When Is It Efficient to Outsource Your Accounting?
When you first launch a business, you feel invincible and almost superhuman. The energy is high, and if you’re like most new business owners, you start out absolutely certain you can do everything in-house. From advertising and accounting to copywriting and SEO, if you can’t do it yourself, you can find competent employees who are eager to be part of a startup. While you might be able to get away with keeping your advertising in-house for an extended period of time, that’s not the case with accounting. There’s too much at stake.
If you’re trying to save money by handling your bookkeeping and financial reporting internally, here’s why that’s holding you back.
Financial Management Only Becomes More Complex With Time
What begins as a small task involving a handful of receipts and a few invoices will snowball into expanding inventory, payroll responsibilities, regulatory compliance requirements, and complex tax obligations that require professional expertise to handle. Remember, your financial records need to be pristine and accurate at all times. As you grow, you risk falling out of compliance in ways that can put your business at risk. Eventually, there comes a time when business owners need to ask themselves if it makes sense to continue handling accounting in-house, or if it’s time to bring in the pros.
Reaching for outside help doesn’t mean you’re failing. Outsourcing accounting functions has been the norm for over a decade and continues to provide benefits that surpass what in-house teams can offer. Although it may not be correct for every business, outsourced accounting can make you more efficient, reduce your costs, and provide specialized expertise on demand without having to hire someone full-time.
Do You Spend Too Much Time On Accounting Processes?
If various employees are managing the company’s finances in their spare time, that’s going to become unsustainable before long. What starts out as a simple task will become a burden that keeps your staff from performing their main roles. As your company grows, the demand for attention to financials will become more demanding. If you’ve noticed you or your team spending a significant amount of time handling the accounting process, that’s a clear sign that you’ll benefit from outsourcing the work. Once you outsource your financial tasks to the pros, your team can focus on higher-value activities.
Are Your Financial Needs Becoming Complex?
An increase in complexity is a sure sign that outsourced accounting is a smart move. For example, if you have multiple revenue streams, inventory, in-house employees with payroll obligations, or complex tax requirements, that’s tough to handle in-house. Every aspect of your finances will only become more demanding as you grow. This includes things like budgeting, meeting your state and federal sales tax obligations, forecasting, complying with payroll and financial reporting regulations, and managing cash flow.
If any of these elements feel overwhelming or too demanding, outsourcing can put your financials in the hands of reputable professionals.
Hiring Full-Time Staff Isn’t Always A Smart Financial Move
If you recognize the need for more support but want to keep everything in-house by hiring a full-time team, you might be surprised to learn how much more that will cost compared to outsourcing. You’ll need to cover each person’s salary, benefits, training costs, office space, payroll taxes, and any other overhead that comes with employees. Outsourced accounting makes more financial sense.
With an outsourced accounting team, you’ll have access to professionals without having to pay all of the extra costs required for maintaining an internal team. In the future, as you grow, you might decide you want your own dedicated accounting department. However, if you’re not there yet, outsourcing can provide you with everything you need.
Does Your Financial Reporting Need Improvement?
As a business owner, you can’t make effective decisions when the data you have is inaccurate. If you don’t have reliable and complete financial information, you’re going to have a hard time evaluating your profitability, managing your cash flow, and identifying problems. This problem will only get worse as your company grows.
Outsourced accounting teams use established systems and procedures that improve financial visibility. When your financial reports are accurate, you’ll have a better understanding of where your company is so you can make more informed decisions. That’s especially helpful where taxes are concerned.
Tax obligations become exponentially more complex with time, and these challenges are hard, if not impossible, to meet without financial expertise. Even unintentional mistakes can be expensive. Outsourced accounting functions can help reduce the tax mistakes that can rack up penalties and interest, and trigger audits.
It’s Time To Prioritize Expertise
Your long-term success depends on organized, accurate financials that can be retrieved and reviewed with no notice. Often, that requires bringing in outside experts. For many companies, outsourcing accounting and bookkeeping is the most practical path forward.
Photo by Scott Graham: Unsplash
