Outsourcing used to be viewed simply as a way to save money by replacing in-house FTEs with contractors. Now, savvy companies recognize that outsourcing certain functions—like accounting—is a strategic approach that goes far beyond potential cost reductions. Done right, outsourced accounting can support an organization’s broader business objectives and prove a competitive advantage, especially in a tight labor market.
Why are so many growth-minded companies and other small and mid-sized businesses outsourcing their accounting? These 10 reasons make outsourced accounting all the rage today.
1. Outsourcing relieves the burden of staying staffed internally. It’s never been easy to keep a specialized function like accounting fully staffed in-house, ensuring you have the right team at the right time. Amidst unprecedented labor shortages and high turnover rates, it’s now nearly impossible. Accounting positions are often vacant for long periods, raising the risk you’ll hire a candidate who isn’t the best fit. When you outsource your accounting to a third-party firm, you shift the burden and risk of recruiting and retaining qualified accounting staff. And when you choose a provider that can tap highly experienced accountants outside the US market, staffing your accounting function becomes easy.
2. Outsourcing gives you access to highly experienced accounting professionals. The more challenging the labor market, the tougher it is to find accounting staff with the experience and expertise to match your needs. Whether you’re leading a fast-growing tech company, an established nonprofit, an emerging biotech, or a large CPA firm, you can’t afford to devote time and resources getting an inexperienced accountant up to speed. But depending on your company size and budget, you may not be able to compete for top candidates. Outsourced accounting providers only hire professionals who have the best credentials and a solid resume of relevant experience, giving you access to top talent.
3. Outsourcing is ideal for flexing to handle ebbs and flows or changing conditions. Almost every organization has peaks and valleys in its accounting needs. Besides the typical quarterly financial reporting and annual tax filing and audit preparation, your business might have other high-demand periods related to grant cycles or investor requirements, for example. Flexing to meet those needs is difficult, if not impossible, when you rely solely on internal staff. At the same time, many companies are anxious about adding permanent employees given the current market volatility and mounting recessionary pressures. An outsourced accounting provider not only offers year-round support for ongoing needs, without requiring additional head count; they can also flex up and down as your needs fluctuate, so you always have the right resources at the right time.
4. Outsourcing helps you fill gaps in capabilities or expertise. Aside from the most common tasks—like accounts payable and receivable, payroll, and bank reconciliation—your organization might have complex accounting needs that require specialized capabilities or expertise. Perhaps you’re preparing to launch a new product and you need financial models to assess the viability. Maybe it’s time to upgrade to more robust accounting software, but you don’t have the in-house skillsets to customize the solution to your needs and manage the implementation. An outsourced accounting provider has specialists in areas like these and more, on staff and ready to augment your internal team by filling in gaps in capabilities or expertise.
5. Outsourcing gives you ready access to industry-specific experience. While some accounting tasks don’t vary much by business, there are always nuances unique to your industry. In the nonprofit world, it’s all about grants. For tech companies, reporting on metrics like monthly recurring revenue and customer churn rates is critical. In the real estate industry, you need to follow complex lease accounting standards. Rather than struggle to hire in-house professionals experienced in your industry, it’s much easier to partner with an outsourced provider staffed with accountants who’ve worked in your industry, understand its complexities and requirements, and have a proven track record of getting it right.
6. Outsourcing simplifies your required financial reporting. Staying compliant with financial reporting requirements—whether they’re driven by investors, lenders, donors, or other stakeholders—is challenging for small- and mid-sized businesses. Every stakeholder expects accurate, timely financials they can trust, yet it’s difficult to maintain the in-house accounting staff it takes to handle your unique financial reporting needs. An outsourced accounting provider can take on the burden and complexities of your financial reporting, ensuring you’re always in compliance and meeting your stakeholders’ expectations.
7. Outsourcing makes it easier to get investor ready. If your business is looking to secure investments from a private equity group or venture capitalist, your financials must be ready to withstand their scrutiny during due diligence and meet their expectations ongoing. At a minimum, you need an accurate, professionally prepared income statement, balance sheet, and cash flow statement. You might also need to provide a detailed budget and revenue and expense projections. If you don’t have the necessary bandwidth or expertise, outsourcing to a third party can be just the solution to getting your financial house in order and generating investor-ready financials.
8. Outsourcing improves your decision-making. It’s not only investors who need accurate information about your business. To make informed decisions that drive your success, you need accurate financial reports and data analytics. Many organizations struggle with this task, partly because they rely on manual, inefficient processes. The more departments, lines of business, or locations you operate, the more difficult it is to access, report on, and glean insights from financial data without the rights processes and tools. Outsourced accounting providers can assess and improve your financial reporting processes and create data visualizations that help you spot trends, patterns, exceptions, and opportunities.
9. Outsourcing leaves more time to focus on your core business. Unless you’re a CPA firm, you’re not in the business of accounting. The more time and energy you spend doing daily accounting work yourself or hiring, training, and managing an in-house team, the less you can focus on your core business. Outsourcing your accounting is a great way to gain back time and resources to keep your attention where it can generate the best return. And even if you do lead a CPA firm, outsourcing day-to-day accounting tasks allows your leadership to focus on big-picture responsibilities that often get pushed aside, like setting the firm’s strategy and direction.
10. Outsourcing can reduce your costs. While it’s not the primary reason, the potential to cut costs is a motivator for some organizations to outsource accounting. Compared to the overhead to maintain a staff of FTEs, partnering with an outsourced provider might reduce your accounting expenses. That’s especially true if your partner can draw talent that’s equally or better skilled than the in-house candidates you can tap yourself, at a lower labor cost.
For compelling reasons like these, many small- and mid-sized businesses are outsourcing their accounting function, especially in industries like technology, real estate, biotech, and the nonprofit sector. And for more organizations, the outsourced accounting partner of choice is Scrubbed.
Scrubbed provides a comprehensive suite of outsourced accounting services that augment your internal capabilities and expertise, help you through peaks and valleys, and ensure you have the right resources to meet your requirements and achieve your goals. Contact Scrubbed to learn more about our range of services, highly effective model, and proven approach to delivering high-quality accounting and finance services.