Accounting plays one of the most pivotal role in running a business, it not only helps you to track your revenue and business expenditures but also provides you with financial information which you need to make business decisions. Yet, you will often see that it is one of the least talked about topic in any industry. People would rather talk about their next big idea, how they want to expand their business and the upcoming challenges than about their business costs and profits!
Whether you are a small, medium or a large business, you must always keep track of your expenditures, and make sure that you get the maximum Return Over Investment (ROI) over any business costs that you sanction.
Any smart business owner will either do the bookkeeping him/herself or will hire an accountant to keep track of finances. This is because in order to keep the operations running, the owner needs to keep track of accounting debits and credits accurately and get regular reports about the financial status of the business.
Below is the list of contents for this post, you can click on the section you are most interested to read to directly jump to it:
Table of contents
1. What is Finance and Accounting Outsourcing?
Finance & Accounting outsourcing is the process of hiring a third party accounting firm for your business rather than having an in-house accountant. If a domestic accounting firm is hired, then it is called onshore outsourcing, while if an outsourcing firm from another country is hired its called offshore outsourcing. As we will see, accounting is outsourced due to many reasons and can be done at any different stage of a company's life depending upon the situation it is facing.
2. When to Outsource Bookkeeping?
For small and medium sized businesses, where the owner mostly does his own bookkeeping, there comes a point where the owner is better suited to use his work time on more valuable part of operations (such as growing the business, taking part in important meetings, making key business decisions, etc.) than to oversee the accounting and finances. It is at this point that the owner would either hire an in-house accountant, or as a better alternative outsource accounting services to an outsourcing company to be more cost-effective.
Conditions that make businesses think about outsourcing its accounting and finance is different for each type of businesses, some of which is elaborated below:
Small and Medium Sized Businesses
Below are some of the conditions, which if met, is the best time for a small business to think about outsourcing:
Increasing Revenue: With increasing revenue, accounting becomes more complex and time consuming, at some tipping point it makes it more worthwhile to hire a virtual accountant than to do it yourself.
Looking for outside investors: Any Investor would scrutinize your finance very thoroughly before wanting to make an investment on your business. It is critically important to have a specialized firm handle your accounting long before you decide to have investors.
Accelerated growth: Similar to revenue increase, accelerated growth also makes accounting more complex and time consuming.
Data-based decision making and sophisticated financial reports: For either of these you need a professional to handle accounting unless you are an accounting expert yourself!
Increasing work for a CEO: As a CEO, as your work load increases you will have to use your time more efficiently, and focus on work that is more valuable than accounting.
Often, outsourcing bookkeeping services for small businesses is very cost effective as the business can hire a virtual accountant at very competitive rates, and thus have their accounting be taken cared by competent professionals.
Large Corporations
For large corporations outsourcing bookkeeping is a must if it is more cost efficient to hire a third party to handle its accounting rather than invest in an in-house department. This is specially true for corporations that are in a stage that they have to focus on core business parts and cannot invest infrastructure on non-core part of operations.
3. Reasons to Outsource Accounting Services
There are many reasons for why businesses outsource accounting. According to Deloitte's Global Outsourcing Survey done in 2016, the top three reasons are to save costs, to minimize capacity of in-house employees, and to invest and focus more on core business functions. Other important factors include outsourcing being critical to the needs of the business, having access to intellectual capital who are professional at what they do, and for the betterment of the quality of the service provided.
4. Accounting Outsourcing Pros and Cons
Just like any other business decision, outsourcing also has some advantages and disadvantages that needs to be addressed. A smart business will always weigh the benefits it will have in outsourcing against the disadvantages before deciding to hire a third party. They will also want to address any drawbacks and resolve them along the way.
Benefits of accounting outsourcing services:
There are 7 primary benefits of outsourcing bookkeeping and accounting, which are:
Saving costs: As previously highlighted, hiring a virtual accountant or an external firm means that you don't have to invest in infrastructural costs of having an accounting department in-house. It also reduces your operational costs as virtual accountants and accounting outsourcing firms are considerably cheaper than an in-house employee.
Being able to focus on work that really matters: If you are a CEO who previously was handling accounting all by yourself, hiring a third party means now you have free time to focus on other things. If you already had and in-house employee as an accountant, outsourcing frees up additional resources which you can now allocate to other parts of operation.
Hiring professionals: Virtual accountants and experienced accounting outsourcing companies are not only professionals they are also certified with having studied in the relative field. So when you hire them, you know that you will get better quality work than say if you were doing it yourself.
Efficient use of resources: Along with saving costs, you are also able to allocate the freed up resources in your office (whether that be money you saved from reduced costs, on unused infrastructure) to more efficient use.
Dependable service: If you choose an experienced accounting outsourcing service provider, they will provide their service in a timely and reliable manner.
Security: Accounting outsourcing firms enforce rigorous and very strict security measures to secure your data. These measures are often more strict than what a small or medium sized company may have in their own office (because outsourcing companies have access to confidential info from many different clients and thus have adhere to strict security). So hiring them makes your data more secure.
Reduced fraud: Quality accounting outsourcing service providers ensure that there is reduced manipulation because there are multiple set of eyes overseeing the team/employee.
Disadvantages of outsourcing accounting:
Hidden charges: Some third parties may have hidden charges in their invoices. So being clear with your outsourcing partner on what you are paying, prevents this from happening.
Decrease in control: When you hire an external entity for your accounting workload, you inevitably loss some of the control which you otherwise may have had if you had an in-house employee. Ultimately, you have to decide how much autonomy you will give them, and what tools you will use to oversee your virtual accountants for supervision to retain some of those control.
Distance apart: Hiring offshore team means you are miles apart from your accounting team. This means communication might not be always instant and there can be sometimes some delays in relaying information over email. But living in the age of globalization, there are lot of ways to mitigate this issue. Ensuring that your accountant works in a shift that is the same as your working hours, using instant message and video calling apps such as Skype, ensure that you do not feel the distance of having a virtual accountant for your business.
5. How much does outsourced accounting cost?
The price for hiring a virtual accountant or a virtual CFO varies depending upon the complexity of your work and the accounting outsourcing company that you hire. For example, Realtime123 provides several packages which pricing defers depending on the number of employees and the number of monthly transactions the business has. Their packages starts from $249 per month to $1449 per month. Your Virtual Accountant, a company based in Canada, has a price range of $250 to $350 per month for small entrepreneurs and startups. Ignite Spot on the other hand provides bookkeeping services at around $575 per month, while a virtual CFO costs $500 from them.
As you can see, pricing differs quite a bit for each company and so does what is being offered at that price.
6. Best Accounting Outsourcing Companies
Researching for a suitable accounting outsourcing company can be tough, do you want a domestic accounting firm or one that is offshore? Are you looking to hire a whole team or just a dedicated virtual accountant? What's your budget to hire a third party? All these factors comes into play when choosing the right outsourcing partner for your business. To make it easier, we have created a list of accounting outsourcing firms that you might want to look at, if you want to hire an outsourcing firm. This list is by no means exhaustive, and so should be taken as more of a guide. Please make sure to discuss in details about your requirements and see if the BPO firm has the capability to deliver before you decide to hire any one of them!
1) Wipro
Wipro LTD is a multinational corporation based on India that provides IT, consulting and business process services. It is among the largest corporations in India that provides outsourcing solutions to large businesses around the globe.
2) Flat World Solutions
Flat World Solutions, also based on India, is a corporation that provides accounting outsourcing services along with other BPO solutions.
3) Cogneesol
Another one of the leading provider of outsourcing solutions in India, Cogneesol provides services in areas such as accounting, tax preparation, insurance back office, legal support, IT, etc.
Wipro, Flat World Solutions and Cogneesol are among the giants in India that caters to large companies and corporations. Their pricing for accounting outsourcing services is also comparatively higher than others. So if you are small or a medium sized business, they might not be the most suited for you. Rather you would want to hire outsourcing companies that focuses on servicing smaller businesses like yours.
4) ASL BPO
ASL BPO, is one of the top startup BPO firms in Bangladesh, that provides accounting outsourcing services along with other BPO solutions. They focus on providing support to small businesses and you can hire virtual accountants from them at affordable prices!
5) Ignite Spot
Ignite Spot is a Certifed Public Accountant (CPA) firm that was founded in 2007. Based in Utah, they focuses on providing accounting services to its domestic market. You can get virtual accountant services from them at comparatively low prices.
6) Your Virtual Accountant
Your Virtual Accountant, is another CPA firm based on Canada. Founded by Harrison White, it provides accountants to entrepreneurs and startups in all over Canada.
7) Basis365
Basis365 is a outsourcing firm in California. Founded by Rhett and Mike, they primarily provide accounting outsourcing services to businesses in USA.
8) Escalon Services
Escalon services is an outsourcing firm primarily based in California with offices in New York, Los Angeles and in Scandinavia. They provide outsourced accounting and bookkeeping services along with other services such as HR, Insurance back office support, and recruitment.
7. Audio Transcription of the Blog Post
Lastly, if you are interested to read the whole blog post, but don't have the time, you can listen to the audio pod cast version down below!
Hope this helps!
Zayed Ahmed is the Founder and CEO of ASL BPO, one of the top BPO firms in Bangladesh.