Accounts outsourcing

As companies continue to operate on leaner budgets, some have found that outsourcing certain functions is a good way to keep quality up and costs down. Outsourcing is not a new concept. For many years, businesses have transferred services such as bookkeeping, accounting, and Controller/CFO services to third-party firms. While once seen as an option for larger companies in the past, today the floodgates of outsourcing have opened and more and more companies are reaping the benefits. According to a recent KPMG survey, about 40 percent of companies planned to increase their use of outsourced accounting. With the availability of advanced financial automation solutions and a deluge of cloud-based systems, all types of companies, small and large, are taking advantage of what it can do to for their businesses.

Finance and accounting (F&A) was one of the first back-office processes that companies outsourced, and the practice continues to boom: Ed Thomas, an analyst for Ovum research, found the number of F&A outsourcing projects valued at $1 million or more increased in 2012 compared to the year before.

As the market matures, companies contracting for outcomes are exploring fresh ideas and seeking new answers to streamline F&A processes. They are expanding outsourcing to new areas of finance and accounting, new industries, and new sizes of companies than in the past.

Driving efficiency is a high priority for CFOs, according to an Ovum study of 150 large companies in the United States, United Kingdom and Canada. Most survey respondents saw the main strategic aim of the accounting department as delivering efficiencies, whether that is within the department itself or across the company as a whole.

“This is a wider trend in outsourcing as a whole,” Thomas explains. “Cost reductions are the table stakes, and companies want to know what else their outsourcers can do to make their processes and technology run more efficiently.”

The most commonly outsourced services within accounting are payroll accounting, accounts payable, and accounts receivable. The Ovum study found companies are “moving up the value chain” in the types of F&A functions they outsource.

“They are looking to move from relatively basic transactional processes, such as accounts payable to more strategic functions, like budgets, forecasts and internal audits,” Thomas says. “More than a third of respondents had outsourced internal auditing, which is a high-level function.”

In large companies, subsidiaries often manage finance, accounting and procurement independent of each other, leading to inconsistent processes and duplications of their efforts. The increase in mergers and acquisitions over the past few years in many industries have reminded companies of the drawbacks of disparate financial processes and systems.

Simplifying and standardizing F&A processes is a key characteristic of well-run companies, and by instilling good F&A processes these companies can achieve a variety of good outcomes—such as more information, more service and more cash. By simplifying their F&A processes, companies have found they can reduce the cycle it takes to close books, and they can develop better benchmark and baseline financial processes to help them meet regulatory requirements.

Here are some of the reasons for accounts outsourcing

1. Saves money and reduced cost

Businesses typically spend 2 to 5 percent of revenues to properly train and staff internal accounting departments. While it might not seem like a lot, outsourcing your accounting can actually lower your total costs by eliminating expenses related to employee benefits, training, accounting software, hardware, and office supplies. You will also save money from the potentially negative consequences of a financial mistake. Mishaps like this can cost you a lot more than the cost of bringing in an outsourced provider to do the job right

In-house accountant and outsourced accountant cost comparison (Avg. salary according to the market condition has taken for the comparison)

Item	In-house	Outsourced	Difference
Pay off	10,000*12=120,000	6000*12=72,000	48,000
Air ticket	1,500	0	1,500
Leave salary	10,000	0	10,000
Gratuity	7,000	0	7000
Total	138,500	72,000	66,500

 

2. Save Time and Improve Operational Efficiency

By outsourcing the accounting jobs you will be able to save your time and can focus your time in the core area of business such as marketing, development and research. As an expert in your field, it’s critical that you use that expertise to focus on business goals, growth and managing your day-today operations

3. Access to Expert Accounting Resources

Outsourced accounting will always provide an expert accounting resources and guidance’s. Being the professionals in the field of accounts and audit, all our staff will be trained and up to date. By outsourcing you’ll have access to a team of skilled accountants having a wide range of experience in the area. This ensures that your books are always up to date, payroll is done on time and you’re not at risk of being subjected to penalties due to inaccurate paperwork and underpayments

4. Save on Technology Costs

By outsourcing, there is no need to buy extra hardware and software for your accounting needs. A provider will have access to leading accounting software and will have the experience and know-how to properly use it to help your business.

5. Improve Processes

One of the hidden benefits that many businesses don’t realize is that outsourcing your accounting function provides an opportunity to upgrade and improve your current financial accounting processes. Outsourcing vendors instill best practices and controls that can help improve efficiency and timeliness of data. In addition, companies have found they can reduce the cycle it takes to close books, and they can develop better benchmark and baseline financial processes to help them meet regulatory requirements. Whether it’s having access to the latest accounting software or improving your payroll processes, implementing up-to-date accounting procedures can help improve service levels, reduce costs, create better cash flow and position your company for growth.

6. Be Proactive and Scale

When you outsource your accounting you can expect to minimize large investments in human resources, technology, and infrastructure and maximize your production, thereby giving an opportunity to scale and react to change more quickly. For example, outsourcing gives an organization the ability to more efficiently handle the surges in activity that may be seasonal or based on business cycles. Rather than having internal resources that are too busy at times and slow at others, companies can instead hand those concerns over to the outsourcing provider. Outsourcing can help you shift your focus and redirect energy from peripheral activities towards work that serves your clients more efficiently and helps grow.

7. Confidence and Peace of Mind —

With timely, accurate accounting records and reporting, you’ll gain total visibility into the financial health of your business giving you greater peace of mind to make more accurate and informed decisions. By outsourcing your accounting you can be assured that your financial information is correct, you avoid any potential threats of fraudulent activity, and have access to a team of experienced accounting professionals who you can count on. No matter the size of your company, outsourcing just makes good business sense. It gives you confidence and security you need that your financial operations are in order so you can focus on growing your business.