Many small businesses, start-ups, and entrepreneurs find it challenging to hire an accounting executive with knowledge and skill to do everything from making payments, paying salaries, issuing invoices, managing company accounts, preparing financial statements, summarizing financial data to generating varied management reports, handling banks and auditors, and manage taxes.

Proper accounting is essential as it helps to evaluate a company's performance, compare it over time, and for compliance purposes. Traditionally, bookkeeping was an insider activity for all organizations. But this core job is not done well in startups and smaller organizations as they don’t have adequately skilled people to do all the tasks. This ends up taking a lot of time of the CEO and the rest of the management which is better spent on business operations and strategy. It is also difficult for the under- skilled staff in those organizations to update themselves with the latest rules, accounting standards, and notifications issued by Accounting Standard Boards and other Authorities.

Outsourcing accounting work helps small companies get the services of highly trained and experienced professionals at a reasonable cost. Professionals who know the ins and outs of not only accounting but also taxation and governance, and how they affect book-keeping. Outsourcing gives the business owners and management an opportunity to hire these experts part-time and have a comprehensive solution.

The latest trend among small to medium-scale businesses is to beat this challenge by outsourcing their accounting and bookkeeping activities to an expert at a reasonable cost. More than a third of organizations are getting their books of accounts outsourced and are far more relaxed under experienced and reliable hands. Thus, this tedious and enormous task is accomplished in a cost- efficient and qualitative manner.

Advantages of outsourcing accounting and bookkeeping

Cost savings: Outsourcing the bookkeeping function will be more cost-effective than hiring full- time employees. The service provided will take on the costs of hiring, training, and attrition, as well as the ongoing costs of salaries, benefits, and office space.

Increased efficiency: Service providers have expertise and access to technology and resources that the finance function of a startup or mid-size company might not be able to afford on their own. This can lead to improved efficiency and productivity.

Focus: By outsourcing non-core accounting processes, a company can free up its management and employees to focus on its core activities.

Access to expertise: Service providers will be able to provide the full gambit of accounting and finance at a fraction of the cost. They will also have access to a network of experts specialized in niche areas such as tax, treasury, legal, secretarial, or technology.

Speed: Normally a lot of time is lost to source, hire and train resources. Organizations can save significant time and effort by outsourcing as service providers will typically have a pool of trained resources ready to start immediately.

Dependency on people: Outsourcing will eliminate dependency on employees when they quit or go on long leave. Outsource partners will have trained backup resources who can take over immediately

Scalability and flexibility: Outsourcing allow organizations to scale their operations up or down as needed, without having to go through the process of hiring and laying off employees. Seasonal or temporary needs like during year-end, implementation of a new system, etc are better outsourced so that companies don’t have to carry employees on their payroll for this work.

Latest technologies: Using software can make processes efficient and can help reduce errors and fraud. Service providers will come with the best accounting, billing, or expense tools and startups or small enterprises need not invest capex and implementation costs for digital assets.

Advisory support: Service providers can also provide advisory support on all finance and governance matters, as they will have experience and expertise across multiple clients, industries and stages.

Access to global talent: Outsourcing enables companies to tap into a global pool of talent, enabling them to access the best and most cost-efficient resources for their specific needs.

Who should opt for outsourcing accounting?

Small businesses or startups which do not need a full-time accountant

Companies that have a budget constraint for the accounting function

Companies of any size that cannot find a full-time employee with the right skills at affordable costs or by the required time

Companies that have a seasonal business or portion of accounting work that is seasonal

Companies that require temporary service eg during year-end or when an employee is on long leave, etc

Companies or startups which need assistance in specific niche areas

Accounting tasks a company can outsource immediately

Payroll processing

Account payables (vendor invoice verification, approvals, payments)

Account receivables (invoicing, collections)

Bookkeeping and preparation of financial statements

Management reporting and MIS

Compliance and tax work (particularly state tax, VAT, GST, etc) involving routine steps

All data entry, data extraction, analysis, type of Work

Conclusion

Accounting is the language of business and a vital part of business, but also complex. It requires time and specific knowledge. Without proper accounting expertise and process, it is likely to be inefficient and costly with chances of errors and fraud. There are significant advantages for companies who decide to outsource their routine accounting tasks. It will immediately provide the benefits of cost efficiency, best-in-class expertise, the ability to scale fast, and most importantly free up management time.

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