OUTSOURCED BOOKKEEPING

Introduction to Outsourced Bookkeeping

Outsourcing is a relatively new solution to a relatively old problem: Small businesses are cash strapped and time poor. There’s not enough time or labor to handle every mechanism in the growing machine, leaving companies in a bind about how to maximize their resources.

In the past, companies had few strategies for approaching this balancing act, but outsourcing has opened the doors to world of new options. These days, outsourced services are the ideal way for a businesses to handle non-essential administrative tasks, with a special shout-out to one of the most important: Accounting and bookkeeping.

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What Is Outsourced Bookkeeping?

Bookkeeping is never high on any entrepreneur’s list of priorities. Yes, it’s a necessary by-product of business practice that needs to be handled, but few business owners have the experience or knowledge required to handle accounting tasks on their own. Basic bookkeeping is simple enough, but as a business grows, builds out its workforce, offers new services, and reports new types of revenue, things get complicated. The input and expertise of certified accountants will inevitably become necessary as a business scales.

Of course, businesses can hire in-house accountants to handle the work, but this isn’t feasible for every company — especially smaller businesses that don’t have the overhead to finance inhouse experts. 

This brings us back to our initial problem: How can business owners find the best possible accounting expertise without committing to expensive talent acquisition, recruitment, and onboarding? When companies must balance cost with expertise, outsourced bookkeeping is the perfect middle ground.

Outsourced bookkeeping is just as it sounds: Business owners hand off their accounting, payroll, and administrative tasks to a managed service provider (MSP). This provider isn’t just any old accountant; outsourced accounting services are generally handled by teams of accounting experts and financial professionals with years of experience in the industry. By leveraging this third-party expertise alongside innovative payment models and cutting-edge technology, businesses of all sizes can benefit from an outsourced accounting partnership

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Is It Really Necessary to Outsource?

Despite the well-documented benefits of outsourcing, it’s natural to be wary of strategies that ask you to give up control of your critical business functions. Those type-A Business owners who need to have a hand in every single one of their business operations may even question whether outsourcing is really necessary. Why trust someone else when we can do it ourselves?

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Pros and Cons of Outsourced Bookkeeping

A survey by the National Small Business Association found that 38 percent of small businesses spend over 80 hours per year on federal taxes alone. 80 hours! That’s two full work weeks of time needed just to process your business’s annual taxes, never mind financial reporting, account reconciliation, payroll processing, and every other task that bookkeepers handle.

For struggling small business owners trying to balance their own bookkeeping with business growth, this time investment is completely untenable. In situations like these, outsourced bookkeeping comes to the rescue.

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Pros of Outsourced Bookkeeping

Bookkeeping is the perfect task to outsource: It’s time-consuming, specialized, and when handled poorly, a serious liability for a small business. Let’s review the biggest benefits of outsourcing this task.

 

Cons of Outsourced Bookkeeping

Outsourced bookkeeping does come with a few drawbacks that business owners should be aware of.

The Cost of Not Outsourcing is Higher Than Overhead Expenses

Today, smart business leaders lean towards outsourcing important administrative tasks in order to focus on what the business does best — provide a quality product or service to the consumer. Outsourcing business practices to reliable third-parties has become such an effective and popular practice that in 2017 the global outsourcing market amounted to almost $89 billion.

One critical-yet-complex administrative task that tops the list of those most outsourced is accounting and bookkeeping, and for good reason. The cost of not outsourcing your business’s bookkeeping is higher than just increased overhead and in-house expenses. Here’s why outsourcing accounting is less taxing on your sanity and your bottom line.

Hiring, training, and managing in-house bookkeeping is pricey

The alternative to outsourcing is establishing an in-house accounting department to handle bookkeeping responsibilities. Though it may sound simple enough on the surface, setting up and maintaining in-house accounting is much more involved than finding a new hire who likes to crunch numbers. Hiring, training, and managing a reliable accountant (or an accounting department) is a “full package” deal.

 

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The cost of hiring a new employee, especially one experienced enough to comfortably handle your accounting needs, adds up quickly. Additionally, no new hire starts running at full speed on their first day, and mid-level employees like accountants still need time before reaching a “break-even” point as far as resource investment is concerned. According to a survey of 610 CEOs conducted by the Harvard Business School, the break-even point even for mid-level managers is at least six months.

End-to-end outsourcing of finance and accounting services is replacing the notion and need for the in-house accounting team. Outsourcing your bookkeeping is less expensive, less time consuming, and less stressful than the in-house alternative.

Beyond the Books: The Benefits for SaaS Companies

SaaS companies face a unique set of challenges when compared to the average business. Unlike business models that allow accountants to recognize revenue as soon as a sale is made, SaaS arrangements typically involve recognizing revenue over contracted time periods. These determinations expose SaaS companies to numerous clerical and compliance risks, although as we’ll discuss, these risks can be eliminated through outsourced accounting services.

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Reporting and Analytics: The Financial Side

Software as a service companies that provide outsourced accounting and bookkeeping solutions instill trust in customers with both the up-front marketing pitch and the after-the-action analytics and reporting. The promise of efficient finance management by experienced professionals draws you in, but it’s the precision and presentation of the bookkeeping data that makes you stay with an outsourced accounting provider.

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Addressing Challenges to Outsourced Bookkeeping

Outsourced bookkeeping and accounting probably sounds like the goose that laid the golden egg. Less in-house stress and overhead resource drain, improved efficiency, and accurate reporting provided by experienced professionals. Win-win, right? 

While it’s true that outsourcing your accounting and financial tasks to a responsible third-party can considerably influence the way you do business, there are challenges companies face when first setting sail on outsourced waters. Here are five common outsourcing challenges and how to overcome them.

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A Perfect Match: Deciding on an Outsourced Bookkeeper

Of course, all the benefits of outsourced bookkeeping are locked behind one decision: The MSP you choose.

Every outsourced bookkeeper will rattle off the benefits of third-party accounting services, but how can you be sure they know their stuff? And what type of working relationship will you have when you partner with them? 

Let’s review some of the key considerations that business owners should keep in mind before choosing an outsourced bookkeeper.

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WHY OUTSOURCED BOOKKEEPING JUST MAKES SENSE

So, let’s recap.

Outsourced services are disrupting the traditional business world. And for certain tasks like accounting and bookkeeping, outsourcing is by far the best way to get things done.

  • Letting a quality MSP handle your books gives you plenty of benefits:

  • Guaranteed expertise, efficiency, and compliance across all accounting workflows;

  • Flexible and scalable bookkeeping solutions that grow alongside your business;

  • Cost-effective strategies for keeping administrative costs low without sacrificing accounting accuracy.

These benefits are of particular value for SaaS organizations that bear the burden of complex compliance and revenue recognition rules. With a qualified accounting provider handling each task, creating customized reports, and updating you every step of the way, outsourcing offers a level of efficiency that in-house teams can’t match.

But of course, the MSP you choose is the gatekeeper to all these benefits. Take your time and do your research before committing to the process. Find information on MSPs as detailed above, create a shortlist of candidates, and contact each company for more details on what they can provide for your company.

And above all, remember why you’re doing this in the first place! You executives have more important things to do than worry about accounting, and the logistic costs of setting up an in-house team aren’t tenable for every business. If you’re tired of choosing between your company’s bottom line and keeping your sanity, you might want to give outsourcing a shot. Whether you’re a struggling entrepreneur, a small business owner interested in growth, or a SaaS company with complicated financials, outsourced bookkeeping just makes sense.

 

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