If you’ve ever nixed the idea of outsourced accounting from your list of potential strategies, you’re not alone. Most small-to-mid-size companies consider outsourcing to be an unattainable resource reserved only for global-size businesses. However, we’re here to tell you that not only can all companies benefit from outsourcing, but small- to mid-sized organizations might just have the most to gain. In this comprehensive guide, we'll walk you through every step of the outsourced accounting process, from initial setup to ongoing management.
Read more: Top 5 outsourcing myths: Why it’s easier than you think.
Key Takeaways
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Outsourced accounting allows your company to delegate financial tasks, freeing up valuable resources to focus on core business competencies and strategic growth.
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Businesses can outsource a wide range of functions, from high-volume transactional tasks like Accounts Payable to complex, judgment-intensive processes like budgeting and forecasting.
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Outsourcing provides a strategic solution to offset talent scarcity and can significantly contain costs compared to hiring an in-house team.
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Choosing the right provider is crucial; look for a partner with proven experience and expertise, who is technology agnostic, and aligns with your company's values and goals.
Table of Contents
In today’s uncertain market, your organization might be drowning in a mess of financial transactions, overworked team members and a lack of time management driven by inefficient processes. And if you’re a CFO, Controller or accounting executive, know that in order to run a thriving business, you need to have an efficient finance and accounting department.
Over the past few years, companies have made the switch to outsourced accounting to either A. supplement and strategically guide their current accounting function or B. build their accounting function from the ground up. Moreover, businesses are more apt to make the switch when their current methods cease to work.
If your company has never utilized outsourcing as a resource before, you may have some questions that give you pause. Better yet, you may wonder why you should outsource your finance tasks rather than taking the traditional in-house approach. Read the full guide to explore why outsourced accounting has surpassed other methods and how choosing the right virtual accounting partner is key to the growth of your organization.
Benefits of Outsourced Accounting
The accounting needs of a company vary according to size and industry. Moreover, finding a reputable outsourcing company that checks off your bucket list of wishes can be like finding a needle in a haystack. However, outsourcing is more than offloading tasks to another individual (or company), and if you want to increase your business’s bottom line, then you need to take note of these benefits:
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Cost containment
The most obvious benefit of outsourcing is to save money. When you add up all the costs of hiring a new team member – salary, benefits, overhead costs, equipment – things can get costly and often times, unaffordable. Outsourcing that same position alleviates that financial burden (thanks to low labor costs offshore) and allows your company to allocate that money to other expenses.
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Ability to reinvest your time and money
Sure, it’s nice to cut costs, but what are you going to do with the money you save? The best part is, it’s completely up to you. Furthermore, with your money and time freed up by outsourcing, your team can focus on bigger picture projects such as strategy or even adding budget to sales and marketing to fast-track growth.
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Add quality talent to your team
Finding top talent can be a huge undertaking, especially one that has the right skills and experience. Whether you’re adding to your existing team or building a new team from the ground up, partnering with an outsourcing provider lessens that hardship and expands your talent pool.
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Ability to focus on the growth of your business
You’re either focused on advancing your company or on menial tasks that swallow up your time. It can be frustrating to spend so much time on the latter. However, by offloading these processes to trusted accounting professionals, you and your team will have more time to concentrate on the essential aspects of your organization.
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Lower turnover and hiring expenses
Even if you do find the perfect fit for an in-house accountant, your business still has the risk of costly turnovers. With an outsourced accounting team, you don’t have to worry about delays in crucial business operations when one team member leaves. Instead, you have a constant backflow of support.
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Access specialized services through an outsourced accounting provider
Sure, you could hire a bookkeeper to handle the day-to-day transactions in your business, but what happens when you need a specialized service? From assurance financial statements to meticulous tax planning, hiring accounting experts can be costly and outside of your budget. Partnering with a quality outsourced accounting team alleviates this problem.
Read the full article: The advantages of outsourcing your back office support needs
What to Consider When Outsourcing Transactional Work
You’ve scoured the internet for blogs about outsourcing and you’ve consumed enough pertinent information to make a well-thought-out decision. However, before you make that next move you want to know if it’ll work for your business. We’ve outlined a few steps to take before you solidify your choice.
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Is outsourced accounting right for your company?
You need to decide whether outsourced accounting makes sense for your business. If your current accounting processes fall into any of the categories below, chances are, you’re an ideal candidate for outsourcing:
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Your current accounting procedures are time-consuming.
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Your current accounting procedures are monotonous.
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Your current accounting procedures HAVE to get completed, but don’t add any strategic value to your company.
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Does outsourcing align with your company's goals?
Create KPIs that are both well-defined and actionable.
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Find the right outsourced accounting vendor
Begin your search online, and once you’ve narrowed down your selections to a handful of potential vendors, get in touch.
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Secure buy-in with key stakeholders
Before you go any further in the outsourcing process, make sure your key stakeholders are on board with the transition.
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Bring all partners to the table
Create a roadmap on how to manage a seamless conversion.
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Analyze what your outsourced accounting setup will look like
This includes:
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Validation
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Demonstration
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Breakdown
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Communication
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Tech Check
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Timeline
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Transfer your knowledge
It goes without saying that if it’s important to you, it’s important to your outsourcing provider.
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Identify trends and opportunities
Communication should not cease once you launch. In fact, a reputable provider will keep you informed of any issues that may arise post-launch as well as any new opportunities that would benefit your company.
Read more: Outsourced accounting step-by-step mini-guide
Accounting Tasks to Outsource
Accounting is not a nice-to-have for a business – it’s a necessity. If you think you can get by without any accounting function, you’re in for a whirlwind of a surprise (and not in a good way). When taking a look at your team members’ responsibilities, you probably know that a majority of their job involves spending a copious amount of time on low-impact tasks. And although those tasks are necessary (like closing the books), they also take away the focus from furthering the growth of your company. In fact, research shows that the more disengaged an employee is, the less productive they become.
Fortunately, the cycle doesn’t have to stay on a never-ending loop. Here are a few functions you can delegate to virtual accounting teams:
| Accounts Payable | Accounts Receivable |
| General Accounting | Tax Accountant |
| Payroll | Inventory Management |
| Ledger Management | … and many more |
View the interactive guide: 101 tasks to delegate to outsourced accounting teams
Top Outsourced Accounting Mistakes to Avoid
Every company new to the outsourcing world knows that there’s potential for mistakes in the transitional process. And while mistakes can happen at any moment, it’s certainly not a planned calendar event. In fact, most businesses make the leap towards outsourcing for that very reason – to alleviate their current pain points (which probably includes costly errors). Take a look at which outsourcing blunders to steer clear of and how you can keep your outsourcing strategy from blowing up.
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Going for the cheapest solution
It’s tempting to save a few bucks, but when it comes to investing in quality talent, being frugal with your money is not the route to take. At the end of the day, you’re already saving anywhere from 50-75 percent by taking your tasks offshore, so choose a provider that meets all of your requirements.
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Being told what you need
You wouldn’t stand for your realtor telling you what type of house to buy, so why would you apply the same principle to outsourcing?
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Don’t ignore soft skills when hiring for outsourced accounting talent
Sure, the new provider looks perfect on paper, but are they a ‘culture’ match?
Read the full article: The 3 biggest outsourcing mistakes businesses make – and how to avoid them
Where to Outsource Accounting
When you think of the word ‘outsourcing’, you probably think of freelancers or contractors who set their own hours. However, outsourcing has evolved over the past decade, and two countries have emerged as the premier destinations for outsourcing: India and the Philippines. In fact, India was ranked as the top location for outsourcing according to Kearney’s 2021 Global Services Location Index, while the Philippines has tripled its global market share of BPO business since 2004, from four percent to 12.3%. As you can see, India and the Philippines are the top outsourcing hubs.
The Pros and Cons of Outsourcing to India
Like any business decision, there are pros and cons to outsourcing accounting to India. Here are a few of the top advantages:
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Lower labor costs
The average hourly rate of Indian accountants is much lower compared to US-based accountants. This can give you access to the same work product at a fraction of the cost.
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Leveraged time zones
The time zone difference between the US and India can give your business access to 24/7 support, which is ideal for fast turnaround times.
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Cutting-edge technology
Many Indian accountants use the latest technology and software, which can be beneficial if you are looking to modernize your accounting processes without a large upfront investment.
However, there are some disadvantages to consider:
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Communication can be challenging
One of the top disadvantages is communication barriers, which can disrupt collaboration and effective communication between your team.
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Data security can be a concern
Data security, especially confidentiality, can be a concern when outsourcing your accounting to India.
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Some red tape
Navigating through India’s complex legal and regulatory environment can be a drawback. While India is working to streamline the process, it is something to be aware of.
The Pros and Cons of Outsourcing to the Philippines
Just like India has pros and cons when outsourcing accounting, so does the Philippines. Let’s explore the advantages in more detail:
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Comparable cultures
The Philippines has a culture comparable to Western countries, which can lead to smoother interactions with customers and better service quality.
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Fewer language disruptions
The Philippines has a great English proficiency, which can facilitate seamless collaboration between your team.
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Lower labor costs
Like India, the Philippines has lower labor costs, helping your business save money on core services, like general ledger management, payroll processing, and more.
Despite these advantages, it’s also important to consider the disadvantages of outsourcing accounting to the Philippines.
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Infrastructure and Connectivity
While major business hubs in the Philippines have modern infrastructure, areas outside these central zones can sometimes face challenges with internet stability and power consistency. It is important to partner with a provider located in a primary business district with redundant systems to ensure uninterrupted service and reliable connectivity for your team.
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Natural disasters are common
The Philippines does have a higher risk of natural disasters, which could potentially cause business disruptions.
Read more: Why outsource to India & Location matters: Top 5 reasons to outsource to the Philippines
Choosing an Outsourced Accounting Provider
Once you’ve set your sights on outsourcing, the road to choosing a provider might get a little bumpy. The last thing you need is to find yourself on the other end of a costly mistake. But that’s exactly what you’ll experience by selecting the wrong provider, which is why we’ve summarized the top five most vital things to look for in a partner.
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Find an outsourcing provider with experience
If they have a track record of one client, chances are, they’re not very credible. Look for a provider that has dozens of happy clients, with reviews to support their experience and expertise.
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Make sure your company and corporate values align
You and the company you choose should mesh well. Moreover, your provider is an extension of your team, meaning they should share many of the same values and goals.
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Evaluate the quality of outsourced talent when choosing an accounting provider
Just like you wouldn’t purchase a new (or new to you) car without driving it first, why would you partner with a provider that employs subpar talent? Vetting the quality of the outsourced talent is just as important as choosing an overall provider.
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Find out about infrastructure and technology
Is your new provider ‘technology agnostic’? Are they able to provide ISO certification upon request? Before you sign on the dotted line, be sure your outsourced providers’ technology and infrastructure meet your standards.
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Visit the facility when you’re choosing between outsourced accounting providers
Take the time to visit these offshore locations. These visits will give you a chance to get to know the people you will be working closely with.
Read the full guide: Choosing an outsourced accounting provider: Top five things to look for in a partner
Empowered by the knowledge in this outsourced accounting guide, you can now confidently choose the best solution for your company's growth. Here at Personiv, we understand the ins and outs of outsourcing and what it takes to succeed in today’s growing accounting landscape. With more than 35 years of experience across multiple time zones, we can help you find, hire, and retain top talent, all the while saving you money and time (a win-win solution).
Ready to get started? Get in touch with one of our experts and see how outsourcing can fit into your accounting strategy.
Frequently Asked Questions
– Lower costs
– The ability to reinvest your time elsewhere
– Access to quality talent
– New resources to grow your business
– Lower turnover and hiring expenses
