Advantages & Disadvantages of Accounting Process Outsourcing

Advantages & Disadvantages of Accounting Process Outsourcing

Small businesses and organizations are outsourcing bookkeeping, accounting and controller services. Mid-size to large enterprises were the organizations that outsource their accounting processes earlier. But now, organizations of all sizes do it because they enjoy the advantages that come along with it.

Accounting process outsourcing may not seem like an ideal option but owners and CEOs of the organization have understood the importance of letting go of activities that is not their core expertise. They and their employees rather focus on other business areas that are of higher importance to them.

The primary reason for accounting process outsourcing is cost savings, making better decisions in business, finding avenues to scale up their business and so on. Outsourcing accounting processes has resulted in improvement in business and has driven dynamic change in the everyday working of the business.

Before your organization finalizes to outsource the accounting process, it is important to understand and evaluate its advantages and disadvantages.

Advantages of Accounting Process Outsourcing

Accounting process outsourcing has many benefits to offer. Some of the many benefits have been explained in detail below:

  • Cost Efficient

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.

  • Proactive Method

 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.

  • Fraud Reduction

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:

  • Hidden Charges

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.

Conclusion 

Weighing the pros and cons of outsourcing the accounting processes, it completely boils down to your objective and priories to take a decision as to whether recruit someone in-house or hire a team from outside.

KlearStack AI can help you streamline your accounting process in case you decide to hire someone in-house. The platform can extract data accurately from structured as well as unstructured documents. Schedule a demo with our experts to learn more about KlearStack AI.

 

Ashutosh Saitwal
Ashutosh Saitwal
www.klearstack.com/

Ashutosh is the founder and director of the award winning KlearStack AI platform. You can catch him speaking at NASSCOM events around the world where he speaks and is an evangelist for RPA, AI, Machine Learning and Intelligent Document Processing.