Bookkeeping is the fundamental function of a company’s financial management procedure. It records all financial data and transactions. Instead of the conventional technique of manual bookkeeping, this process is now accomplished using accounting software such as FreshBooks, Zoho Books, etc. Accounting software can be used in-house or by an outsourcing accounting and bookkeeping services provider. However, outsourcing is one of the most frequently utilized bookkeeping methods, as it helps save significant time and money. It allows businesses to focus on their core business activities to enhance productivity and profitability. Besides this, there are numerous other benefits of outsourcing bookkeeping services. But, to enjoy all the benefits and ensure a business’s success, it is crucial to outsourcing business bookkeeping at the right time. To choose the right time, it is important to keep an eye on signs that the business finds it difficult to manage in-house bookkeeping. Here are some indicators that suggest the need to move towards outsourcing.
Signs that a business needs to outsource its bookkeeping process
Though businesses can manage the accounting and bookkeeping processes independently, it distracts them from other important business activities and presents a risk of fraud and errors. Using accounting software can be a solution to streamline the process but managing it in-house means an expert must be hired to manage the software, and the business will also need to purchase the software. All these are expensive.
The best solution is to outsource the process to an expert third party to save the extra costs. Even though outsourcing companies use accounting software to manage the process, it will not add costs to the business’s accounts. Outsourcing bookkeeping services providers bring their personnel and already have access to the best accounting software and tools. It means the business does not need to worry about additional costs and personnel. When a business receives more benefits from outsourcing than from having an in-house team, it is time to outsource the bookkeeping process. Here are some indicators that a business must outsource its bookkeeping:
- Business is on a time crunch- Due to the fact that business bookkeeping is a complicated process and requires tracking and recording a business’s every financial information like accounts payable/receivable, payroll, financial records, etc., time is regularly scarce for the business. Businesses spend most of their time tracking and recording financial information, leaving little time for the core business activities like management and working with clients. If the company is frequently put in this situation, it’s best to choose an expert and experienced outsourcing bookkeeping services provider to outsource the bookkeeping process.
- Data security concerns- When a business uses an in-house bookkeeping team, accounting and bookkeeping personnel require many computers or laptops. Internal fraud, like billing and payroll fraud, as well as data leaks, could occur because of this situation. Outsourced companies operate under contracts that obligate them to data security. They guarantee data security by using up-to-date and hi-tech accounting software and equipment. Using cloud-based accounting software ensures that all the business data is stored in a secure server that can be accessed by business personnel anytime and from anywhere.
- Lack of qualified staff- When it comes to running a company, having under-trained or unqualified staff can negatively impact productivity. Outsourcing the bookkeeping process allows a business to hire qualified, experienced, and knowledgeable staff to handle the job. Outsourcing bookkeeping services providers have their own experienced and qualified staff that has been adequately trained. Outsourcing firms have personnel with up-to-date knowledge about business rules and regulations along with accounting standards and principles.
- High overhead costs- Having an in-house accounting and bookkeeping team is expensive, especially when you factor in office space, salary, equipment, training costs, etc. Even the process of hiring an accountant is costly as it requires businesses to invest time in job posting, screening, and interviewing. Outsourcing the bookkeeping process can significantly reduce these overhead costs.
- Inability to scale up or down- People who work in a business that handles increased transactions during certain seasons and periods are either idle or overworked. Overworked employees create discrepancies in cost, while idle employees waste associated expenses. However, outsourcing to an accounting and bookkeeping services provider helps pay based on work, enabling the business to increase or decrease in size as needed. It allows the company to expand or contract as needed without hiring or firing employees.
- Limitations of in-house bookkeeping- Outsourcing the bookkeeping process frees a business from all the limitations of in-house bookkeeping, including the necessity to hire and manage accounting and bookkeeping staff, the risk of internal fraud, lack of financial training, etc. The business has to hire an outsourcing partner and hand them a fixed fee, and they will take care of all the requirements of the staff and training processes.
Bookkeeping is a vital business finance function as it forms the basis for the further accounting process. Therefore, maintaining its accuracy and efficiency is crucial. Though in-house bookkeeping can handle the process efficiently, there are shortcomings that they cannot fulfill. Outsourcing the bookkeeping process allows a third party to handle the business’s accounting functions, help businesses overcome the in-house bookkeeping’s limitations, and boost productivity and profits. Business owners should be aware of accounting applications and software the outsourcing bookkeeping services provider uses and have a working knowledge of them.
However, it is also important for businesses to choose the right outsourcing partner to manage their accounting and bookkeeping. An inefficient team can damage the business’s financial management even more. The service provider must have a team of expert and experienced professionals with experience in different industries. They must be well-versed and up-to-date with accounting standards and principles. Make sure that the business clearly understands its accounting needs and that the service provider chosen has the qualifications to fulfill them. Choosing the right outsourcing partner can go a long way in ensuring a business’s profitability and overall financial health.