Benefits of Outsourcing Accounting Services

Benefits of Outsourcing Accounting Services

Outsourcing is becoming an increasingly common practice for small businesses. In fact, more than half of all small businesses in the United States planned to outsource at least one business function in 2019, with accounting being the most common function to outsource.

Still, if you are looking for accounting services for your business, you’ve probably stopped to ponder “why do companies outsource accounting?” Maybe you’re trying to decide if you should hire someone full time or make use of outsourced accounting services to help with the financial functions of your business. While it is important to research both options to find the right fit for your business, outsourced accounting services offer a wealth of advantages for small- and mid-sized businesses looking to stay on top of their books and benefit from financial expertise.

This article will explore what accounting functions can be outsourced, the benefits of accounting for small businesses, and the top ten reasons to outsource bookkeeping and other accounting services.

What Accounting Functions Can be Outsourced?

These days, thanks to modern technologies, most accounting functions can be outsourced. When outsourcing accounting work, business owners should look for a firm that allows them to choose from a suite of services to meet their financial needs. Simply put, business owners should have the option to choose which services to outsource—they shouldn’t pay for services that aren’t needed. Most accounting firms offer the following services:

Bookkeeping: The most basic accounting function that involves tracking and maintaining a company’s financial records, including revenue and spending. Bookkeeping is often performed by a bookkeeper with entry-level financial skills.

Monthly Accounting: The next step up from bookkeeping, monthly accounting involves closing the monthly books and providing insights about current financial health. Monthly accounting processes are often performed by a higher-level financial professional like an accountant.

Cash Flow Forecasting: A future-focused accounting practice that reviews a company’s cash inflows and outflows to create short- and long-term projected cash flow. Cash flow forecasting can be performed by experienced, high-level accountants.

Outsourced CFO: Also known as Fractional CFO services, this gives businesses an opportunity to contract a top-level financial professional on a part-time basis for consulting and high-level financial support. CFOs often bring years of financial and accounting experience to the table.
Operational Support: Various services that help business owners identify opportunities to increase efficiency and get better information through improved processes and best-in-class technology applications. Operational support may be provided by financial professionals or consultants who help businesses perform more efficiently.

Consider this example: A non-profit that focuses on serving K-12 students is seeking a large grant opportunity to provide more programming. An outsourced accounting firm can help this non-profit through the entire process.

To start, the non-profit will likely need to provide detailed information about their financial statements as a part of the grant application. An outsourced accountant can help the non-profit gather compelling, accurate, and relevant financial information to include in the application. Once the non-profit receives the grant, they may need assistance overseeing any financial requirements. An outsourced CFO—or even a high-level accountant—could provide leadership in this area, on a project-basis, to ensure grant compliance and successful financial implementation.

While the non-profit may be able to secure the grant without outsourced accounting, using this service will allow the non-profit employees to spend their time implementing the grant and growing their programming —not getting bogged down in the accounting.

How Does Accounting Help Businesses?

For some business owners, accounting is probably seen as a necessary evil. However, savvy business owners recognize how accounting can help them make smarter business decisions to improve short-term and long-term financial well-being. So what are the benefits of accounting to a business, and how can bookkeeping and accounting services help take your business to the next level?

Meaningful budgets: Accounting services help business owners create meaningful budgets that are informed by current and historic spending and revenue trends. A well-designed operating budget will not only help a business owner plan for the future, but will create accountability throughout the organization.

Inform major spending: Deciding to make a significant business purchase or hire a new employee can be scary without good financial information. When making major decisions, it is important to understand not only the current financial health of the business, but also the likely financial impact those changes could bring. An experienced financial professional can shed light on those decisions and provide confidence and peace of mind.

Monitor financial health: Did your business meet revenue goals for Q2? For the entire fiscal year? Do your expenditures fit within your projected cash flow? A well designed accounting system will provide timely and accurate information about your operating performance as well as the overall financial health of the company.

Let’s explore an example to illustrate the benefits that accounting services can provide a small business. A tech startup recently launched their first product—a resounding success—and they are seeing a large influx in revenue. Outsourced accounting services can help this tech startup in both short- and long-term ways.

For the short-term, an accountant can assist the startup in creating a budget, based on current revenue streams, projected revenue for the remainder of the fiscal year, and expected expenditures to grow and support their new product. What’s more, an accounting professional can use a financial forecast to walk the startup through the financial advantages and disadvantages of business decisions like hiring a new employee to provide technical support for clients using their product.

For the long-term, an accountant or outsourced CFO can provide leadership services and longer-term projections. For example, the startup may need financial advice on how much to budget for future iterations of their product. Or, they may want to analyze if and when they should raise more capital to support future growth plans and explore various funding options.

As illustrated in this scenario, utilizing outsourced accounting and CFO services can guide business owners through important financial decisions that will impact the short- and long-term success of their company.

What are the Benefits of Outsourcing Accounting Services?

There are myriad reasons to outsource your accounting and other financial functions. But what is the main benefit of outsourcing? Most businesses agree that cost reduction is one of the main benefits of outsourcing services. In fact, a 2020 Deloitte survey reported that 70% of businesses cited cost savings as the primary reason for outsourcing business functions. Following that, around 40% indicated that outsourcing enables more flexibility for their company. Let’s take a look at the top ten benefits of outsourcing accounting and bookkeeping services.

Save Money

Why outsource accounting services? As we mentioned previously, most business owners agree that outsourcing business services can lead to significant cost savings. The salary range for the average, entry-level accountant is between $51,000 and $61,000, not to mention the added expense of recruitment, training, and benefits. Monthly fees associated with outsourcing basic and intermediate accounting functions can run between $500 and $5,000 a year, freeing up money to spend on employees that support the core mission of the business, rather than auxiliary services.

Access Modern Accounting Systems and Reports

The financial tools available to small business owners have improved significantly over the past ten years. A progressive outsourced accounting firm will use state-of-the-art accounting software to increase efficiency and reduce the risks associated with human error. Having access to these systems can be a game changer for small businesses. Modern accounting software provides business owners with real-time reporting and dashboarding capabilities. With increased financial visibility, business owners can make informed decisions and achieve the peace of mind that comes when you have your financial house in order.

Make Smarter Business Decisions

While no one can predict the future, accounting can help business owners make the smartest decisions possible based on financial data. With access to professional accountants and a well designed accounting system, business owners can make informed decisions about the future of their company. Outsourced accounting firms can also provide strategic financial advice and provide an experienced sounding board for major decisions.

Timely and Accurate Records

In order for information to be meaningful, it needs to be both timely and accurate. One of the real benefits of working with a good outsourced accounting firm is that they will own the accounting function and establish a routine for maintaining your books. The end result is that you will get timely and accurate record keeping that will lead to meaningful financials.

Reduce Business Risk

Outsourcing business functions like accounting may seem risky, as you’re bringing in someone new. In fact, the opposite is true. One of the benefits of outsourced bookkeeping services is that you’ll have expert guidance from accounting teams in designing your accounting systems and processes to minimize the potential for fraud. A good outsourced accounting firm will provide a second set of eyes on the accounting records and be able to help you establish good internal controls. While business risks like fraud can never be 100% ruled out, having more than one person working on your books will certainly reduce the risk.

Get Expert Support

Hiring an experienced outsourced accounting firm or fractional CFO who understands what it takes to run a successful company can make all the difference. Running a small business is not for the faint of heart. There are a number of financial challenges that small business owners face on a regular basis. And most small business owners aren’t equipped to face those challenges on their own. When you engage the right outsourcing partner you gain access to financial experts, including CFOS, who can work on your business on a part-time, cost-effective basis to help get your business to the next level.

Stay on Track with Payroll

It’s not an overstatement to say that the success of a business is inextricably linked to the happiness and performance of its employees. Taking care of employees means making sure they’re reliably paid on time. There is no margin for error. An outsourced accounting firm that can reliably handle your payroll needs will not only take the burden off your plate, but it will ensure a good employee experience.

Be Prepared for Crisis

While no business owner wants to think of a financial downturn that might impact their business, the COVID-19 pandemic illustrated the importance of planning for unexpected crises. Having the solid support of a team of financial experts is important during normal business times, but it can be critical during times of distress. Be prepared for potential financial downturns by ensuring that your finances are already in order and protocols are in place to weather any storms.

Fully Scalable

As your business changes and grows, so too will your accounting needs. You may only need basic bookkeeping services now, but in a year’s time, you might need more advanced financial support. One of the best reasons to use an outsourced accounting firm is that they can scale your services up or down as needed. And, you’ll continue to work with the same team of experts.

Save Time and Focus More on your Business

This is probably one of the most important benefits of outsourcing accounting services. Time is the enemy of all entrepreneurs. It’s the thing they value the most, and yet often use the worst. As a business grows, more time and focus are needed to properly handle the accounting functions. It’s estimated that small businesses spend approximately 120 working days per year on bookkeeping and other administrative tasks. By using outsourcing accounting services, you will not only get more time to run your business but you will also be able to focus your time in a way that leads to better results.

Get All The Benefits of Outsourced Accounting with Personalized Services from Milestone

At Milestone, we enjoy helping small business owners and being a part of their success. With a simple model that offers experienced C-Level leadership at a fraction of the cost, no long-term contracts,and the flexibility to scale up or down as your business evolves, Milestone can help you transform your back office into a powerful tool to inform your business decisions now and in the future.

We’re not just another outsourced accounting firm. Milestone offers a refreshingly forward approach to outsourced accounting tasks that is informed by our four core values—our Core4, as we call them: service, integrity, leadership, and lifestyle. We are passionate about our clients and the value we create for them. But that’s not the whole story. We have a deep admiration for the work of entrepreneurs and approach every day with honesty, integrity and a firm code of ethics. We understand the importance of serving businesses in our community and strive to leave the world a little better than we found it.

We believe every business deserves access to strategy and expertise. At Milestone, we partner with businesses to help them save time and money and join them on the entrepreneurial journey. Contact us today to discuss outsourcing accounting functions as you grow your business.