7 Overlooked Benefits of Outsourced Accounting Services
A quick reminder from Economics 101: Businesses have limited resources, including financial, time, and human resources. So, it makes sense to focus whatever resources you have on doing the things that are central to creating products or services that leverage your company’s talents to bring in revenue and grow your business.
But that does not mean ignoring functions like accounting that provide essential support while not central to what your company produces and sells. Outsourcing support functions could be the best way to maximize your resources.
Saving money is one reason many small- to mid-sized businesses outsource their accounting function, but it is certainly not the only one. In fact, the out-of-pocket cost of outsourcing is often small compared to the benefits it offers.
1. Outsourcing is not just about reducing headcount- it offers many benefits to small-to-mid-sized businesses that are not big enough for a full accounting team.
2. These benefits include expertise “on-demand” staffing flexibility and greater confidence in the numbers for decision-making.
3. Outsourced accounting services give CE’s and business owners intangible value that goes far beyond debits and credits.
Here, we describe seven overlooked or even unexpected ways your company could benefit from using outsourced accounting services.
You know your true revenues and expenses and how much money the business made or lost. Many companies cannot afford to hire accounting experts with experience in different areas and a controller or even a CFO. You might have the budget to hire one full-time person, but no individual can supply the range of expertise you need.
Trust us on this – you should not expect a good bookkeeper to also have the insights of an accounting expert or CFO, and you should not expect an experienced CFO to handle day-to-day bookkeeping. A competent bookkeeper is essential for recording transactions, sending out timely, accurate invoices, and managing the payroll.
Still, you need someone else to calculate your revenues and expenses correctly, make recommendations when there is ambiguity in accounting treatments, and compute KPIs.
Processing transactions correctly requires attention to detail. An outsourced accounting firm can manage your entire accounts receivable effort, including creating and maintaining an aging schedule, so you know when customers are slipping on their payments, which affects your cash flow.
A capable outsourced accounting firm can also help to pursue collections. Similarly, outsourcing your accounts payable function to experienced professionals offers important benefits: Invoices are reviewed before they are paid, and they are paid on time but not early.
Outsourced accounting services can also oversee payroll – a thankless job, as no one says anything when it is done correctly, but if anything is wrong, you hear about it immediately. Although payroll software can automate a big piece of this task, mistakes happen.
We know of one situation where someone misread a W-4, so the employee had almost no withholding for the year and faced a big tax liability as a result. Outsourcing gives you access to a team of people who can do different things with the needed level of expertise.
Frankly, closing the books is not a full-time job. If you have an in-house accounting team, they are probably not as meaningfully occupied a decent part of the month once the monthly close is completed. Outsourcing lets you easily scale up when you need people and cut back when you no longer need them.
Using outsourced accounting services allows you to meet time-sensitive deadlines, such as at tax time when you need to report payments made to customers month by month. When the job is done, your outsourced team shrinks.
When you discover a problem in your kitchen or bathroom but the source of the problem and the solution are not obvious, what do you do? You call a plumber or an electrician who assesses the situation, pulls out the right tools, fixes the problem, and leaves. You do not keep a plumber or electrician living in your home full-time. The same logic applies to your company.
You may realize there is a problem with your daily accounting processes, or your financials may say the business is profitable, but your cash flow is shaky, but you do not have the expertise in-house to figure out what is going on. A good outsourced accounting firm can diagnose the problem and either fix it or bring in other trusted experts to help.
At G-Squared, we can also connect clients with Professional Employer Organizations that provide resources small companies would not be able to access otherwise, such as 401(k) plans, healthcare, and other benefits that allow you to compete for those critical human resources that are at the core of what your company is striving to accomplish.
Cash is a precious resource for small businesses, and there is usually a great deal of uncertainty as to how much cash will be coming in and when. A quality outsourced accounting firm can get to know your business quickly and generate rolling 13-week cash flow projections that allow you to know in advance when you will run out of cash.
That allows you to proactively talk with your bank about the need to draw on a credit line or start cutting expenses. A bookkeeper, no matter how well-qualified, may struggle to do this.
To calculate useful financial ratios and KPIs, a capable outsourced accounting firm can use the accounting data generated for you each month – data that you know is reliable because their experts compiled it.
Outsourced accounting experts can do more than calculate these values; they can advise you on which KPIs are important to companies in your industry. For example, outsourcing your accounting needs can provide you with a clear understanding of your true customer acquisition costs and monitor your compliance with bank loan covenants.
A strong, capable outsourced accounting firm has the ability to sit down with CEOs to help them interpret accounting information, point out areas of concern, and suggest corrective actions based on the deep expertise in the outsourcing firm and what it has seen in working with other clients.
It is one thing to record and report the numbers; understanding why this number looks this way, identifying when something changes and needs attention, and helping to figure out what your company should do next takes the value of accounting to a whole new level. That is a smart use of your company’s resources.
G-Squared Partners provides outsourced accounting services that provide companies with all of the benefits discussed above. Contact us or instantly book a meeting to discuss how we can provide your company with the accounting expertise you need.