Accounting is a crucial part of every business. It involves preparing financial statements and reports that help make the right business decisions and determine the performance of the business. Therefore, the accounting function needs to be handled accurately while considering the compliance requirements. A business can either hire an in-house accountant or outsource it to an accounting services provider. But, before deciding on a method to handle accounting, let us know about accounting and accounting services first.
What is Accounting?
The process of recording a business’ financial transactions is known as accounting. It involves summarizing, analyzing, and reporting the financial transactions related to a business. Accounting is necessary for decision-making, cost planning, and performance measurement. Major accounting fields in every business are management accounting, financial accounting, cost accounting, and tax accounting.
Accounting works on a framework that is made of accounting principles and standards. Professional accountants follow GAAP (Generally Accepted Accounting Standards), a set of accounting principles and standards, to prepare financial statements.
What do accounting services do?
Financial management is an important business aspect that requires competent and well-trained professionals. Financial management includes accounting and bookkeeping. Accounting services include tracking incomes and expenses, preparing statements and reports, consultation, etc. Though a bookkeeper can manage the basic accounting activities, a certified accountant is compulsory for advanced accounting functions like preparing financial statements and reports. Accountants are professionals trained to provide financial services to businesses and individuals. Businesses can hire an in-house accountant or utilize the services of accounting and bookkeeping service providers.
Some of the accounting services that can be outsourced are:
- Bookkeeping services
- Accounts receivable and accounts payable management
- Payroll processing
- Preparing financial statements and reports
- Controller services
- Financial planning and analysis
- Cost accounting
- Forensic and fraud accounting
- Tax filing and reporting
Businesses can outsource some or all accounting services as per their requirement. Usually, it varies from business to business as to what accounting services to outsource. However, an outsourced accounting services provider can manage numerous accounting services simultaneously.
What to consider before outsourcing accounting services?
Accurate accounting requires compliance with accounting and taxation laws and regulations. The time and cost of having an in-house accountant or accounting team are higher in the long run. Taking help from an outsourced accounting services provider saves time and money for the business in the long run. It also saves the hassle of managing the accounting team and worrying about their competence as the outsourcing accounting service providers have a well-trained and competent team.
Numerous factors decide which outsourced accounting services a business should hire. Following are some important factors that a business should consider before outsourcing accounting services:
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- Know your requirements:
Before outsourcing the accounting services, the first thing to consider is determining the business requirements. It includes recognizing the important accounting services that need to be outsourced. Detailed accounting tasks like payroll processing require skilled professionals to manage them properly and accurately. Outsourcing the accounting services to a competent service provider will ensure timely and detailed bookkeeping and sets of accounts on a monthly, quarterly, or annual basis. Timely account management helps in determining the overall business performance.
- The service provider’s expertise:
While looking for an outsourcing accounting service provider, it is important to consider their expertise. Look for an accounting services provider with the required qualifications and experience. A service provider with experience and knowledge in the industry in which the business operates should be preferred. Conduct a background check on the qualifications and experience of every member of the accounting service provider’s team.
- Careful company selection:
Besides the expertise, other things should be considered, such as the service provider’s track record and the security system used. Checking the track record includes feedback from previous customers, online reviews, and recognition from the existing customers. Also, the service provider must be using an industry-standard security system to maintain confidentiality and prevent business data from breaches, hacks, and other such risks. All these factors form the market reputation of the service provider.
- Cost-benefit of the service:
Considering the cost-benefit of outsourcing the accounting services of the business is another important factor. Having an in-house team involves numerous costs like salary, equipment, office expenses, etc. However, outsourcing the accounting services prevents these costs. Service providers charge a reasonable price based on the work involved and don’t need equipment or office space to work. They use their tools to fulfill the services required. Outsourcing seems expensive, but in reality, it saves considerable costs in the long run while providing expert services.
- Learn about their tools and methods:
Identify the accounting tools and methods used by the accounting services providers. Make sure that the service provider chosen by the business uses the latest technology and systems. Using the latest technology and tools ensures efficient and accurate performance. Ask about the time given by the service provider for the business’ tasks, methods used for preparing the statements and reports, and the strategies for tracking the financial transactions. It is also important to get familiar with the tools and methods used by the service provider to track their work.
- Inquire about their turnaround time:
One of the major reasons to outsource accounting services is to save time. Make inquiries about the turnaround time of the service providers from their previous and current customers. It is also important to keep track of their work to ensure everything is going accurately and as per the timeline given.
- Solid communication channel:
It is crucial to have an excellent communication channel with the accounting service provider. Proper communication helps convey the business goals and strategies for the accounting function. It helps the business in keeping track of the accounting task. It also allows the service provider to keep the business informed about any issues. Make sure to be on the same page as the service provider at all times. Arrange frequent meetings and discussions with the service provider. Make sure to have a backup communication plan in case of any emergency.
- Complete transparency:
Transparency and reliability make the process smoother when outsourced to a service provider. Before finalizing which accounting service provider to choose, meet the prospective options and observe closely if they willingly share enough information to prove their reliability. The service providers should be transparent about their qualifications, experiences, the technology used, team density, competence, and project management process. Having complete transparency between the business and service provider ensures efficient handling of the outsourced accounting process.
Every business’s accounting and bookkeeping needs differ based on factors like business size, clients, number of transactions, etc. A business can get an in-house team of accountants or use the services of an outsourced accounting service provider to manage these needs. Some or all the accounting services of the business can be outsourced based on business requirements. However, before deciding if and what to outsource, a business must consider all the important factors affecting the final decision. Outsourcing accounting services brings numerous benefits to the business. So, choose the right outsourced accounting service provider to add to the profitability and efficiency of the business.
