Managing your accounts without any accounting tool or expertise can be a real struggle.
Whether you are a startup or have an established name, every business requires an efficient solution to financial management.
Bookkeeping and accounting are necessary for managing business finances.
However, both tasks are equally time-consuming, demanding your attention for data accuracy for informed decision-making.
As a business owner, you already have a dozen tasks lined up for you. You can’t afford to spend hours of your day on accounting.
On the other hand, you can hire a dedicated in-house resource to do your accounting.
Of course, their recruitment, training, and retention come with the territory — a costly decision for a startup, might I add.
Now you may wonder if there’s a way you can regularly maintain your books and manage your accounts without adding strain to your budget.
Well, you can outsource your accounting.
Here’s a detailed guide to do exactly that.
Key Takeaways
- 37% of businesses outsource their accounting.
- Outsource your accounting to increase data accuracy and get strategic insights.
- You save time and cost by outsourcing your accounting.
- Make sure you outsource accounting to a service provider that is aligned with your current needs and understands the quips of your business.
Outsource accounting for businesses
Let’s understand what it means to outsource your accounting first.
When a business outsources its accounting, it hires a third party to manage its accounting operations and get control over its finances.
37% of businesses outsource their accounting to a reliable service provider.
What does it mean for the business?
Well, it means that their bookkeeping, financial reports, payroll, account payables and accounts receivables, and tax-related tasks are handled by this third party.
The reasons why businesses outsource their accounting include but aren’t limited to flexibility, cost reduction, and operational efficiency.
4 reasons why you should outsource your accounting
As mentioned, when a business decides to outsource its accounting, there is a valid thought behind it.
- 24% of small businesses outsource their accounting to increase operational efficiency.
- 18% of businesses outsource their accounting to leverage their professional expertise.
- 16% of businesses outsource their accounting to create flexibility.
- 15% of businesses outsource accounting so their in-house employees can focus on core business operations.
Let’s discuss the 4 main reasons why businesses outsource their accounting.
1. To increase data accuracy
With so much going on in a business, how can you focus on every minor detail of your finances?
The likelihood of error is quite high – something you cannot afford where every mistake has a price.
By outsourcing your accounting responsibilities, you can pay undivided attention to your core business operations, fully aware that someone professional is handling your accounting.
An accounting agency will give you a dedicated resource. They will ensure your financial data is up-to-date, accurate, and according to the latest accounting principles.
This will be the best decision for your business whether you need real-time financial updates or accurate financial reports.
They will also have access to the latest accounting tools and NetSuite integration that automate all financial transactions and data, further reducing the chances of manual errors.
2. To get strategic insights
Imagine having accurate and up-to-date information on your accounts but not the tools and expertise required to analyze this data for making profitable decisions.
Well, this is where the role of an accounting agency comes into play.
When you outsource your accounting, you don’t simply make them responsible for the desk work.
On the contrary, you outsource to get strategic insights.
You expect them to provide you with in-depth financial analysis to take your business to the next level.
They track your finances to create and analyze your financial statements. And use it to guide you toward better decision-making.
Also, they can help you become more proactive to avoid economic disasters impacting businesses within your industry.
3. To access advanced technology
One of the key reasons why businesses outsource their accounting is the lack of access or understanding of advanced accounting tools.
Technology is necessary not only to manage your financial data but also to make the most of it.
When you outsource your accounting, your accountant can access the latest accounting software to track your day-to-day financials.
The benefit of technology is the automation of your work processes.
You save time, money, and quite frankly energy on monotonous tasks, increasing overall efficiency, increasing data accuracy, and productivity.
4. To reduce overhead costs
Outsourcing reduces your operational costs.
Instead of hiring an in-house employee to manage your account, you can outsource this responsibility to a dedicated resource to whom you don’t have to pay monthly salary or look after their benefits and miscellaneous expenses.
This dedicated resource has the training necessary for handling your account and the expertise to analyze your data and guide you for better performance.
Here’s the list of costs you save:
- Office space
- Monthly salary and annual increments
- Professional development
- Benefits
It’s a win-win.
4 benefits of outsourcing your accounting
You now understand why businesses outsource their accounting.
Now let’s explore the benefits they get from it.
1. It helps them automate and increase productivity
A service would have access to accounting software and other integrative tools to automate different business processes, including accounting.
This way, your workflow speed will improve, impacting the productivity level without reducing the accuracy of data.
2. It provides easy access to expertise
A reliable agency can handle your finances, looking into every aspect of your business.
They will be responsible for drawing strategic insights by evaluating the revenue, cash flow, and other financial data.
This professional advice will shape the financial state of your business, helping you make mature decisions.
3. It saves their time and money
Getting a third party onboard is more feasible than hiring and training a full-time in-house employee.
You have to consider their salary, benefits, and other miscellaneous costs.
It can be a difficult choice for a startup, especially when your resources are limited.
By outsourcing your accounting, you ensure someone is regularly managing your accounts without weakening your financial position.
4. It prepares their business for scaling
Every business has different needs at different stages.
A dedicated accounting team that understands your growing needs is crucial. It shows their flexibility – something every business needs in order to scale.
When you handle your own books, the volume of data can impact how many hours you spend.
This is not the case with outsourcing.
A dedicated team of accountants will support your growing need instead of turning it into a hindrance.
Outsource your accounting – A step-by-step guide
Here is a step-by-step guide to outsourcing your business accounting.
Evaluate your options
Go through all the options that you have.
There are different types of accounting services, whether you want round-the-clock services or support for tax preparation, find a service that understands your needs.
Make sure you have properly mentioned what you are expecting.
For example, write down the tasks you expect them to do. Is it bookkeeping, payroll processing, or financial reporting?
Set a meeting with every candidate and have a detailed discussion to decide which agency is more aligned with your goals.
Also, when you choose a service provider, keep your budget and their pricing model in mind.
Always look into their track record and get references.
Discuss your expectations
Before you begin this professional relationship, do set your expectations straight.
Let them know how you prefer to communicate and the expectations regarding deliverables.
You will discuss your timeline and ensure both parties are aligned with each other’s needs.
This step is necessary for businesses that are planning to scale.
Your accounting service providers should meet your growing demands. This means they should handle the increasing volume of data when the time comes.
Negotiate
Negotiation is an important part of the deal.
However, there are various aspects that you must mention in your contract. Some of them are listed below.
- Payment schedule
- Payment method
- Confidentiality terms
- Termination terms and conditions
Onboarding
After you and the service provider sign the contract and start this professional journey, it is time to get used to the process.
This may come with a slight discomfort in the beginning.
But the idea is to get used to a process both parties find comfortable.
Set regular meetings
The more frequently and openly you communicate with your accountant, the better it is for your business.
Therefore, have one or two days dedicated to such meetings with your accountant.
Here are some of the things you can discuss during these meetings:
Weekly, monetary, quarterly, and annual performance
- Feedback on different business avenues
- Investment opportunities
- Cash flow and financial management
- Get financial insights
Track performance
Always track your performance to see if you’re meeting your goals.
By goals, I am referring to the objectives you wrote down while searching for the right accounting service.
And this is why I wanted you to have clear goals as it will help you compare your expectations with reality.
2 mistakes to avoid when outsourcing your accounting
Outsource your accounting to the right agency.
While it shouldn’t be a problem should you follow my step-by-step process above, there are still some rookie mistakes that you can make.
For example:
- Choosing service providers that are not aligned with your needs
- Choosing service providers without experience in your industry
The Bottom Line
Outsource your accounting to free up time to focus on core business activities and create business strategies.
By outsourcing your accounting, you benefit from automation and technical expertise that you may not have otherwise.
Also, you cut down on your costs and save time significantly.
Ledger Labs has been helping businesses of all sizes and industries for over a decade.
We have the right tools and expertise to guide you through different phases of your business.
Let’s set up a meeting so you can learn about our accounting service in detail.
