Save your Business by Outsourcing your Accounting Needs - Online Income Generation, Income Growth Strategies, Freelancing Income  
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Sound financial management and accurate accounting reporting are essential for any growing business. A skilled finance department requires full-time employees that may or may not meet your company’s requirements.

However, in-house accounting teams come with high operational and maintenance costs, which can slow down business growth. So it shouldn’t be a surprise that many CEOs are turning to outsourced finance and accounting outsourcing for a solution.

With outsourced financial management and sophisticated accounting software, you can completely shift focus on core business operations, gain access to reliable financial data, and save your company in the process.

Outsourcing your bookkeeping to an outsourced accounting firm gives the CFO peace of mind and enough time to focus on important issues within the company. We will discuss other reasons why outsourcing your business accounting needs.

  • Why Should you Outsource your Accounting Needs?
  • What are some Advantages of Outsourcing your Accounting Needs?
  • How Accounting can Help a Business?
  • What are the Functions of Accounting?
  • Functions of Accounting Within a Business

Why Should you Outsource your Accounting Needs?

To recognize the reasons why outsourcing and how big of an impact outsourced accounting can have on your business, we must look into each benefit of outsourcing.

Read Also: Modern Accounting Standards: Do they live up to the Regulator’s Expectations?

A Precise Billing Method

When you decide to outsource your accounting, you will recognize how it saves time and money. Outsourcing makes sense when you consider how outsourcing accounting functions removes the need for the following:

  • Unemployment taxes
  • Hiring and training new staff members
  • Health care benefits
  • Paid-time-off
  • Infrastructure (office space, investment in technology, need for desks, etc.)
  • Utilities
  • Expensive technology solutions and accounting systems
  • Internal controls

People working in central offices or even remotely, have replaced the in-house accounting function but also lowered all costs. Reliable third party solutions offer executive-level staff members that are available to companies on demand.

Business owners can now focus on scaling and add or remove their financial staff as needed. All of this enables a precise billing method where companies only pay for the work performed.

This doesn’t only cut costs but increases efficiency as well. Depending on your service provider and your company’s needs, accounting fees can be billed hourly or monthly.

Reduced Operational Costs

Traditional business accounting implies that your company should perform accounting tasks in your office. In some cases, companies chose to have a back-office accounting staff handle their accounting processes for many different reasons.

The main one being lower office space costs. Both of these accounting departments can become a constraint when it comes to scaling and transparency.

You can’t always count on accurate document management, and additional human resources are needed if your company is constantly growing. This means more investment in technology and training, adding even more reasons to outsource.

Local financial departments are in constant need of office space and inventory. On top of that, regulatory changes may require additional training for your employees, which ads other expenses and restricts your financial capabilities.

Reliability and Efficiency

A company can’t have effective financial planning and accurate financial statements without a reliable finance and accounting team. Most investment decisions are based on the company’s financial health, and inaccurate balance sheets can lead to bad decision-making.

When you outsource bookkeeping, it doesn’t only save your business money but also contributes to efficiency and precision. A skilled outsourced team will make sure that your balance sheets and financial statements are up to date so you can conduct an error-free financial analysis within the company.

With expert advice coming from executive-level team members, you can make better financial decisions and provide timely updates to your investors.

In most cases, requests are handled immediately, and reports are delivered to your inbox as quickly as possible.

Reliable and effective reporting from your finance and accounting department has become a necessity in the current market. Investors value transparency now more than ever, and it seems there is no better way to achieve it than with outsourcing financing and accounting.

High-Tech Solutions at Low Costs

Technological advancements in accounting may require some companies to invest significantly in tech improvements. However, acquiring advanced software solutions for your company is an expensive business strategy.

With outsourced financial management, you gain access to cloud-based software platforms like SIMPL at a fraction of the actual cost. Reputable service providers offer access to these solutions for all of their clients with significantly lower costs. This ensures accurate financial insights with minimal expenses.

Outsourcing Saves Time

If you are handling your finances in-house most of the time, your best-performing employees will be busy with administrative tasks. This gives them less time to focus on essential tasks and limits your access to valuable company resources.

Outsourced solutions completely eliminate the need for this. By paying a third-party service provider to handle your books, you can have your most skilled staff members on important positions at all times, while your finances are handled remotely.

Hiring additional staff for your finance department can also slow down your growth and deplete your financial resources quickly.

The location of your office will determine the quality of available talent, but you will also need a detailed screening process and a hiring manager. When it comes to finances, you want to consider outsourcing because it will give you access to the very best talent.

Outsourced solutions have an edge in this situation because they have access to large talent pools worldwide. Remote work gives both the financial experts and the service providers the ability to deliver high-quality services at low costs.

What are some Advantages of Outsourcing your Accounting Needs?

Some small business owners consider having an internal team to manage their finances or, in some cases, manage it themselves. This might be suitable for some, but most businesses could really benefit from outsourcing their accounting to a specialist.

There are numerous reasons why outsourcing your financial management makes business sense, here are eight.

1. You Can Concentrate On What You Are Good At

Unless you have experience and training as an accountant, you are unlikely to have the best accounting skills. You are, however, an expert in your own industry.

Therefore, if activities like accounting are outsourced you will free up more of your time to concentrate on the tasks you are great at. This can lead to great productivity and better quality of work.

2. Lower Employee Costs

When you outsource your accounting operations, you can save up to 40% of the costs compared to the cost of an employee because you don’t have to pay for any benefit packages, training or equipment, and your insurance could be lower.

The cost to hire a new employee can be as high as 150% of their annual salary. So by outsourcing you could really be saving money.

The less it costs you to recruit and run your accounting operations, the more funds you can reinvest into the business or the more profits you can take home.

3. Reduce Fraud

Employee fraud is a massive problem and it is unlikely any business with employees is completely immune from some sort of theft.

We’ve covered before how employee related theft can affect your business, but those statistics didn’t cover fraud in general.

Statistics highlight that companies with fewer than 100 employees are most vulnerable to fraud and face an average yearly loss of $155,000. Outsourcing your accounting can be a way to detect fraud within a business.

4. Lower Tax Burden

Accountants have intimate knowledge of their profession and know all the tax codes relevant to your business.

They take the time to understand new tax laws and where they might be applicable, and recognize how their clients can benefit from changes in state and national tax.

This can mean that you are able to make more money, which can be used as a reward for your efforts or be reinvested back into the business.

At the same, all of this is done for you by someone else so you aren’t rushing around during tax season. Instead, you can just concentrate on your business and provide a great service to your customers.

5. Scalability And Flexibility

When you have an in-house team, scalability becomes a big challenge. If you suddenly grow and need a greater workforce within your accounting department, it can take up to 26 days to hire a new employee.

This does not include the time which might be needed for the new hire to hand in their notice and work through any notice period. If we include this, the wait time for any new hire could be up to 57 days.

In addition, a new hire needs time to settle within your organization and it could take them six months to reach their full potential.

Until then, your business and your accounting team specifically, might suffer. In addition, if the sudden increase in demand reverses, you will have too many staff and could face extra costs in maintaining the in-house accounting team or alternatively, in paying redundancy.

In contrast, outsourced accountants have a team ready employed that can increase or decrease the resources allocated to a client. There may be a waiting period for any changes, which should clearly be stated in any contracts you sign with an outsourced accountancy team.

6. Access To Top Software

Choosing what software is best for your business can be really difficult. There are numerous options and to the uninitiated they can all look the same.

When you outsource your accounting duties to a professional firm, you can benefit from the accounting software they have chosen based on their experience.

This prevents you wasting your time and money trialling packages which don’t offer you the accounting coverage you need.

It also means you don’t have to learn how to use a new piece of software or end up making mistakes in financial entry because you don’t know the system.

7. They Can Offer Invaluable Advice

When you are looking to expand your business or seeking investment opportunities, an experienced financial expert can be a great support in your decision making.

They will have knowledge of similar scenarios and might have invaluable information for you to consider; which might help you avoid unreliable investment and reduce the cost of those that are suitable.

Their advice is usually impartial, which employees might not be. Of course, just keep in mind that an outsourced accountant isn’t going to be as excited as you are about any projects you are considering.

8. Peace Of Mind

A qualified and experienced accountant can provide you and your leadership team with peace of mind.

You know your financial management is being handled by the right people and when you turn up for meetings, you can be assured that the financial information will be accurate and presented in a way that everyone understands.

Finally, you know that when you bid on government contracts – you have the required financial management in place to comply with any regulations or restrictions they place upon you.

Having this before the bidding will also put you in good stead during the application process and place you above those competitors who haven’t thought about this yet.

A qualified outsourced accountant is one of the best investments for your business. They offer cost savings, quality of information and protection for your business.

These benefits can help you concentrate on activities that are more suited to your skill set.

How Accounting can Help a Business?

Accounting refers to the systematic and detailed recording of financial transactions of a business. There are many types, from accounting for small businesses, government, forensic, and management accounting, to accounting for corporations.

Accounting plays a vital role in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions.

There are three key financial statements generated by your records.

  • The income statement provides you with information about the profit and loss
  • The balance sheet gives you a clear picture on the financial position of your business on a particular date.
  • The cash flow statement is a bridge between the income statement and balance sheet and reports the cash generated and spent during a specific period of time.

It is critical you keep your financial records clean and up to date if you want to keep your business afloat. Here are just a few of the reasons why it is important for your business, big or small!

It Helps in Evaluating the Performance of Business

Your financial records reflect the results of operations as well as the financial position of your small business or corporation. In other words, they help you understand what’s going on with your business financially.

Not only will clean and up to date records help you keep track of expenses, gross margin, and possible debt, but it will help you compare your current data with the previous accounting records and allocate your budget appropriately.

It Ensures Statutory Compliance

Laws and regulations vary from state to state, but proper accounting systems and processes will help you ensure statutory compliance when it comes to your business.

The accounting function will ensure that liabilities such as sales tax, VAT, income tax, and pension funds, to name a few, are appropriately addressed.

It Helps to Create Budget and Future Projections

Budgeting and future projections can make or break a business, and your financial records will play a crucial role when it comes to it.

Business trends and projections are based on historical financial data to keep your operations profitable. This financial data is most appropriate when provided by well-structured accounting processes.

It Helps in Filing Financial Statements

Businesses are required to file their financial statements with the Registrar of Companies. Listed entities are required to file them with stock exchanges, as well as for direct and indirect tax filing purposes. Needless to say, accounting plays a critical role in all these scenarios.

What are the Functions of Accounting?

Accounting is a broad and varied profession. When you study accounting, you’ll find that you can apply your education to a wide range of possible functions within a business.

You can specialize yourself to serve your employer, if not your own business, in a variety of ways. You can also work in any industry and many departments within each of them. Government work is also a common employment choice for accountants.

Some accountants make their careers in the financial sector. They apply their ability to analyze corporate health to deals that can include initial public offerings, mergers, and acquisitions.

These accountants don’t often engage in functions such as audits, but their knowledge and expertise enable them to assess an auditor’s conclusions with an educated eye.

Other accountants perform more managerial functions. If you move your career in this direction, you will be tasked with projects dealing with budgeting, maximizing efficiency, checking for errors, or even theft in the system.

Managerial accountants might also work in information technology, where they audit an organization’s technological systems in search of new ways to optimize workflow or overall efficiency.

Managerial

Managerial accountants are an integral part of a business’ daily operations. They seek to find new ways to maximize efficiency, write budgets for new projects, and even perform audits on various systems.

One key function of a managerial accountant is cost control, which can mean anything from finding cheaper toner for the copiers to shaving minutes from worker’s hours to save the company thousands of dollars.

They also work to evaluate employee performance to ensure that the organization receives the most productivity possible from the payroll expenditures.

When individuals or departments are found to be too inefficient, accountants might seek ways to improve workforce output. This could entail upgrading technologies, discovering new workflow methods to improve how work is actually done, or even outsourcing labor to other sources.

Managerial accountants might work for a single organization and continually seek to improve its functioning and efficiency. They might also work as consultants for organizations all over the nation and world.

In each case, these accountants need to work closely with department heads in a range of areas. They might need to assess efficiency in a manufacturing facility or discern how to best upgrade IT functions in a small company.

Managerial accountants frequently will focus on a specific industry where they will become experts and forge a successful career. This is important because each industry has an individual set of issues to work with.

Healthcare, for instance, must abide by certain regulations governing patient care. On the other hand, the automotive industry deals with a whole different type of regulation.

Here is a brief list of other managerial functions accountants perform regularly:

  • Budgeting – both for individual projects and the company as a whole
  • Cost Controls – determine company policy for areas such as payroll or accounts payable
  • Employee Evaluations – analyze the workforce to see where improvements will result in savings
  • Fraud Control – investigate shortages to ensure that neither outside theft nor inside embezzlement is occurring
  • Error Control – accountants analyze how and why errors happen to help determine how to avoid them in the future

Financial

Financial accounting is the other main function of an accountant. This set of functions is also called stewardship accounting. This might be what most people think of when they think of a staff accountant; a professional tasked with aggregating and analyzing the hard numbers.

Stewardship accounting is always concerned with keeping accurate financial records. They need to ensure that every penny spent or earned is recorded accurately. That is, it’s vital to know how certain transactions can be accounted for on a tax return.

In a publicly traded company, this sort of classification can be incredibly helpful when putting together quarterly and year-end documentation. Shareholders need to have an accurate accounting of the company’s finances and also a fair and objective description of those figures.

Sometimes, a company will have one-time expenditures that will dramatically impact overall earnings or profits. On the other hand, shareholders need to understand how a sell-off of assets can result in a revenue spike, which is unlikely to repeat.

Financial accountants might also analyze the company’s overall fiscal health with regards to multiple factors. They can take into account external events that impact financial health including taxation, government regulations, or even weather events.

In some cases, financial accountants might make the seemingly counter-productive recommendation that a company take on more debt. However, when seen in a broader perspective, that debt can offset profits and thus help the organization avoid taxation.

A financial accountant’s duties can include, but are not limited to:

  • Recording financial transactions
  • Describing financial transactions
  • Translating financial data for executives or shareholders
  • Calculating the actual bottom line for a company
  • Preparing reporting documents such as the Annual Report

Functions of Accounting Within a Business

Accounts Payable (Money Out)

Accounts payable is the part of every company that handles expenses. After all, every commercial enterprise must purchase things such as raw materials, office equipment, industrial equipment, and more. Furthermore, organizations need to pay vendors of certain services.

An accountant can set the terms of these payments so that the company absorbs the expenditures in the best way, and at the best times.

For instance, vendors might not receive payment for a set time after their work is complete, thus enabling the organization time to receive payments from a client before paying the vendors. Delayed payments might also enable the organization time to accrue interest on funds.

Accounts Receivable (Money In)

For any business to be successful, its accounts receivable department should bring in more money than the accounts payable department spends. The accounts receivable department is ultimately responsible for the organization’s revenues. They are on the front lines of profit-making.

Thus, an accountant in accounts receivable is responsible for ensuring that all accounts are paid in full. The accountants may be in charge of ensuring that all outgoing invoices are as accurate and detailed as possible.

They also need to be sure to collect on every outgoing bill. In the case of vendors, it’s vital to keep track of each vendor contract because some payers will negotiate individual terms for payment such as a delayed lump sum or an interest-bearing payment plan.

Ascertain Results/Income – Budget Preparation

Budgets are vital for planning out a business’ overall, future success. Accountants need to diligently consider every future expense and then justify that expense by showing its long-term value in terms of profits. Budgets can be long-term or cover a shorter time frame.

For instance, some budgeting is for certain projects that a company or department wishes to complete.

Some projects involving research and development need to find the most efficient ways to research a product and then demonstrate the long-term revenues that can result from success. It’s also vital to show how expenses will be absorbed in the meantime.

Since companies attract investments by demonstrating the long-term value of current expenditures, budgeting is a vital part of the equation.

When a project can come to completion both on-time and within budgetary constraints, it’s more likely that investors will receive gains. These same investors will thus be more likely to invest in future ventures with the same team.

Payroll

Payroll is often one of a company’s largest expenditures. After all, every business relies on its human capital before any revenues are realized. Accountants constantly scrutinize payroll expenses to determine how to maximize the return on their investment in labor.

They might even set standards for hiring and compensation. A new hire with a lot of experience and success may be deemed worthy of a much higher salary than an untested worker fresh from college.

Payroll also includes issues related to travel expenses, benefits packages, and severance payments. Accountants strive to ensure that everyone is paid equitably so that the company can attract and retain top talent.

Financial Report Preparation – Management Decisions

Financial reporting is a vital part of any business. If you work for a publicly traded organization, your quarterly and annual reporting documents must include an Income Statement, Balance Sheet, and Cash Flow Statement.

These reports are all subject to scrutiny by both shareholders and the Securities and Exchange Commission, a governmental regulatory body.

These documents are required by law to be filed in a timely fashion and to reflect the actual condition of the company. Private companies also need these reporting documents to present to private equity stakeholders as well as internal executives.

The Income statement demonstrates the company’s financial health. It is essentially the result of comparing total revenues, plus all gains, minus total expenses and losses. This statement can show how non-operating revenues, such as outside investing, measures up against operating revenues.

A company’s Balance Sheet is a statement of a company’s assets. This is the sum of all the company’s liabilities plus its equity or retained earnings.

A balance sheet is a snapshot of a company’s health and does not offer insights about long-term growth. However, when accountants compare Balance Sheets from previous periods, a pattern can emerge.

Finally, a Cash Flow Statement demonstrates for investors and executives how much cash is moving through a company during a period of time. This financial analysis shows how well a company holds its cash and what percentage of the cash flow results in profits.

Analysis and Advice

Analysis and advice results from scrutinizing a company’s financial documentation.

This can be a crucial part of an accountant’s career. In the case of a larger organization, a Chief Financial Officer might receive all of the relevant data and then spend a great deal of time preparing a presentation for the Board of Directors or other stakeholders.

Their report should help the audience understand the true meaning of the numbers, so that they can make decisions for the company’s future.

Outside consulting accountants can likewise provide analysis and insights from a vantage point that is difficult for the company’s internal accountants. They might advise a company to undergo a restructuring, eliminate certain processes, or otherwise improve efficiency.

Financial Data Management

Data management used to be comprised of paper ledgers that were stored in fireproof safes. These days, accountants need to ensure that their financial data is stored and managed in ways that are both safe and reliable.

For this reason, contemporary accountants can specialize in information technology so that they are best able to keep tabs on how and where the information is stored. Further, they can also ensure that the data is safe and not compromised by unauthorized individuals.

Regulatory and Reporting Compliance

Every company in the United States is subject to governmental regulation. Thus, accountants need to be well-versed in governmental regulations so that their operations remain in compliance with current statutes.

For instance, a publicly traded company must meet certain transparency standards for its reporting. The Securities and Exchange Commission (SEC) is responsible for enforcing these regulations so that average investors can make sound investing decisions.

Companies may also have their own standards. Often, these standards reflect the government’s rules but are often stricter. Accountants who hold themselves to these higher standards find that their organizations have less legal exposure and possibly higher success rates in the long-term.

Security

Accountants are responsible for every aspect of a company’s financial data. They need to provide accurate numbers and sound analysis to all relevant stakeholders and then ensure the safety and security of that data.

These days, ensuring that safety of data may require a deep knowledge of cyber security and information technology. Companies might hire outside consultants to help with this security or hire accountants who have an IT specialty.

Financial Controls

A financial controller is an accounting executive who applies their years of experience in maintaining and controlling a company’s budget. They might also be tasked with ensuring that financial reporting is accurate, truthful, and prepared to meet regulatory stipulations.

Read Also: Internal controls: Good or bad for Employees of Accounting Firms?

The controller will also file all required documents to the SEC, including the quarterly, annual, and proxy statements. Sometimes a controller heads up the hiring of accounting professionals and meeting all legal requirements pertaining to taxation and licenses.

Finally

Outsourcing your financial operations will clearly save you money. In-house staffing requires constant monitoring, but the current market conditions don’t allow enough time for executives to focus on such tasks.

With outsourcing, the CFO can spend more time on decision making and financial management. Precise and reliable financial reports from your service provider can make a huge difference in decision making.

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