Firms must understand the pros and cons of outsourcing accounting services to thrive. Amid the soaring inflation, SMEs have faced challenges in the accounting department, which involve high salary demands, inexperienced resources, and training costs. This can result in outdated financial records, errors in financial records, and unforeseen expenses. This is where accounting outsourcing comes in.
Accounting outsourcing can help SMEs hire highly skilled accounting resources without compromising on quality, reducing their overhead expenses, enhancing productivity, and freeing up resources.
However, there are also some challenges that SME owners might encounter while outsourcing their accounting. Thus, it is important that before hiring an outsourcing accounting firm, SME owners explore the pros and cons of outsourced accounting and whether their firm needs it at the present moment.
Following are some pros and cons of outsourced accounting that SME owners can use to improve their company’s financial performance and achieve business objectives.
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Pros of Outsourced Accounting Services
1. Cost Reduction
Cost reduction is a major advantage that outsourcing accounting can offer struggling SMEs. Most SME owners seek this priority. By hiring highly skilled accounting resources at a fraction of the US cost, business owners can invest their hard-earned revenue in core areas of their firm. This can enhance their service and/or product quality, attracting more returning customers.
Research by Ivana Tomašević titled “Factors Influencing Accounting Outsourcing Using the Transaction Cost Economics Model” shows that more companies are opting for outsourcing accounting.
2. Embracing Technology:
With outsourcing accounting firms, business owners can get access to the latest accounting tech in the market. From cloud-based solutions to robotic process automation (RPA), a reputable outsourcing accounting firm relies on automation to streamline accounting processes and complete more work in less time. This ensures that you are updated with your company’s financial records.
Moreover, with international clients, business owners often travel outside their state or country. With outsourced accounting, SME owners can access their financial database 24/7. If there is a problem to be solved, they will not have to wait for the working hours to start, as outsourcing firms can provide them with resources from different time zones depending on their needs.
3. Reduced Risk
By hiring an outsourcing accounting firm, you can minimize the risk of human error as you get access to expert resources, and the bookkeeping is usually automated using bookkeeping tools. Further, these outsourcing firms have built-in highly secure systems that ensure data security.
A reputable outsourcing firm also does not engage in any suspicious activities that might harm its reputation, so this way, your accounting records are in the hands of trusted and credible service providers.
4. Detailed Financial Reporting
By outsourcing your accounting, you can get feedback from highly skilled experts in their industries. Their valuable insight can help your firm gain a financial foothold. This way, you can make informed financial decisions by analyzing financial information such as cash flow and profit and loss statements with their help.
5. Business Efficiency
Outsourcing their accounting services allows business owners more time to develop business strategies and focus on other core areas of their business. With expert financial insight already at your disposal, you have more time to plan for your financial endeavors and implement business development strategies. This way, you can mitigate financial risks and drive sustained growth for your business.
Cons of Outsourced Accounting Services
1. Unprofessional Company
Choosing an unreliable outsourcing partner can put your company’s finances at risk. For instance, by going with strangely low-cost accounting firms, you might have to deal with highly inexperienced accounting resources. This can lead to unmet deadlines, outdated financial records, and other accounting errors, such as inaccurate books.
Before hiring an outsourcing accounting firm, make sure you have done your research and know your company’s accounting needs. It is always better to consult an accounting expert before going for accounting outsourcing. This can ensure smooth workflow and mitigate potential accounting setbacks.
2. Lack of Communication
Unreliable outsourcing accounting firms might also have a transparent communication problem. For instance, they might not respond in the hour of need, which can cause agitation as you may not be able to access your financial information at the required time. Moreover, with outsourcing accounting firms, you do not have in-house resources, so you might encounter challenges such as network problems and difficulty assigning tasks.
3. Limited Visibility
When hiring an external accounting firm, you might not be able to see how the work is being done and how your financial information is being handled. Consider going for a reputable outsourcing accounting firm with considerable client testimonials to ensure that your financial information is in the right hands.
4. Data Security Concerns
While going for an outsourcing accounting firm, you might be asked to share sensitive financial information with your outsourcing provider, which some business owners might not be comfortable with. To ensure data security, hire an outsourcing accounting firm that has integrated a robust data security system in place.
5. Potential Cultural Differences
Since outsourcing firms hire resources from all over the world, cultural differences may lead to different work practices. Understanding and working around these cultural differences is the key to having a successful outsourcing experience.
Expertise Accelerated: Your Gateway to Outsourced Accounting Resources
With Expertise Accelerated, business owners no longer have to worry about the cons of accounting outsourcing. They also rely on Expertise Accelerated to hire outsourcing accounting resources and streamline accounting processes. This way, they have enough time and investment to make informed decisions, and drive sustainable financial growth and build customer relationships.
Further, with the help of expert financial advice from experienced resources, business owners can stop worrying about the financial risks their firm might be vulnerable to, as their valuable insight can help them mitigate financial risks.