Outsourcing is the practice of using outside firms to handle work normally performed within a company, is a familiar concept to many entrepreneurs. There are multiple reasons a business would do this, including access to expert knowledge, price advantages, minimizing risks and improving security, saving time, and more.
Outsourced bookkeeping and accounting services have steadily become more and more popular in the business world for many years now. In fact, as of 2018, nearly $33 billion is spent worldwide on outsourcing finance and accounting processes. It has grown nearly 25 percent in the past five years and doesn’t show any signs of slowing down.
Most businesses don’t entirely understand the benefits of outsourcing. While it is true that outsourcing can reduce costs and save money, there are many other reasons to do it. As many firms discovered during the outsourcing “mania” of the early 1990s, outsourcing too much can be an even bigger mistake than not outsourcing any work at all. The flat economy caused many companies into huge layoffs and subsequently outsourced functions that were better kept in-house. Wise outsourcing, however, can provide a number of long-term benefits including:
#1. Reduce Labor Costs
Requiring less staff time for internal accounting functions will allow you to save employment costs such as salaries, payroll taxes, benefits, training and recruitment expenses. Hiring and training staff for short-term projects can be extremely expensive, not to mention you have to pay an in-house employee even when you don’t really need them and temporary or contract employees don’t always live up to your expectations
By picking and choosing only the types of services you really need from your outsourcing partner, you will be able to eliminate unneeded overhead expenses in those areas. Businesses need to concentrate on the return of every dollar they spend and be ready to deploy resources where they can maximize their leverage quickly.
#2. Control Capital Costs
“Why would I pay for outsourcing when I can do it myself?” is what you might be saying out loud to yourself or in your head. It’s a fair question, but the answer is that outsourcing can actually save you more in the long run by reducing overhead. Cost-cutting may not be the only reason to outsource bookkeeping and accounting functions, but it is definitely a major factor.
When you outsource, your small business has the ability to convert fixed costs into variable costs which real eases capital for investment elsewhere in your business. This can also help your small business avoid large expenditures in the early stages of your business.
Outsourcing can also make your firm more attractive to outside investors. When you outsource, your small business is able to pump more capital directly into revenue-producing activities.
#3. Focus on Your Core Business
Every business has limited resources and limited time, but small business especially. Outsourced bookkeeping and accounting services can help your business shift its focus from peripheral activities toward work that serves the customer. When you can focus on strategy, on customer service, and on growing your business instead of your back office tasks that don’t generate revenue, you’ll be able to increase your bottom line, which is what every business owner is ultimately after.
#4. Level the Playing Field
Most small businesses simply just cannot afford the talent that large companies are able to maintain. Outsourced accounting and bookkeeping can help small firms act “big” by giving them access to the same economies of scale, efficiency, and expertise that large companies enjoy. The ability to provide higher quality accounting information faster, more efficiently and with greater effectiveness is crucial. Working with accounting professionals will yield more reliable information to make improved business decisions in less time.
#5. Outsourcing Accounting Improves Data Security
Outsourced bookkeeping and accounting services have already invested the money into highly secured servers using the best encryption technology. You could be the most careful accounting expert in the world, but you still may not have the security and peace of mind offered by an outsourcing company. The amount of money you would have to invest in that technology alone already exceeds what you most likely would pay for the outsourcing service itself.
#6. Outsourcing Accounting Minimizes Risks
Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions, and technologies all change very quickly. Unfortunately, risks can even come from within your own company. It’s not unheard of for your own employees to manipulate records for their own benefit. In fact, embezzlement is a hot topic in the news.
Reporting errors can be very costly. Penalties, interests charges, and even litigation are all pitfalls of accounting no matter what business you’re talking about. Placing the responsibility for these types of expenses on trained professionals will greatly limit the risk of losses to your organization. When you outsource a good company, you’re counting on the fact that they employ the best of the best within that field, thus minimizing risk. They are experts who understand the complexities of regulations, government compliance, taxes, and human resources
#7. Start New Projects Quickly
Going back to the idea of saving time and focusing on core business tasks, outsourced accounting services allows you to focus on new projects and clients. A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. Additionally, if a project requires major capital investments, the startup process can be even more difficult.
Limitless Investment and Capital’s Outsourced Bookkeeping and Accounting Services
Are you tired of spending your free time reconciling your books, but don’t want to spend a small fortune hiring an expensive full-time CFO or controller? If so, get in touch with Limitless Investment and Capital! We are the outsourced accounting and bookkeeping service that provides your business with accurate and timely back-office functions, from basic project management to complex strategic planning.