Accounting Outsourcing Process: A Starter Guide

published on 28 February 2024

Outsourcing your accounting tasks can streamline your business and save you money. Here’s a quick guide to get you started:

  • Identify Your Needs: Determine which accounting tasks require external expertise.
  • Find Reliable Companies: Search for accounting firms with a solid reputation and secure practices.
  • Choose the Best Fit: Select the company that aligns with your needs and budget.
  • Transition Smoothly: Work together to transfer responsibilities effectively.
  • Maintain Communication: Keep a clear line of communication for smooth operations.

Outsourcing accounting involves hiring an external team for tasks like bookkeeping, tax preparation, and financial reporting, offering benefits such as cost savings, access to expertise, and more time to focus on core business activities. Whether you’re a new or growing business, or facing new compliance requirements, outsourcing can be a strategic move. The key steps include identifying your requirements, researching and evaluating providers, and implementing a structured plan for integration and ongoing management. Choosing the right partner involves considering their experience, communication style, and data security measures. Properly managing the outsourced relationship and avoiding common pitfalls are crucial for success.

What is Accounting Outsourcing?

Accounting outsourcing is when you hire an outside company to take care of your business's accounting stuff like keeping track of money, paying employees, figuring out taxes, and making financial reports. This way, you can use the know-how and tools of these outside experts to make your money management more efficient and cheaper than doing it all by yourself.

Distinguishing In-House vs Outsourced Accounting

When you handle your accounting with your own team, that's in-house. But when you get an outside company to do it, that's outsourced accounting. Here's how they're different:

  • Cost: Going with an outsourced team usually saves money because you pay for the services you need when you need them, instead of paying salaries and for tools all the time. Plus, you don't have to spend on accounting software and other tech stuff.
  • Expertise: The companies you outsource to are pros in accounting. They keep up with all the new rules, ways to do things, and software. It's hard to have that level of expertise in-house without a lot of effort and money.
  • Scalability: If your business grows or slows down, it's easier to adjust with an outsourced team. Adding more in-house accountants isn't as simple.
  • Data Security: Good outsourcing companies put a lot of money into keeping your data safe, which might be hard for a small business to do on its own. But, you do give up some control over your information.
  • Access to Technology: Outsourced teams have the latest accounting tools to work efficiently. Keeping up with technology using your own team can be really expensive.

Thinking about these points can help you decide how much of your accounting you want to do in-house and how much you want to outsource. As your business changes, you can shift things around to keep costs down and work more efficiently.

Why Outsource Accounting?

Outsourcing your accounting work can really help your business in a few big ways. Here's why you might want to think about it:

Cost Savings

By choosing to outsource your accounting, you can save a lot of money—somewhere between 40% to 60% compared to having an accounting team in-house. This is because you pay for exactly what you need, when you need it, instead of paying full-time salaries and benefits. Plus, you won't have to spend on things like accounting software or keeping up with tax laws. Outsourcing companies can spread these costs across many clients, making things cheaper for everyone.

Access Specialized Expertise

When you outsource, you're getting help from people who know accounting inside out. They're always learning about the latest rules, the best ways to do things, and the newest technology. This means you get top-notch expertise without having to hire experts yourself. Plus, if someone is sick or on vacation, the outsourcing company has it covered.

Focus on Core Business

Dealing with day-to-day accounting stuff can take up so much of your time. If you outsource these tasks, you can use that time to focus on the big picture—growing your business, coming up with new ideas, and reaching your goals faster. In short, outsourcing lets you concentrate on what you do best.

In the end, outsourcing your accounting can save you money, give you access to expert help, and free up your time to focus on growing your business. For most businesses, it's a smart move.

When to Outsource Accounting

Deciding to let someone else handle your accounting depends on a few things, like how fast your business is growing, what rules you need to follow, what help you already have, and what you're aiming for in the long run. Here's a simple way to see if it's the right time for your business to get accounting help from outside:

Early-Stage Businesses

If you're just starting or have been around for a short time, getting outside help for accounting can be really helpful. It can:

  • Give you expert advice so you set up your money management the right way from the start
  • Save you money because it's cheaper than hiring a full-time accountant
  • Adjust easily to your needs, whether you need more or less help

This way, new business owners can focus on growing their business without worrying too much about accounting mistakes.

Growing Businesses

When your business starts to pick up speed, adding more customers and employees, your accounting needs get a lot more complicated. You'll have to deal with:

  • Keeping track of more sales and expenses
  • Handling payroll for more people
  • Making sure you follow tax rules in different places

Getting your accounting done outside your company can help manage these growing pains by offering smart ways to handle tasks and special knowledge while you keep your mind on the big picture.

Businesses Facing New Compliance Requirements

Sometimes, new rules or standards can overwhelm your team. Outsourcing can help you manage things like:

  • New ways of recognizing income
  • Following tax rules in new countries if you're expanding
  • Preparing financial reports if you're thinking of going public

This gives you the extra hands and brains you need exactly when you need them.

In short, getting your accounting done by someone else is most useful for businesses that are growing fast, have to follow lots of rules, or don't have enough people to do the work. Looking at where your business is at can help you decide if outsourcing can help your bottom line.

Types of Accounting Services to Outsource

Let's talk about the main accounting tasks you can have someone else do for you:

- Bookkeeping


Bookkeeping is all about keeping track of the money that comes in and goes out every day. This includes things like recording sales, paying bills, handling payroll, and making sure your bank records match up. When you let experts handle this, you get:

  • Help from people who really know the ins and outs of bookkeeping
  • Lower costs because you're not paying for a full-time employee
  • The flexibility to get more or less help as your business grows or slows down

- Tax Preparation

This is about getting your taxes done right, figuring out how to pay less tax legally, and dealing with tax forms. Outsourcing this means:

  • Working with folks who understand all kinds of taxes really well
  • Finding ways to lower your tax bill
  • Getting help if you ever need to talk to the tax authorities or deal with an audit

- Financial Statements & Reporting

This involves putting together important reports, analyzing your business's financial health, and looking at key numbers. Outsourcing this task gives you:

  • Reports tailored to your business that show how you're doing
  • Comparisons to other businesses like yours to see where you stand
  • Suggestions on where you can improve, based on solid data

In short, when you outsource these accounting tasks, you're getting experts to handle crucial parts of your business. This not only saves you money but also gives you access to specialized knowledge and tools that can be hard to have on your own. Plus, it lets you focus on running your business while knowing the financial side is in good hands.

Step-by-Step Guide to Outsourcing Accounting

1. Identify Accounting Requirements

Start by looking at what your accounting team is currently doing and figure out what could be done better. Think about:

  • Which tasks are eating up too much time? These might be good to give to someone else.
  • Are there any jobs that are boring or easy to mess up? Giving these to experts can make things more accurate and faster.
  • Do you need help with special skills or technology? An outside team can fill in the gaps.
  • Are you having trouble with rules, making reports, or making decisions? A good outsourcing team can bring the expertise you need.

Be clear about what you want. Is saving money important? Or maybe getting access to better tools? Or do you just want to free up your team's time? Knowing your goals helps find the right help.

2. Research Potential Providers

There are lots of companies out there that can take over your accounting tasks. To start looking:

  • Ask people you know or check with industry groups.
  • Search online for "outsourced accounting services".
  • Look in business directories that focus on accounting.

Make a list of companies that look promising. Check if they have experience with businesses like yours. This helps narrow down your choices.

3. Evaluate Providers

Now, take a closer look at the companies you're interested in. Important things to compare include:

  • Services: Make sure they can do everything you're thinking of outsourcing, like bookkeeping or taxes.
  • Technology & Security: How do they keep data safe? What tools do they use?
  • Expertise: Are their accountants certified? How much experience do they have?
  • Communication: Can you easily talk to them? How fast do they answer questions?
  • Pricing: What's included in their fee? Any extra costs?

Making a chart to compare them can help. It's also a good idea to ask for references from their clients.

4. Select Your Preferred Partner

After all that research, you should have one or two companies that stand out. Think about:

  • Can they meet your needs?
  • Do you feel comfortable talking to them?
  • Do they know your industry well?
  • Have they helped other businesses like yours?
  • Is their price fair?

Pick the company that seems like the best match for what you need.

5. Develop an Implementation Plan

Work together with the company you chose to plan how to start. This plan should include:

  • Scope: Be clear about what tasks they'll be doing.
  • Timelines: When should everything be done?
  • Milestones: Mark important dates on the calendar.
  • Responsibilities: Who is doing what?

Having a plan makes sure everyone knows what to do and when.

6. Transition Accounting Responsibilities

Now it's time to move your accounting tasks over. This means:

  • Sharing your accounting info and how you do things safely.
  • Telling them about your accounting rules and what reports you need.
  • Training their team on your systems.
  • Checking their first work and giving feedback.

Having regular meetings at the start can solve any problems early. This helps make sure everything goes smoothly.

Choosing the Right Outsourcing Partner

Key selection criteria when evaluating providers:

- Relevant Experience & Credentials

When picking a company to handle your accounting, it's important to look at their experience and what qualifications they have. Choose companies with certified experts like CPAs (Certified Public Accountants). They should know a lot about your type of business and how your accounting works. This helps them fit right into your team.

It's good to pick partners who have worked with businesses like yours before. Ask them to show you examples of their work or introduce you to past clients. A company that knows your business well can do a better job for you.

- Communication & Cultural Alignment

Being able to talk easily and get along with the outsourcing company is key. See how quick and open they are when you ask questions. Are they clear and fast in their responses?

Also, see if their company culture is like yours. Do they work and think in ways that match your business? Having similar values and ways of solving problems helps everyone work better together.

Try to meet the team who will be working with you. Check if they speak your language well and understand your business culture. When everyone gets along, it's easier to trust each other and avoid misunderstandings.

- Data Security

It's super important to make sure your financial information is safe. Ask about how the accounting company keeps data secure. They should use strong security measures like encryption and control who can see your information.

Find out how they manage your data. Where is it kept? How do they back it up? Make sure they follow strict rules to keep your information safe and private.

Choosing a company that takes good care of your data and follows all the rules is crucial. You want to make sure your financial details are in safe hands.


Implementing Outsourced Services

- Define Scope & Standards

When you start working with an outside company for your accounting, it's really important to be clear about what you need them to do. This could be keeping track of your money, handling payroll, preparing taxes, or putting together financial reports. You should also talk about how well and how quickly you expect them to do these tasks. Make sure you both agree on how they will share their work with you and how you'll keep in touch. Being clear from the start helps everything go smoothly.

- Schedule Periodic Reviews

After you've started working with the outsourced accounting team, make sure to check in with them every few months. Use these meetings to talk about how things are going, solve any problems, and think about ways to do things better. Keeping the lines of communication open is important for a good partnership. Be ready to show what's working and what's not. Think of these meetings as a chance to make things even better.

- Automate Processes Where Possible

Try to use software and tools that make it easier to share information and work between your team and the outsourced company. Setting up ways for data to move smoothly can help avoid mistakes, save time, and make everyone's job easier. It might take some time to set up at first, but automating routine tasks can really help in the long run. Focus on making the most common tasks as automatic as possible.

Managing the Outsourced Relationship

Keeping a good working relationship with the company that handles your accounting is crucial to getting the most out of the arrangement. Here's how to do it right:

Proactive Communication

  • Make time for regular meetings (like once a week or month) to go over what needs to be done, any issues, and how things are going.
  • Use online tools that let you talk and share files easily to keep in touch.
  • If something's not right, talk about it early on to avoid bigger issues later.
  • Let them know if something changes in your business that could affect their work.

Feedback Loops

  • Set up a way to regularly tell each other what's working and what could be better.
  • Always be ready to tell your outsourced team how they're doing and listen to their suggestions on improving things.
  • Feedback helps make sure everyone is clear on expectations and how to meet them.

Review Metrics

  • Decide on some clear numbers to measure how well the accounting work is being done, like how fast tasks are completed, how often mistakes happen, and if deadlines are met.
  • Plan to look at these numbers together every so often (maybe every three months).
  • Use these discussions to find ways to do things better or fix any issues.

By keeping the lines of communication open, giving each other regular feedback, and keeping an eye on how things are going through clear metrics, you can maintain a strong and productive partnership with your outsourced accounting team.

Pros and Cons of Outsourcing Accounting

Pros Cons
Saves Money You're Not in Charge of Every Detail
Experts on Your Side You Rely a Lot on Them
Work Gets Done Faster Might Be Hard to Talk to Them
Easy to Change Size Takes Time to Get Used to New Ways

When you think about getting someone else to handle your accounting, there are good points and not-so-good points to consider.

Saves Money

One big reason companies choose to have their accounting done by someone else is to spend less money. By using accounting services from places where pay is lower, businesses can cut their accounting costs by a lot. Plus, this way, you only pay for accounting help when you need it, which can save you even more.

But, doing this means you don't have control over every little detail. You have to trust someone else to take care of important stuff like paying bills and keeping track of money. It's really important to talk clearly and set up rules so that everything is done right.

Experts on Your Side

Outsourcing lets you get help from people who really know accounting well, without having to hire them full-time. These experts can handle tricky things, make sure you're following the rules, and give you smart advice.

The downside is you might end up relying a lot on these providers. If they don't do a good job, or if there are big changes in their company, it could be a problem for you. Having a backup plan and maybe using more than one provider can help avoid trouble.

Work Gets Done Faster

Outsourced accounting teams are all about doing accounting work, so they can usually do things quicker and more accurately than a general team. They know the best ways to do things and can handle lots of work at once.

However, working with a team in another country or time zone can lead to communication problems. It's really important to set up clear ways to talk to each other and manage the work.

Easy to Change Size

A big plus of outsourcing is that you can easily make your accounting team bigger or smaller, depending on what your business needs. This means you can save money when things are slow and easily get more help when things pick up.

But, changing how much help you get or switching to a different team can mean there's a learning curve. New people will need time to understand how you do things. Planning ahead and training can help make these changes smoother.

In short, getting your accounting done by another company can save you money and give you access to expert help, but it also means you have to trust them a lot and might face some challenges in talking to them. Thinking about these pros and cons can help you decide if it's the right move for your business.

Common Outsourcing Mistakes

Key pitfalls to avoid when outsourcing accounting functions:

- Unclear Scope & Expectations

Not being clear about what you want the outsourced team to do can cause problems. To avoid this:

  • Make a detailed list of all the accounting jobs you need done, explaining how you want each task handled.
  • Set up agreements that explain how quickly and well you expect the work to be done, how often they should report back to you, and how you'll check their work.
  • Plan regular meetings to talk about how things are going, give feedback, and fix any issues right away.

- Lack of Internal Buy-In

If your team isn't on board with the idea of outsourcing, it can make things difficult. To make sure everyone's in agreement:

  • Explain to your team how outsourcing can help them by taking care of routine tasks, so they have more time for important work.
  • Talk to managers early on to get their thoughts and agree on the plan.
  • Create a clear plan for how you'll move from doing everything in-house to working with an outsourced team.

- Poor Vetting Before Selection

Choosing a partner without checking them out properly can lead to disappointment. Make sure to:

  • Look closely at their past work, security measures, and if they've worked with businesses like yours before.
  • Check how they protect your information and their privacy policies.
  • Talk to their team, ask for references from other clients, and make sure they're easy to communicate with.

Taking the time to carefully choose the right partner is key to a good working relationship.

Conclusion & Next Steps

If you're thinking about letting another company handle your accounting, there are a bunch of good things that can come from it, like saving money, getting work done faster, and having experts help you out. But, to make sure you get all these good things, you need to pick the right company to work with, be clear about what you want them to do, and keep a good relationship with them.

Here’s a simple way to go about it:

  • First, figure out exactly what you need help with in accounting and why you want to outsource.
  • Look around and check out different companies that offer the accounting services you need. Make sure they’re good at what they do and that you can trust them with your information.
  • Choose a company that has experience with the kind of work you need, takes security seriously, is easy to talk to, and feels like a good match for your business.
  • Be super clear about what tasks you want them to handle, how you want things done, and how you’ll check their work.
  • Make sure your team knows why you’re outsourcing and what it means for them. Help them get used to the idea.
  • Move your accounting tasks over to the new company slowly to make sure nothing gets missed.
  • Write down all the details about what the company will do for you and how much it’ll cost in a contract.
  • Have regular check-ins to talk about how things are going, any problems, and how to make things better.
  • Use technology to make sharing information and working together easier.
  • Keep talking to the company regularly to make sure everything is going smoothly.
  • Check how well they’re doing based on what you agreed on.
  • Always look for ways to make working together even better.

It might seem a bit scary to let another company take care of your accounting. But lots of businesses have done it and seen big improvements. By being careful in choosing the right company and keeping a close eye on how things are going, you can make outsourcing work really well for your business.

How do I start outsourcing accounting?

To begin outsourcing your accounting work:

  • Pinpoint the specific accounting tasks you want to hand over, such as bookkeeping, handling payroll, preparing taxes, or creating financial reports. Clearly define what you need.
  • Look for accounting outsourcing companies that provide the services you're after. Consider their expertise, how they handle data security, and if you'd communicate well together.
  • Pick 2-3 companies you like best and compare them closely. Choose the one that fits your needs and budget the best.
  • Make a clear agreement with them that outlines the services, quality expectations, timelines, and costs. Share any necessary data and processes with them.
  • Start by giving them a few responsibilities to see how they do. Gradually give them more work based on their performance.
  • Keep in regular contact for any questions, feedback, or to manage your working relationship. Use technology to help work together smoothly.
  • Regularly check how things are going and talk about any issues early. You can always adjust the services as your business grows or changes.

What is outsourcing accounting processes?

Outsourcing accounting means you hire an external company to take care of certain accounting tasks for you. This lets your own team focus more on the main parts of your business.

Tasks often outsourced include:

  • Bookkeeping - Keeping track of money in and out
  • Payroll - Managing employee pay and taxes
  • Billing & collections - Sending out bills and collecting money
  • Financial reporting - Making reports on how the business is doing
  • Tax preparation - Handling taxes

Outsourced teams use their special skills and technology to do these tasks better and cheaper.

Is outsourcing accounting a good idea?

Yes, for many small businesses that are growing, outsourcing accounting can be a great choice. Here are the main reasons why:

Cost Savings: It's cheaper than having your own accounting team and buying all the needed tools.

Access to Expertise: You get help from people who really know accounting.

Focus on Core Business: Your team can concentrate on the most important business tasks.

Process Efficiencies: The outsourcing company's ways of doing things can save time and money.

Service Flexibility: You can get more or less help as your business needs change.

Risk Mitigation: There's less chance of making mistakes with rules and reports.

Just make sure to choose the right partner, set things up carefully, and keep a good working relationship.

What are the 5 benefits of accounting outsourcing services?

The top 5 advantages of using outsourced accounting services are:

  • Cost Savings: You save on the costs of hiring, training, and equipping an in-house accounting team.
  • Access to Expertise: Expert accountants can help you with complex tasks.
  • Scalability: It's easy to adjust the level of support as your business grows or slows.
  • Time Savings: Your team has more time for other tasks.
  • Financial Reporting Improvements: Experts can help make your financial reports better.

Other pluses include lower risk of compliance issues, easier audits, access to the latest technology, and having accounting help available all the time. The key is finding a partner that fits your business well.

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