Guide To Outsourced Accounting Services

outsourced accounting

As a small business owner, it is only natural to feel overwhelmed by your many responsibilities. 

You have countless tasks to consider on a daily basis, such as choosing products and services, managing marketing strategies, dealing with customers and overseeing human resources.

However, one of the most important tasks any small business owner will face involves managing the company’s finances. 

When it comes to dealing with your company’s accounting needs, you have two main choices: keeping accounting in-house or outsourcing accounting to a third party.

37% of small businesses outsource their accounting function. Accounting as well as IT services are the most commonly outsourced processes for smaller companies.

Below is an overview of outsourcing and how it will affect your business. 

What Are Outsourced Accounting Services?

Note: Outsourcing your accounting services simply means that you hire another individual or company to handle the company’s accounting needs. It is an alternative to handling accounting with your own employees. In most cases, this will involve paying a fee to the third party based on the services you need and the third party’s requirements. 

Accounting functions which you can outsource may include:

  • Payroll
  • Bookkeeping
  • Invoicing and Account Receivables Management
  • Account Payables Management
  • Bank Reconciliations
  • Tax Accounting
  • Financial Reporting

Why to Outsource Accounting Services?

There are several reasons you may decide to outsource your accounting services instead of trying to handle them on your own. Some of the possible motivators for outsourcing your accounting services to another company include:

  • Lack of qualified personnel. One of the most common reasons businesses may choose to outsource their accounting services relates to a lack of qualified personnel. If you don’t have any employees who are qualified to handle accounting and you don’t know how to handle accounting yourself, you may decide to pass these responsibilities to a company that has the necessary knowledge and experience.
  • Lack of time. In some cases, you may have knowledge of accounting and/or you may have employees who understand accounting principles, but you simply don’t have the time to handle these needs on your own. If you and your employees already have other responsibilities that require your attention, you may choose to outsource accounting in order to free up time for these other tasks.
  • Concerns about accuracy or liability. When you outsource your company’s accounting needs, you may have an opportunity to protect yourself from liability and/or improve the accuracy of your financial statements. If you have had issues with accuracy or you are concerned about protecting yourself from legal problems, outsourcing may be your best option.
  • Desire for better profitability. In many cases, a professional accounting firm will be able to provide insights and advice you wouldn’t have uncovered on your own, helping you to make better decisions for your company as you move forward. This often leads to improved profitability for the business.

When to Outsource Accounting Services?

Every business is unique, so it can be difficult to decide whether outsourcing your accounting services is right for you. Some businesses may be able to handle accounting in-house until the business grows to a certain point, making it necessary to bring on professional outsourced help. In other situations, a growing business may decide to hire dedicated accounting personnel instead, depending on financial resources and goals.

If you have a smaller business, you may still benefit from outsourcing your company’s accounting needs, depending on your financial resources and abilities to handle accounting on your own. 

Regardless of the size of your business or its current rate of growth, to decide whether outsourcing your business’s accounting needs is right for you, it helps to consider all of the pros and cons of outsourced accounting. 

Pros and Cons of Outsourced Accounting Services

The pros of outsourced accounting services include:

  • More cost-effective than an in-house accounting staff. When you hire your own staff members to handle accounting, you will typically be required to offer benefits as well as salary. Thus, in most cases, it will cost less to outsource accounting services to a third party than it would to hire your own dedicated accounting staff. 
  • Lower chance of inaccuracies and fraud.  Outsourcing your accounting needs ensures that multiple people will have a chance to review your financial statements. This means you will have a lower likelihood of accidental inaccuracies that impact your financial situation, as well as deliberate fraudulent activity. 
  • Less time and energy required from you. As a small business owner, you already have enough responsibilities. Taking accounting out of the mix and handing it off to another professional gives you more time and energy to dedicate to running your business. In addition, many business owners find that they enjoy better peace of mind when they are not responsible for the company’s accounting needs. 
  • Fewer headaches.  Accounting issues can arise for a variety of reasons when you try to handle this need on your own, from audits to sick employees. When accounting is outsourced to another firm, however, you won’t have to deal with these headaches as often.
  • Help in difficult circumstances. Any business can face an audit or another difficult financial situation. When you are trying to handle accounting on your own, you will be forced to handle these situations on your own as well. However, outsourced accounting connects you with an ally and advocate who will be by your side during these challenging times. 

The cons of outsourced accounting services include:

  • Less control over accounting. Outsourcing the business’s accounting needs to another firm requires a certain amount of trust. When your records are no longer kept in-house, you won’t have as much control over the day-to-day accounting procedures, nor will you have immediate access to these records if you need to view them. 
  • Unforeseen costs. In some cases, the costs of outsourced accounting can grow unexpectedly, especially if your business experiences sudden growth or is subjected to an audit. If you are handling accounting in-house, these changes won’t affect your accounting expenses. However, an outsourced accounting services provider will typically expect a higher payment when new responsibilities are added.
  • Possibilities of accounting fraud. Although fraud is less likely when you have outsourced your accounting needs to another firm, it is still a possibility. For this reason, it is important to maintain communication with your outsourced accounting provider and address any red flags you see along the way. 

How to Outsource Accounting Services?

If you have decided to outsource your business’s accounting services, you may wonder how to begin the process. First, it is important to be sure that you are ready for outsourcing and that you have the financial resources to cover the cost. Once you have confirmed that you want to move forward with outsourcing, you can begin the process by:

1. Selecting the right provider. 


A variety of different firms may be available to handle your outsourced accounting needs. However, it is important to note that not all providers will offer the same quality of services. For this reason, it is important to compare your options carefully before you make your choice. Some of the characteristics to consider as you compare different providers of outsourced accounting services include: 

  • Services available – Not all providers will offer the same services. For example, some providers may offer comprehensive accounting services, while others may not be willing to handle all of your needs. Be sure the provider you choose provides all the services you are expecting to receive. 
  • Cost – Different providers of outsourced accounting services will have different pricing structures. Although it is important for your accounting services to be affordable, it is also important to remember that cost should not be your deciding factor if you will be forced to sacrifice quality. Look for a provider who offers high-quality, reliable services at a fair price that fits within your company’s budget. 
  • Reputation – One of the best ways to learn about the quality of service you can expect to receive is by learning about the experiences of past customers. A company’s reputation will tell you what kind of customer service you can anticipate, whether the company has a history of disappointing its customers and whether past customers would recommend the company’s services to others. When researching the reputation of different outsourced accounting services providers, remember to look for reviews from unbiased third-party sources, as opposed to focusing only on the testimonials the company publishes. 
  • Reliability – Nothing is more frightening than the idea that your outsourced accounting provider might unexpectedly shut down their business and leave you with a mountain of problems. For this reason, it is always a good idea to look for a well-established provider with a long history of reliability. A provider with a long history is less likely to engage in fraud or go out of business unexpectedly. 
  • Communication standards – If you are feeling at all hesitant about giving up control of your accounting to another company, it is important to look for a provider who is willing to maintain open communication. Although you may not be able to get immediate answers to your questions, many providers will offer access to specific contacts within the company who can get back to you quickly when you have a concern. 

2. Choosing your package. 


Many providers of outsourced accounting services will offer more than one package. After you have chosen your provider, you will need to select the package that makes the most sense for your company. Keep in mind that these packages typically come with different price tags. In addition, it is important to ask about the possibility of hidden or unexpected fees that could arise with each package available. 

3. Turning over your books. 


After you have established a relationship with your accounting provider and chosen the right package, it will be time to turn over control of your finances to this firm. This can be a difficult step for many business owners. However, if you have chosen the right provider, the benefits you receive from outsourced accounting will be well worth the discomfort you feel during this part of the process. 

4. Maintaining communication. 


As time goes on, you will need to maintain communication with your accounting provider, turning over important documents and answering any questions as needed. Even with the most trusted accounting firms, it is also a good idea to look over your financial statements and other records at regular intervals to make sure everything is on track. If you notice any problems with your financial statements, ask for clarification immediately and deal with any issues you find. 

How Much Does It Cost for a Small Business to Outsource Accounting?

The cost of outsourced accounting services can vary widely, so it is difficult to estimate how much outsourced accounting will cost. In general, the more responsibilities you outsource, the greater the price tag will be. In addition, larger companies with more complex financial situations tend to pay a higher price for their outsourced accounting services than a smaller company with a simpler financial situation. You can find out how much it will cost to outsource your company’s accounting needs by requesting quotes from various providers. 

Outsourced accounting is not the right choice for every small business. However, many business owners find that outsourcing their accounting needs is beneficial in the long run. If you aren’t sure whether this is the right choice for you, you can simplify the decision-making process by researching the firms in your area and learning more about the services they provide. If you decide to outsource, remember that the provider you choose will make all the difference, so compare your options carefully before you sign a contract. 

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