Outsourcing started showing its existence from the 1970s; however, it came to be known as a strategy only in the early 1990s. Accordingly, companies started outsourcing their non-core activities to outsourcing firms to achieve operational efficiencies and reducing costs. There are multiple pros and cons of outsourcing a few functions to other companies. Still, it has become a trend nowadays, for it allows the host company to focus on its principal business and outsource the auxiliary services to its experts. One of the key functions that a good number of companies outsource is the accounting function since it is one of the most complex and time-consuming tasks. The key benefits of outsourcing accounting services are as under:
Reduction in the company’s operating costs
With attention to their critical business functions and less on the auxiliary services such as accounting, companies can eliminate the costs and expenses involved in managing these tasks. Companies are expected to get profits from the business they engage in and achieve the maximum return on investment. It is possible only if they do not fret over the not-so-important task of accounting but instead set out their resources where they can maximize their revenues quickly.
With the accounting function outsourced to the right firm, the company saves a lot of time that would have been spent on the complex task of record-keeping and managing finances. With these tasks being managed well, it allows the companies to put more effort in workload management. Hence, they can dedicate a good amount of time to what matters to them – to provide the best solutions and services to their clients, maximize profits, and create new business strategies.
Avoid hiring costs and time
If companies try to employ an internal employee for accounting and finance functions, they are required to put money in the hiring of such an employee. The time and costs involved in hiring a new employee and the related costs, including recruitment expenses, salaries, benefits, payroll taxes, and training expenses are enormous compared to outsourcing the same to expert accountants or accounting firms. Instead, companies should put their money and time into employing people required for their critical business function and not the auxiliary services.
Access to expert accounting resources
Expert CA firms and accounting professionals are better equipped than the company employees on providing accounting information of the company – that too with higher quality and in lesser time. With just one eye on the accounting statements and other financial information, they can articulate the financial performance of the company. They can divulge reliable information that can help the company’s senior management to make better strategic decisions. They can provide any financial information in the way needed by the company at any time and alert you on any critical finance and accounting related business signals that the company managers may overlook due to workload.
Increased focus on business scaling
When an essential function of accounting and finance of a company is outsourced to an expert outsourcing firm, companies can put their focus on what they do best. They can put their resources, time, and strategic mindset to scaling the key business activities that are important from their business point of view. They can plan and strategize their core business, strengths, key clients, and key geographic areas to achieve maximum profitability. With no worries about the accounting issues, they can concentrate on acquiring new clients or expanding to new geographic regions or probably entering into some new related business of their core business sector.
Access to best practices related to financial decision-making
When expert accounting professionals handle a company’s accounts and finance, the companies can expect an unbiased, qualified, and objective opinion. It helps to ensure that the company gets customized services with the required expertise at the right time. Expert accounting firms can give the best advice on financial decisions to the companies after consideration of all the factors that may influence – be it macroeconomic or related to the company.
Use of automated solutions for accounting
Outsourcing firms use accounting automation software to save time and reduce risks because it reduces human errors. This software enables them to identify any errors or potential problems early on in the process and rectify them at the same time to avoid more significant issues later on. This also helps the firms to avoid any possibility of manipulating accounts and thereby avoid any internal fraud.
Curtailed risk of errors
There is a high risk of errors in a task if you are not an expert in it. Accounting is such a task. If not done by an expert, it may lead to unintended repercussions, which may lead to further issues for the company. Therefore, it is better to leave it to the experts as it reduces the risks of losses to the company.
Any mistakes made in the calculations or reporting of accounts can turn out to be very costly for the company. It may lead to higher penalties, staggering interest charges, or litigation expenses that may drain the company of its profits made. Moreover, any judgments against an entity will tarnish its image and may repel the existing or potential clients from the company. They may look for business elsewhere, thereby harming the company’s market position.
Increased confidentiality of financial data
With the outsourcing firm looking over your accounts, it is accessible to only a few people. In this way, the data is locked uptight, and there are lesser chances of being leaked. On the contrary, if managed internally, there are chances of informal discussions amongst employees regarding the numbers, leading to more repercussions that are negative. Therefore, to maintain the integrity of the business accounts and finances, it is best to hand it over to the experts.
Access to more insights on the industry and economy
If the company outsources its accounting function to the outsourcing firm, it not only gets a solution to its accounting and reporting needs but also obtains access to a good source of information regarding new financial and accounting laws and policies. With this, the company will not be required to put effort, time, and money for a good information source for such information – either internally or externally. On the contrary, the accounting professionals will provide information on the new or expected laws, policies, procedures, required documentation, and technologies that may impact the company’s finances or accounts. They will also give a hint on new economy-wide rules and regulations related to budgeting, taxes, legal constraints, company laws, and many more. All these will help the company to comply with all the regulatory requirements and to stay current on new procedures.
Even with all of the benefits mentioned above, it becomes immensely crucial for the company to select the right outsourcing partner; otherwise, it becomes a burden instead of a relaxation. With diligent research, companies can find the right partner for their accounting needs so that they can put emphasis on their key business and thereby save time and money