Accounting in many businesses is relegated to a part-time bookkeeper, or the responsibility may fall squarely on the business owner. Business owners know deep down inside that neither of these options is in their best interest. They may even have a sneaking suspicion that they are losing valuable opportunities to analyze and make decisions based on solid financial data.
One way many mid-sized businesses can solve this problem is by outsourcing their accounting functions, says Joanna Eggett, associate director and head of the Outsourcing Department for SS&G Financial Services Inc. “By outsourcing accounting, a business can have anything from simple bookkeeping all the way to payroll and controller services taken care of by one firm. Outsourcing saves money in payroll and overhead costs, and it frees up the business owners’ time.”
Smart Business talked to Eggett about the advantages and disadvantages of outsourcing accounting functions, and what to look for when seeking an accounting services provider.
What is the major benefit to outsourcing accounting for a mid-sized company?
It helps the owner stay focused on the business. It takes the onus of the day-to-day accounting tasks off the owner’s shoulders and into a place where it’s properly taken care of. This frees the owner to focus on core duties that are important to growing the business.
Are there other benefits to the company?
Outsourcing accounting functions instills a discipline and efficiency in the accounting process that is often difficult to get if these duties are done by one bookkeeper or the owner. There’s a lot to be said for having professional expertise at a business owners’ side, particularly if the accounting firm has access to all kinds of professionals within the firm, such as experts in tax, auditing and accounting.
Outsourcing saves the company money in a variety of ways. Businesses save on personnel and training costs as well as the cost of upgrading technology. If a company has multiple locations, outsourcing can eliminate the need to have a bookkeeper in each location and centralize the entire company’s accounting functions.
Are there any disadvantages involved with outsourcing accounting functions?
Yes, there are two disadvantages that the business owner needs to seriously consider. The first is that outsourcing could mean that someone in the company will lose his or her job. If a company has an entire accounting department, this may mean that many people will lose their jobs. An owner needs to carefully weigh what this will do to company morale, particularly if the business is older and established and has had an accounting department for many years.
This leads to the second disadvantage, which is the decrease in company morale and loyalty should you let go an entire department. This may not be an issue in a younger company that does not have its accounting practices as established, or if there is a sole bookkeeper.
What are some typical accounting jobs that are frequently outsourced?
Accounting, controller, bookkeeping functions and special projects such as budgeting, report customization, accounting software conversions, streamlining and documenting of processes and procedures. With the advancement of Web-based accounting programs, a company can outsource its accounting to places other than its hometown. This has led to outsourcing companies starting up in places such as India. Of course, any time financial information is transferred electronically, there is always a need to consider the security risk of the data. On the other hand, the ability to have information at your fingertips can be a very powerful resource.
What should a business owner do before attempting to outsource a project or ongoing work?
He or she needs to determine precisely which functions need to be outsourced. For example, an owner may outsource all accounting functions but retain the company controller to manage the process.
Next, interview several reliable accounting firms; find a company that is well established in the community and is referred to you by a business associate or other trusted adviser. Spend some time researching your options. I would recommend doing even more diligent research on companies that may be just starting out or that are located in a foreign country.
Then narrow choices to companies that have knowledge of your specific business or niche. You also want to see if the firm is compatible with your own corporate culture. Look at firm’s ability to customize services according to your specific needs. Cost is also a consideration, which can be hourly, monthly or a fee based on the number of transactions.
JOANNA EGGETT is associate director and head of the Outsourcing Department of SS&G Financial Services Inc. Reach her at (440) 248-8787 or [email protected].
