In its most simple terms, outsourcing means entrusting a certain portion of a business to a third party. Overall, it’s becoming a very popular trend in today’s business world. However, the concept of outsourcing seems to be of particular use to companies in terms of their accounting functions. For years, businesses have struggled to stay up-to-date in regards to their accounting departments. Changing tax laws and government regulations have made it increasingly difficult to keep accounting departments staffed with employees who have the experience and expertise to handle bookkeeping tasks in an efficient and competent manner. As a result, many businesses both large and small have turned to outsourced accounting as a solution to these challenges. But, what exactly is outsourced accounting?
Outsourced Accounting Functions
When a company switches to outsourced accounting, they are basically utilizing an accounting staff which has been specially trained in accounting functions. Since accounting is the core competency of the firms offering these services, companies have the benefit of leveraging highly skilled accountants, without the need to keep them on staff. Accountants who work for accounting firms have a high level of expertise, which they maintain through ongoing training programs. As a result, even the smallest business can reap the benefits of a top-notch accounting staff, even if they don’t have the budget to hire their own in-house accounting department.
Accounting Tasks Frequently Outsourced
When a company turns to outsourced accounting, they no longer have to worry about many of the bookkeeping functions they may currently be struggling with. These services often include financial statement preparation, financial reporting, sales report processing, cash balance reporting, accounts payable processing, and payroll processing. Depending on how the outsourcing arrangement is set up, a business may choose to keep certain accounting functions in-house if they have a desire or need to do so. However, even though the accounting firm handles many of the day-to-day bookkeeping activities and functions, the company continues to make its own financial decisions and maintains complete control of their cash accounts. Treasury-related functions such as signing checks, investing and authorizing bill payments are also tasks that generally remain completely under the control of the company. As a result, companies are able to tap the resources of the accounting firm for the services they need while still maintaining complete control of their overall business finances.
Advantages of Outsourced Accounting
There are many advantages to be realized for companies who switch to outsourced accounting. In addition to saving on salary, benefits and training costs, businesses often find they are better able to focus resources on their primary business goals and objectives once they’ve handed off their bookkeeping tasks to an expert accounting firm. Companies also no longer have a need to purchase and maintain expensive accounting software packages and can often save on computer and equipment expenses. Plus, especially for companies who have locations in different states or even in different countries, the level of experience possessed by an experienced accounting firm in regards to complicated tax laws and requirements can prove to be invaluable. Because of these advantages and many more, outsourced accounting just makes good business sense for many companies.