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The Pros and Cons of Outsourcing Your Accounting

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Cash flow is the lifeblood of small and medium businesses (SMB) and, as any business owner will tell you, ensuring consistent cash flow hinges on effective accounting.

Unfortunately, not all SMBs have the appropriate amount of resources, staffing, or expertise to devote to make sure they keep on top of their accounts receivable.

An under supported accounting department is prone to errors such as inaccurate tax returns, ineffective cashflow forecasting, or poor resource allocation.

The good news is that there is a solution.

Outsourcing your accounting gives you and your business all the benefits of a dedicated, professional accounting department at a fraction of the cost of in-house staff.

To help you understand whether outsourced accounting is right for you, we’ve analyzed the pros and cons and broken them down for you.

What Is Outsourced Accounting?

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Before we get into the specific pros and cons of outsourcing your accounting process, we need to define exactly what that means.

Outsourcing your accounting, or hiring a virtual accountant, as it’s sometimes known, means transferring your accounting burden over to a professional accounting firm, rather than actioning it yourself.

Most outsourced accounting firms charge a monthly subscription fee with varying levels of accounting support available based on your needs.

According to the Deloitte global outsourcing survey, the primary reasons that businesses choose to outsource services are as a cost-cutting tool or to enable them to focus on their core business.

Finance and accounting are some of the more commonly outsourced functions, with around 42% of the businesses surveyed by Deloitte reporting that they had opted for the benefits of outsourcing their accounting.

The Pros and Cons of Outsourcing Your Accounting

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To give you all the information you need to decide if outsourced accounting is right for you, we've broken down the most common pros and cons and paired them up, so you can compare them directly.

Pro - The Cost Savings

As highlighted by the Deloitte global outsourcing survey, the primary reason for outsourcing your accounting is that it will save you time and money compared to hiring new employees.

Outpouring your accounting means you have access to professional accounting assistance on day one.

You don’t need to go through the hiring process, you don’t need to invest in new software or update legacy systems, and you don’t need to pay for any more staff.

You also won’t need to pay the often-hidden costs associated with hiring more staff, such as health insurance, vacation time, sick days, and training costs.

Con - The Potential Costs

As with all outsourced services, there is a cost aspect to outsourcing your accounting. If you’re not careful, and don’t have a full understanding of your business’s needs, those costs can creep up over time.

The best way to avoid this is to make sure you fully understand what exactly you need from a virtual accountant in order for them to support your business.

Here at WATS CPA, we offer multiple monthly accounting subscriptions that cover a range of needs, from basic bookkeeping to full advisory services, so you only pay for what you need.

Pro - The Enhanced Focus on Your Business

Another of the primary reasons that business owners outsource their accounting is so that they can fully focus on growing their business.

Not every SMB owner is a fully qualified finance professional who wants to spend their time pouring over the company books.

Instead of spending yet more time away from focusing on growing your business to hire in-house accountants, you can quickly and easily outsource your accounting to a professional.

Outsourcing gives you the peace of mind of knowing your books are in good hands and you can concentrate on growing your business.

Con - The Slight Delay in Communication

Obviously, not having your accounting department in the same building as you is going to put a slight hitch in your communications. You can’t just go down the hall to ask the finance department questions anymore.

The good news is that an effective outsourced accounting team will have comprehensive communications policies in place to make sure you are kept very much in the loop.

To make sure you are happy with the level of communication and reporting coming from your outsourced accounting team, you should always discuss with them how important it is that you are regularly updated.

Setting communications expectations at the beginning of your business relationship with a virtual accountant offsets the slight delay in communications caused by outsourcing.

Pro - Increased Oversight

It’s a sad fact that most accounting fraud is committed internally.

Outsourcing your accounting gives you another layer of spend and reporting oversight, that isn’t a member of staff, that can detect suspected fraud and report it promptly.

This additional oversight doesn’t just protect against fraud, however.

Outsourcing your accounting to a professional team means it is more likely that accounting errors and compliance issues will be picked up early, before they cost you in the long run.

Con - Less Control

One of the potential caveats of outsourcing your accounting is that it lessens your control over your business.

However, this is only partially true.

While you won’t have direct control over the accounting firm you’ve outsourced to, they’ll still be making the same decisions an in-house team would, only with more expertise and at a lower cost to you.

Since most virtual accountants are more than happy to adapt their practices to suit their customers, outsourcing doesn’t mean you’ll be losing control over any part of your own business.

Pro - Peace of Mind

Running your own business is stressful and the cash flow issues caused by ineffective accounting processes and credit control only make that stress worse.

There is a well-documented link between stress and a loss of productivity and financial issues with your business can have an impact on your personal and professional life.

Around 75 % of small business owners report being unable to sleep due to unpaid invoices and 22% start chasing invoices as soon as they wake up.

Outsourcing your accounting to a professional means you can rest easy knowing that your finances are being handled by experienced experts.

With the added peace of mind of knowing your accounting is in good hands, you can refocus on growing your business and even have time for a social life again.

Con - A Reliance on an Outside Business

Given the importance of accurate accounting to most small businesses, it can be a big step to hand such an important department over to the control of someone you don’t directly employ.

This is particularly true if you’ve been in charge of your own accounting for a while and are suddenly faced with the fact that a core part of your business is being taken out of your hands.

The good news is that the old adage ‘if you want it done right, do it yourself’ rarely has a place in modern business.

As can be seen from the Deloitte global outsourcing survey, a huge number of businesses across the world, and in multiple industries, outsource their finances to external teams.

The obvious benefits of outsourcing your accounting, such as reduced costs, reduced fraud, greater oversight, and greater peace of mind, do outweigh the need to rely on other professionals to get the job done.

How Can WATS CPA Help Your Business?

Here at WATS CPA, we specialize in assisting small and medium-sized businesses by offering a range of outsourcing accounting services, including bookkeeping, profit and loss analysis, tax preparation, tax planning and consulting services.

While we specialize in providing childcare providers with outsourced assistance with their taxes and childcare financials, we also provide accounting services for a huge range of businesses, from start-ups to non-profit organizations.

We offer a range of subscription-based services that are specifically tailored to fit the needs of different-sized businesses, so you’ll never pay for more than you need.

Our founder, Audra Wilson Russell, CPA, MBA, is a licensed CPA in the State of Florida with more than 15-years of experience in accounting and taxation.

She is also a proud member of the Florida Institute of Certified Public Accountants (FICPA), American Institute of Certified Public Accountants (AICPA), and The Greater Delray Beach Chamber of Commerce, so you can rest assured that you’re in good hands with WATS CPA.

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