Maroof HS CPA Professional Corporation, Toronto

Outsourcing Accounting: When & Why?

should i outsource my bookkeeping and accounting?Outsourcing is not a newer concept!

Businesses outsource their functions and processes for multiple reasons – to lower costs, increase efficiency, access to expert and specialized solutions and to focus more on core business processes that add value to customers’ experience – all of which lead to business growth or sustainability whatever the objective may be.

With swiftly and continuously changing paradigms for business operations, only the companies with a competitive edge can sustain in the long run; which demands a steady & undivided focus on core business activities.

Said by Lee Kuan Yew:

‘If you deprive yourself of outsourcing and your competitor does not, you are putting yourself out of business.’

Let’s admit that in the SME sector, entrepreneurs and business owners love to multi-task by running all the key functions by themselves. Why? Sometimes, to cut costs and at others not to lose control of critical business functions!

Do they actually cut costs or get better control of critical functions like accounting and bookkeeping? The answer is “not much”. This is where they lose sight of their long-term objectives by focusing more on Non-value-added activities rather than core value-added activities. Multitasking not only burdens the workload but also causes damage to productivity.

Outsourcing accounting and bookkeeping have become a trend in recent years because now we know that accurate and timely accounting is a booster to business success.

When to Outsource accounting and bookkeeping function?

There is no specified time when it comes to making a decision whether to outsource or not! It can help at every stage of the business life cycle.

If you are a startup, consider outsourcing. This will save precious working capital being spent on developing an accounting department and hiring human resources. Hiring an accountant is not cheap!

If your business is at maturity or decline, here access to specialized skills can certainly add value to your business so that you can add value to your customer. At the end of the day, this is where it comes down to delivering a better customer experience to ensure customer retention.

Not an exclusive list, but below are few of the indicators when businesses should highly consider outsourcing accounting function

Your work is piling up: When the daily tasks start piling up and things are not getting done at the time, you may need outside help to manage that.

Not being able to cope with increased customer traffic: Are you facing challenges with dealing customers due to lack of time? With the increasing customer traffic, it usually becomes hard to deal with each of them when a substantial time is spent on managing accountants. Here diverting resources from the accounting department to core business operations can certainly help in achieving a better whereas external resources can help here.

“A satisfied customer is the best business strategy for all” – Michael LeBeau.

You are facing “Shortage” of Specialized skills: Do you feel that you or your team’s skill set is not enough for advanced accounting functions? Hiring an accountant is not a problem, hiring the right one with the right skills is! So why struggle to go through a never-ending process of finding a skilled accountant, not to mention the fact that higher skills have higher costs. With an outsourced accounting function, you can get quick access to a specialized and qualified talent pool at a lower cost.

“Do what you do best and outsource the rest” – Peter Drucker

You are scaling your business: If you are planning to extend your business and your in-house team can’t take the burden of the new extension, Outsourcing can be a good option for that. Outsourcing from the beginning can maintain all the work and records. If you still need to maintain an in the house accounting department, augmenting the team with external resources can boost efficiency and productivity.

Increased Fraud Risk: Maintaining an in the house accounting department is one thing and an effective one is another! An understaffed accounting department is a mere bunch of paper-pushing people. Such a shortage of staff weakens or fails the internal controls and increases the fraud risk. Here this is critical either to increase the number of staff – to ensure segregation of duties separating recording and custody of assets role – or outsource the process where later is cheaper and more effective in such a situation.

What to outsource?

What should be outsourced? This is not an easy decision to make for any business. It needs a lot of thought. Usually, tasks related to key business operations need special consideration whereas back-office operations are easy to outsource. Some of these roles are below:

Repetitive tasks: Now there are some daily time-consuming tasks such as data entry, recording bills to account payables or receivables, posting journal entries related to general accounting. If you are maintaining an in-house accounting department, these repetitive tasks may take a lot of precious time. Outsourcing these kinds of tasks is a good option so that accountants can focus more on tasks that aid in decision making.

Specialized tasks: Sometimes, your bookkeeper does not possess the skills to perform advanced financial reporting tasks due to limited skills and hiring a CPA or Chartered accountant posses pressure on your cash flow and financial performance, it’s best to outsource. You can access the top talent at affordable prices.

How to pick the right business partner?

Giving your critical business processes, like accounting, on to the other hand is not an easy decision to make. The selection of the right partner is very important. Outsource your business to the company which makes the best fit for your goals and objectives. Some of the key factors which affect selection decision for the accounting firm are:

Cost and Fee: this is by far the most important one if the objective is to lower the costs. While making a comparison of different proposals, do not forget to take into account payment rates, payment frequency and taxes (sales tax or VAT).

Reputation: consider the reputation of the firm you intend to hire. Pay special attention to their ethical and professional behaviour or verify the credentials with member bodies. Always go for the firms with team members having their credentials in good standing.

Quality of Human Resources: Ask specifically for the educational and professional qualifications of the team which will be assigned to handle your accounting function.

Flexibility: Before signing the contract check their service structure and how it will work as per your requirements. Prefer the firms who are flexible to adjust to your workflow rather than imposing their own workflow on your business. It can make a difference between a good or a bad outsourcing decision.

Security: Data security is very important when you outsource your accounting and bookkeeping. Reputable firms with individuals having industry-recognized credentials put a higher emphasis on clients’ privacy and confidentiality due to standards set by the governing bodies.

One way or another, outsourcing your accounting and bookkeeping function plays a key role in your business growth and success if rightly decided.

Fatima Aslam

Fatima Aslam

Fatima Aslam writes exclusively for Maroof HS CPA Professional Corporation and Innovation Hub on common topics related to business.

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Fatima Aslam

Fatima Aslam

Fatima Aslam writes exclusively for Maroof HS CPA Professional Corporation and Innovation Hub on common topics related to business.

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