right goals and performance indicators to measure your company’s performance and the efficiency of your partnership.

Established providers of outsourced accounting services keep themselves to the highest standards in order to maintain a high reputation; therefore, you will not have to worry about employees cutting corners or not having the capacity to follow procedures accurately.

Building a high-functioning in-house finance team can be a long and expensive process, as it might take a few recruitment cycles to find the right fit for your business.

3. Saving on Employee Costs

One of the main reasons most organisations explore outsourcing is cost reduction, with 63% of businesses choosing outsourcing because of its cost-cutting benefits.

Outsourcing your finance department can eliminate fixed employment costs such as recruitment fees, training costs, onboarding, benefits, office supplies or software subscriptions. These can quickly eat up a significant chunk of your revenue and leave you with less cash to grow.

Employing an external financial partner means paying only for the services you need, cutting out unnecessary tasks and extra fees.

4. Easy to Scale

When your company’s growth starts to accelerate, keeping up with the demand is often challenging, and you might even find yourself short on staff. But, if you decide to outsource your finance function, you can grow your business quickly and efficiently without putting too much pressure on your employees.

There’s no need to hire new employees when your business production spikes, but you will also not have to turn to uncomfortable layoffs during quiet periods. An external financial partner can easily adjust their services depending on your company’s growth stage, so you no longer have to worry about bringing in new staff members.

5. Access to Expert Knowledge

With an external financial partner, you can tap into world-class expert knowledge at no added cost. Your provider specialises in this area; therefore, you can reliably count on them to keep up to date with the latest regulations and policies while providing continuous training to their staff and access to the newest software.

Their expertise can get you through multiple hurdles in your business journey, from funding to business loans, tax reports or financial planning and help you transform or grow your company. An expert financial partner can provide you real-time data-driven reports that you can leverage to make the best decisions for your next moves.

The Disadvantages of Outsourcing

1. Loss of Control

When you outsource your financial team, you will have to make peace with the fact that your accounting department will no longer physically sit within your business, and you will not be able to approach the individuals within the team personally.

This is typically accompanied by the concern that you would be unable to communicate with or supervise your financial staff. However, with collaborative tools and a cloud-based system, this worry is simple to address.

When working out the initial terms of your agreement, establish clear communication channels and guidelines with your outsourced accounting services provider, as miscommunication can negatively affect the partnership.

Make an effort to have an open dialogue and establish a good partnership through regular check-ins and reporting cycles.

2. Hidden Costs

If an outsourcing contract is not transparent or well-managed, hidden costs can quickly add to your business outgoings. Take time to work out the right arrangement and budget with your chosen provider that fits your business.

This will alleviate stress for both parties and help you to avoid unpleasant surprises when the first invoice arrives. Review every part of your contract and ask as many questions as you would like to set clear expectations and boundaries.

3. Security Concerns

Opening your business to an external partner might be a source of concern. 65% of outsourcing buyers are worried about cyber risk when sensitive data is processed outside.

As we have previously highlighted, choosing the right partner is the number one technique to avoid any security risk. Investigate what security measures and data handling procedures an external financial partner uses, and make sure you ask for references and previous use cases to cover all bases.

The best outsourcing firms have access to the most up-to-date software and cloud technology, ensuring your private data is as secure as possible. External financial partners can be more secure in many ways, as they can eliminate the risk of human errors with their strict protocols.

The Final Word

As with any business decision, choosing to work with an external financial partner can come with challenges. However, you can mitigate most of these by finding the right partner for your business.

At Sanay, we can help you address your concerns about using an external financial partner, enabling you to succeed in your business journey.

Reach out to us now!