What Is Outsourced Finance and Accounting: A Complete Guide
Imagine a world without finance and accounting. Managing and expanding businesses would have been a tall order making these two components critical for running a business. Large and small businesses rely more on accounting firms to manage outsourced finance and accounting complexities, shifting from in-house teams.
Through this blog, we offer insights on current outsourcing trends, benefits, and maximising its potential. Let’s jump into it.
Outsourced Finance and Accounting 2024 Trends
Certain outsourced finance and accounting trends have been consistent, and 2024 will not be different. Knowing about these trends is crucial to prepare and maximize benefits from them. Let’s go through them.
AI-Savvy Accounting Professionals
It’s quite easy to note the influence of artificial intelligence on accounting functions due to increasing integration with it. Outsourcing accounting enhances quality, reduces costs, and integrating AI boosts service excellence. Currently, every business is investing or has outsourced accounting to a service provider that employs AI-trained accounting professionals.
Accounting service providers who employ AI-trained accounting professionals are also a plus point to market to your potential clients, thus ensuring a steady stream of work. You may worry that AI will put your in-house team of accountants out of the job but that’s not true. AI and automation will only change the way we do things.
Increase in Demand for Specialised Accounting Services
One of the main factors attracting multiple businesses and accounting practices toward outsourcing accounting is the service provider’s ability to offer specialized accounting services. Outsourcing providers offer these specialized services through experienced accounting professionals and matured processes.
Accounting tasks such as payroll, year-end, VAT, audit, forecasting, and bookkeeping, to name a few are becoming so complex that your in-house team may it tough to manage. They will need the crucial support of service providers to do the job. In some cases, you can delegate this complex and recurring accounting task to these experienced service providers. By embracing it, you will be able to keep your competitive edge in offering specialised services to your clients.
Greater Focus on Data Security
Data security will be a concern in 2024 for businesses, accounting firms, and accounts outsourcing service providers. Thanks to the increased use of multiple accounting software, AI, and automation, digitisation has become the way to do accounting efficiently but there are challenges. It has given opportunities to dubious characters in the cyber world to prey on the sensitive data of your clients. That’s the reason why many of your competitors have outsourced accounting to service providers who take fool proof measures to stop data theft.
A professional accounting service provider ensures data security through measures such as data encryption and end-to-end protocol to avoid data theft and data breaches. After all, the better the data security more will be their business. A professional service provider also gives due importance to the cyber literacy of accounting professionals to counter cyber threats and provide a safer business and accounting environment.
Sustainable Accounting Workplace
Environment protection and its awareness is increasing among the business and accounting community in the UK and around the world. This expectation leads the accounting industry to contribute its part to saving the planet. Also, businesses are increasingly outsourcing their accounting tasks to service providers that follow environmentally sustainable standards such as digitisation. This trend is here to stay for the foreseeable future.
Types Of Outsourced Financial Services
In simpler terms, when accounting practices have outsourced finance and accounting to service providers, they have delegated accounting functions to outsourcing providers rather than their in-house team. Through these service providers, you can delegate some important but recurring accounting functions such as:
Bookkeeping
In bookkeeping, your team will record all the financial transactions of your clients in ledgers. It also includes preparing financial statements, source documents, and so on.
Management Accounting
Through management accounting, analysts will study and measure accounting data to make informed decisions. By outsourcing it, a service provider accountant will be able to monitor costs, sales, and budgets to identify future needs and goals.
Tax Accounting
Under it, a service provider will be preparing tax returns and payments on your behalf.
Payroll Services
Outsourcing payroll tasks to a service provider can streamline this recurring and time-consuming accounting task.Once outsourced the service provider through its accountants will handle salary calculations, tax calculations, and tax, and ensure full compliance with tax laws and labour laws.
The Key Benefits of Outsourced Accounting and Finance
As you are reading this blog your competitors must have decided to opt for or have already outsourced accounting to a service provider. Through it, you are promoting efficiency and cost-effectiveness in your accounting firm. Through outsourcing, you will inevitably gain multiple benefits, but some will significantly impact your accounting operations.We will focus on them.
Promotes In-House Efficiency
When you have outsourced accounting, you are reducing the stress levels and increasing the productivity of your in-house staff. Firstly, outsourcing your service partner will help you reduce unwanted costs without lowering the quality and efficiency of your services. Secondly, through it, you and your managers will get more time to focus on other key business priorities. Thirdly, along with managers your in-house accountants will also be freed up from recurring accounting tasks and can focus on improving service quality and on activities that can lead to more business.
Also, hiring and providing infrastructure for your in-house staff is a costly proposition. You must be aware of the cost it takes to find a suitable candidate, offer salary and benefits, and provide training and related infrastructure. Instead, if you outsource you can skip all these expenses.
Access to Experienced Talent
The expectation drives the accounting industry to play its part in saving the planet.You will not face this problem if you choose to outsource where you have the option to choose the experts as per your requirements. These experts will work remotely partnering with your in-house team and also put in extra hours, thus boosting your efficiency and service quality.
Is Outsourcing Accounting Services Right for Your Business Growth?
There are multiple factors to watch for while thinking about whether to outsource or not. Let’s consider each of them one by one.
In-House Staff
If handling your in-house staff is becoming too much to handle then the time has come to outsource. After you have outsourced accounting services to a professional service provider you will get financial statements on time which can used to monitor your client’s financial activities and make informed decisions. Through outsourcing your service provider ensures that there is no disruption in your work.
Technology
When you have outsourced finance and accounting to a professional service provider you will get automatic access to advanced technologies. Technologies such as AI, cloud computing, and the use of accounting software require a lot of investment and training to operate which can be unaffordable. However, through an accounting service provider, you can access them at a much lower rate.
Work Quality
Consider choosing an outsourcing partner when you find your work quality and the quality of your in-house team not up to the mark. With lower work quality you have no option but to choose outsourcing.
Too Many Recurring Errors
Errors are the last thing you would want in the financial reports prepared by your accounting firm and if it keeps occurring then the time has come for choosing an outsourcing service partner. Through outsourcing you can avoid costly accounting mistakes and resolving them is time-consuming and expensive.
How Do I Choose an Outsourcing Provider?
If you have made up your mind of outsourcing then you must concentrate on selecting the right service provider. Unless you select the right service provider you may not be able to gain the benefits that come with it. Let’s go through the factors step by step.
Set your Budget
While it will be difficult to estimate a budget for outsourcing, you must still make a rough estimate so that you can avoid overspending. Hence consider certain things.
- How much you can afford to spend
- Types of services required
- Value of outsourced services to your accounting service providers
- Cost of hiring an in-house team and technology
Narrow Down on a List of Service Providers
Once you have set your budget start narrowing down your list of service providers. To do that check the benefits they offer such as:
- Infrastructure and software used
- Data security and compliance
- Advanced processes and controls
- Advanced financial reporting that increases your visibility
Service Providers Reputation
Take a look at the previous work and client testimonials that the service provider worked for. Give special attention to those clients that have a similar requirement as yours to get an idea of the service quality and performance. This will help you narrow down your list to select 2 or 3 service providers.
Take a Trial
Finally, take a trial project with the service providers and check the performance of each one and how they have met your requirements. Also pay attention to certain things such as:
- Is there any communication gap between the service provider team and your in-house team?
- How efficiently does the outsourced accounting team handle assigned tasks?
- How does their work meet your business requirements?
Conclusion
Thanks to your busy schedule and other important activities both you, your managers, and your in-house staff will be unable to devote considerable time to conducting regular accounting activities. You can hand over all of this to an accounting outsourcing provider, who will partner with your team and simplify your life.