Accounting is a critical function in any business. Managing the finances, bookkeeping, and accounting tasks can be time-consuming and challenging, especially for small and medium-sized enterprises (SMEs). Accounting process outsourcing is a popular solution to this problem, offering cost savings, increased efficiency, and improved accuracy. Outsourcing accounting processes has resulted in improvement in business and has driven dynamic change in the everyday working of the business.
According to whizconsulting Finance and accounting outsourcing is projected at US$51.5 Billion by 2026. With outsourced accounting and bookkeeping service providers, businesses save up to 60% overhead costs along with the capital cost, which otherwise would be invested in the infrastructure of the accounting department.
Before your organization finalizes to outsource the accounting process, it is important to understand and evaluate its advantages and disadvantages. In this blog, we’ll explore accounting process outsourcing and how KlearStack can help you streamline your accounting process.
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What is Accounting Process Outsourcing?
Accounting process outsourcing involves hiring an external provider to perform your accounting tasks. It includes everything from bookkeeping, financial reporting, accounts payable and receivable, payroll, and tax preparation. Outsourcing accounting processes can help businesses to focus on their core competencies, reduce costs, and improve efficiency. It also enables businesses to have access to expert accounting professionals who have a thorough understanding of the latest accounting standards.
Advantages of Accounting Process Outsourcing
Accounting process outsourcing has many benefits to offer. Some of the many benefits have been explained in detail below:
It’s much more affordable to outsource accounting and finance functions than to hire in-house staff to handle and manage them. There are no overhead costs when accounting activities are outsourced. Hiring employees will need additional costs in health insurance, retirement, workers’ compensation and so on. Apart from this, having an entire team’s expertise over just one internal person adds more value to your firm at a lower cost. The risk of non-compliance is also avoided and trustworthiness with an entire team for accounting activities is much more than a single individual.
As an owner or the CEO of the business, you may have to wear many hats. But that does not mean that you have to be an expert or a professional in every field. You have a started business of your passion and do not have to oversee your accounting books all the time. Accounting process outsourcing helps to free up your time and helps you to take up a proactive role in your day-to-day business making.
The outsourced accounting team also takes a proactive approach in ensuring the books are well maintained and flag any discrepancies your way immediately. This provides you peace of mind and helps you to take smart financial decisions promptly.
Accounting frauds are something that has, unfortunately, become the norm nowadays. Be it a small-sized firm or a large enterprise, every type of business is threatened by financial fraud. It is highly easy to manipulate books and fake an expense that may go unnoticed for months or several years. There may be multiple warning signs but if in-house accountants miss out on finding these errors, it can add a huge burden to the business. It is best to outsource accounting processes to avoid such errors in the long run. An accounting firm will ensure that every expense or added cost is cross-verified with its corresponding invoice and receipt.
Disadvantages of Accounting Process Outsourcing
After evaluating the advantages, let’s take a look at some of the disadvantages of accounting process outsourcing:
As is the case with any paid services, outsourcing accounting processes can lead to hidden charges creeping into your expense without you even noticing. This can result in additional financial burdens for your firm if you do not notice such costs making their way to your wallet.
Ensure to check the invoices and receipts sent to you by the accounting firm thoroughly and spot any costs of which you may not be aware before releasing the amount.
Lack of Control
For business owners, handing over control of the books can sometimes feel uncomfortable. Starting with an in-depth onboarding process that defines roles, policies and procedures sets expectations and ensures communication is timely.
Business owners may at first hesitate to hand over the control of their books to someone else. But by an in-depth understanding of the process and by pre-defining policies, and roles and setting expectations, the transition can be seamless. Make sure to have timely communication now and then.
Lack of Accessibility
The obvious advantage of having an in-house accountant is that they are available at your disposal for answering questions promptly. However, with an outsourced team, there may be a breakdown in communications and may miss out on timely responses. As the outsourced team is not available in the same office as yours, it can make it difficult at times for you to reach out to them.
Establishing a communication schedule is highly important. The division of responsibilities needs to be well discussed in advance. Discuss the priorities and responsibilities and arrange a weekly or monthly schedule to get regular updates on time.
How KlearStack can Help You Streamline Your Accounting Process?
KlearStack is an AI-powered accounting automation solution that offers a range of benefits for businesses looking to streamline their accounting process. It offers intelligent data extraction, document management, and seamless integration with accounting systems like QuickBooks, Tally, and others. KlearStack enables businesses to automate their accounting processes, saving time, reducing errors, and increasing productivity.
KlearStack offers a range of features that can help businesses to streamline their accounting process, including:
Automated Data Extraction:
KlearStack uses AI and machine learning to extract data from invoices, receipts, and other financial documents accurately, reducing the need for manual data entry.
Real-Time Tracking and Reporting:
KlearStack offers real-time tracking and reporting, allowing businesses to monitor their financial performance in real-time, make informed decisions, and manage cash flow effectively.
Streamlined Approval Workflow:
KlearStack enables businesses to streamline their approval workflow, reducing the need for paper-based approvals and improving overall efficiency.
A mid-sized manufacturing company had been struggling with a slow and inefficient invoicing process. They were manually entering data from invoices into their accounting system, which was time-consuming and prone to errors. This led to delays in processing invoices, late payments to suppliers, and a negative impact on their cash flow.
The company decided to implement KlearStack to automate their invoicing process and improve their accounting operations. KlearStack’s AI-powered solution was able to extract data from invoices and other financial documents with high accuracy, eliminating the need for manual data entry. The solution also provided real-time tracking and reporting, allowing the company to monitor their financial performance in real-time, make informed decisions, and manage cash flow effectively.
With KlearStack, the company was able to reduce their invoice processing time from 14 days to just 2 days. This helped them to improve their cash flow, reduce the risk of late payments, and increase their overall efficiency. Additionally, the streamlined approval workflow enabled by KlearStack reduced the need for paper-based approvals, saving time and resources.
In conclusion, outsourcing accounting processes can provide businesses with numerous benefits, including cost savings, increased efficiency, and improved accuracy. KlearStack offers an excellent solution for businesses looking to streamline their accounting process. Its AI-powered technology and automated features can help businesses to reduce errors, save time, and increase productivity. To learn more about KlearStack AI and how it can help you streamline your accounting process, Schedule a demo with our experts today!