As the current 30-year mortgage rate hovers around 8%, and the 10-year treasury approaches 5%,…
Many companies and organizations find it difficult to hire the right accounting expertise at the right price in today’s tight labor market. Some enterprises struggle to find qualified team members, or they cannot afford to pay the salary of someone who has the skills they need. However, outsourcing your accounting function provides companies and nonprofits with a better option.
1. High Level Expertise
When you delegate your accounting tasks to an outside professional, you have ready access to a highly experienced accountant who is up to date on best practices. Accounting firms have qualified team members with expertise across that spans the entire spectrum of accounting roles — from bookkeeper to CFO — as well as specialized niche knowledge for you to tap as needed. That translates into performing your work correctly the first time, and in a cost-effective manner.
2. Access to the Latest Technology
Outsourcing provides ready access to sophisticated, updated accounting and tax software and other technology tools. Smaller organizations frequently lag behind their larger competitors on the adoption of such tools, which might be cost-prohibitive until they have been on the market for a while. Reliance on outdated systems could put you at a disadvantage. Accounting firms can spread the costs of early adoption across multiple clients so you need not wait for prices to drop.
3. Reduced Staffing Costs
Business owners sometimes regard outsourcing as just another cost. However, another perspective is to view outsourcing as an opportunity to cut your accounting costs while maintaining the same level of quality work. After all, staffing and associated payroll is typically one of a company’s largest expenses on the P&L Report. By outsourcing your accounting function, you can avoid the payroll expenses associated with staffing.
Outsourcing will also allow you to avoid the high cost (and frustration) associated with recruiting and managing staff. While you’ll still have to pay an accounting firm, their charges are usually much lower than employing a full-time in-house staff.
4. Scale Costs as Needed
Many businesses have fluctuating accounting needs during the year. For instance, they might be busier at year-end and tax time or when pursuing a major capital investment project. Outsourcing allows you to pay only for what you need, when you need it.
In effect, you can convert fixed staffing costs into variable accounting fees. With outsourcing you can dial your level of service up or down on demand. And you don’t have to worry about keeping full-time accounting staff busy in slow times to head off layoffs — or scramble to bring on new hires or pay overtime when the workload is more voluminous.
5. Strategic Resource Deployment
Delegating your accounting function frees up time for you to focus on core competencies and new business development efforts. For example, growing the business through marketing, operations, networking, and relationship building.
In addition, lower-level accounting staff with extra bandwidth can be assigned to work in other areas that could use more manpower, such as procurement or customer service. This can translate to higher quality customer service, increased customer satisfaction, and ultimately higher profits. Moreover, you won’t have to worry about critical accounting employees calling in sick, using leave, quitting, or otherwise leaving a gap.
6. Better Decision Making
External accountants who work with multiple clients across industries obtain a higher level of business intelligence than those who have worked solely for one company. You can leverage this expertise to make better, more well-informed business management decisions. Plus, accounting firms can usually answer your questions and provide analytics more efficiently than in-house staff that typically have fewer resources available to them.
7. Reduced Exposure to Risk
In-house accounting staff typically have their hands full keeping up with the day-to-day tasks, such as journal entries, invoicing, accounts payable, and monthly account reconciliations. They often find it difficult to stay on top of the latest tax, accounting, and regulatory requirements. Inadvertent mistakes can leave your company vulnerable to legal judgments, penalties, fines, and unwelcome attention. Accounting firms, on the other hand, closely monitor such developments and promptly respond by adjusting their processes and procedures accordingly.
8. Improved Fraud Prevention
The Association of Certified Fraud Examiners estimates that organizations lose 5% of their revenue to employee fraud every year — and 12% of frauds occur in the accounting department. Financial reporting scams are the least common type of fraud, but also the costliest, with a median loss of nearly $600,000, compared to roughly $100,000 for asset misappropriation schemes.
Using external accountants who are not in a position to profit from financial misstatement cuts your risk of fraud by company insiders. External accountants also are more likely than employees to immediately flag objectively suspicious activity, and they may have fewer opportunities to collude with others to commit fraud.
Accounting is not necessarily the most glamorous or enjoyable part of running a successful business, but it is essential. We are dedicated to serving the accounting needs of small businesses regardless of industry. We offer a broad range of services and expertise to meet our clients varied and unique needs. Contact us today to find out if we’re the right fit for your business.