Most business owners would agree that accounting can be complex and time-consuming to manage in-house.
Outsourcing your accounting to an experienced controller can help streamline processes, provide valuable expertise, and allow you to focus more on core business activities.
This article explores what outsourced accounting is, the role and responsibilities of an outsourced controller, and best practices to ensure a smooth implementation so you can fully leverage the benefits.
Defining Outsourced Accounting
Outsourced accounting involves hiring an outside firm or freelancer to handle some or all of a company's accounting tasks, rather than performing those tasks in-house. This allows companies to access accounting expertise and capacity without having to staff up internally.
What is outsourced accounting?
Outsourced accounting refers to the practice of contracting an external accounting services provider to handle some or all of a company's bookkeeping, accounting, payroll, tax preparation, and other finance-related tasks. Rather than hiring full-time in-house accountants, companies can outsource these functions to dedicated accounting professionals.
Why companies outsource accounting
There are several key reasons companies choose to outsource their accounting functions:
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Cost savings - Outsourcing to an external accounting firm can cost significantly less than hiring full-time accounting staff, resulting in major cost reductions. Specialized firms can offer competitive rates and centralized services across clients to maximize efficiency.
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Access to expertise - Outsourced accounting providers employ experienced accounting professionals across various specialties like bookkeeping, financial reporting, taxes, and more. This expertise can be difficult and expensive to hire for in-house.
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Focus on core competencies - Handing accounting tasks off to a specialized external team allows companies to focus energy and resources on their core business offerings rather than back-office finance functions.
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Scalability - As a business grows, outsourced accounting teams can seamlessly scale up or down to match demand. Internal teams often require disruptive hiring/firing to adjust capacity.
In summary, outsourced accounting enables access to world-class accounting talent and capacity without the overhead, allowing companies to control costs and focus on their competitive advantages.
What is outsourcing in accounting?
Outsourced accounting is when a business hires a third party (outside of their company) to complete the accounting and finance functions of the organization. This allows the business to focus on its core operations while the outsourced provider handles essential back-office tasks like bookkeeping, financial reporting, payroll, and more.
There are a few key benefits to outsourcing accounting functions:
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Cost Savings: Outsourced accounting can save businesses 30-50% on labor costs by leveraging offshore talent pools and economies of scale. There's no need to hire, train or manage an in-house team.
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Access to Specialized Expertise: Outsourced accounting firms employ CPAs, CAs, and other finance experts to ensure work is done accurately and in line with the latest regulations. This level of talent is expensive to hire full-time.
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Focus on Core Business: Free up time for strategic tasks by offloading essential but non-core back-office work to your outsourced team. This lets your existing staff concentrate on revenue-generating activities.
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Scalability and Flexibility: It's easy to ramp accounting activities up or down as your business needs change. No need to hire and fire in-house staff. The outsourced team adjusts quickly to fluctuations in workload.
The most commonly outsourced accounting functions include bookkeeping, financial reporting, payroll, tax preparation, accounts payable/receivable, expense reimbursement, budgeting and forecasting. More strategic tasks like financial planning and cash flow analysis can also be outsourced successfully.
For small businesses and startups, outsourced accounting is an affordable way to implement robust finance operations without expending scarce resources. It's a scalable, flexible approach that delivers access to high-level skills at a fraction of the cost of hiring in-house.
How much do outsourced controllers cost?
The cost of outsourced controller services can vary depending on several factors, but generally ranges from $2,500 to $4,000 per month.
Some key things that impact cost include:
- Scope of services needed - More complex accounting needs or additional services like financial reporting, analysis, etc. typically cost more. Basic bookkeeping and controller duties tend to be cheaper.
- Level of experience and expertise required - More seasoned controllers with specific industry experience or advanced credentials usually have higher rates. Recent graduates or generalists may cost less.
- Location and cost of living differences - Controllers based overseas in lower cost of living countries can save on labor costs. Those from larger metro areas in the US with higher costs of living may charge more.
- Company size and workload - Larger or fast-growing companies with heavy transaction volumes needing full-time support incur higher monthly fees.
While outsourced controller fees might seem high compared to an in-house employee's salary, the total cost savings are substantial when factoring in benefits, payroll taxes, paid time off, training, recruitment costs, and productivity losses from turnover. Outsourced controllers are also only paid for work delivered, reducing wasted spend.
Businesses can realize 50% or higher total cost savings in some cases by leveraging outsourced accounting and finance talent. The improved efficiency and expertise also frees up bandwidth for strategic projects. As companies grow, outsourced controllers provide invaluable financial leadership and continuity when transitioning to add in-house roles.
What do you mean by the term outsourcing?
Outsourcing refers to the practice of hiring an external service provider to handle business functions and operations traditionally performed in-house. In accounting, outsourcing involves contracting an outside firm or freelancer to provide services such as bookkeeping, payroll, tax preparation, financial reporting, and controller duties.
Some key things to know about outsourcing in accounting include:
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Cost Savings: Outsourcing accounting functions can significantly reduce operating costs compared to hiring full-time staff. Service providers overseas often charge much less while still delivering quality work.
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Access to Specialized Expertise: Outsourced accounting providers have extensive expertise dealing with financial data, reporting standards, tax codes, etc. They can provide support that a small business may not have in-house.
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Improved Efficiency: Accounting tasks can be tedious and time consuming. Outsourcing frees up a business to focus energy on core operations and strategy.
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Flexibility and Scalability: It's easy to adjust service levels up or down based on seasonal financial needs. No need to hire and train new full-time employees.
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Risk Management: Reputable outsourcing providers carefully hire and manage their accounting teams. This reduces compliance errors, fraud risks, and other liabilities.
In summary, outsourcing accounting functions to qualified specialists overseas has become an attractive option for many companies to drive growth in a globalized business landscape.
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What to look for when outsourcing accounting?
When considering outsourcing accounting functions, there are several key factors businesses should evaluate:
Scope of Work
Clearly define which accounting tasks you want to outsource, such as accounts payable, receivable, financial reporting, payroll, etc. Understanding the exact scope of work enables selecting the right outsourcing firm.
Quality
Examine the provider's reputation, certifications, processes, and staff qualifications to ensure they deliver accurate, timely work meeting your standards. Request samples of financial reports, tax filings, etc.
Cost
Compare bids from multiple vendors. Consider whether outsourcing will achieve the target cost savings for your business based on the scope and quality of service.
Security
Evaluate data security protocols for accessing sensitive financial information remotely. Ensure adequate measures protect confidential data through encryption, access controls, audits, etc.
Communication
Discuss expected frequency, channels, and level of detail for status updates from the outsourced team. Clear communication ensures visibility into work progress and quick resolution of any issues.
Timeline
Agree on deliverable due dates and overall project timeline. Build in buffer for reviews, revisions and approvals to avoid delays.
Key Benefits of Outsourced Accounting
Outsourcing accounting functions can provide several key benefits for companies looking to optimize costs and focus on core business operations.
Cost savings
Outsourcing accounting to specialized firms, often overseas where labor costs are lower, can lead to significant cost reductions compared to hiring full-time accounting staff. Outsourced services are paid on a project or hourly basis, converting fixed payroll expenses into flexible operating costs. Companies can save 30-50% annually on accounting expenses through outsourcing.
Access to specialized expertise
Outsourced accounting providers employ experienced professionals specializing in functions like bookkeeping, payroll, tax preparation, financial reporting, and more. This level of expertise can be difficult and expensive to hire full-time. Outsourced services offer on-demand access to these specialized skills.
Focus on core business
Handling essential back-office functions like accounting internally ties up a company's resources. Outsourcing these non-core functions lets companies redirect those resources into developing products/services and growing the business. Companies can rely on outsourced accounting experts to handle essential but non-strategic back-office tasks.
Scalability and flexibility
Outsourced accounting services can easily scale up or down based on seasonal business needs. Companies pay only for the specific services performed, rather than carrying excess internal capacity during slower periods. The flexible, on-demand nature of outsourced accounting also provides continuity and support during periods of rapid growth or restructuring.
The Role of an Outsourced Controller
Outsourced controllers are senior accounting managers who oversee a company's financial operations remotely. Hiring an outsourced controller can provide significant cost savings while accessing specialized expertise.
Responsibilities of an outsourced controller
Typical duties handled by outsourced controllers include:
- Financial reporting - Preparing financial statements, managing general ledger, performing account reconciliations
- Budgeting and forecasting - Developing budgets, financial models, dashboards to track performance
- Payroll and payments - Managing payroll, accounts payable and receivable
- Compliance - Ensuring adherence to accounting standards and tax regulations
- Analytics - Providing financial insights and recommendations through data analysis
Outsourced controllers function as virtual Chief Financial Officers, managing critical finance and accounting responsibilities to support business growth.
Qualifications to look for
Ideally, outsourced controllers should have 5-10 years of experience as an accounting manager or controller. Specific credentials to look for include:
- CPA license or equivalent designation
- Expertise with US GAAP or IFRS standards
- Proficiency with major accounting software platforms
- Bilingual English fluency
- Bachelor's degree in accounting, finance or related field
When evaluating outsourced controller candidates, relevant industry experience and cultural alignment are also key factors for fit.
How controllers engage with your business
Effective collaboration is critical for success with an outsourced controller model. Communication channels may include:
- Video conferences for regular check-ins, reporting, strategy sessions
- Shared access to accounting software, financial systems and documentation
- Email and instant messaging for prompt consultations
- In-person visits can also be scheduled if beneficial
With today's technologies, outsourced controllers can engage seamlessly despite geographical distances. Clear expectations, availability and effective tools are vital for productive controller partnerships.
Best Practices for Implementation
Outsourcing accounting functions can provide significant cost savings and efficiency gains, but requires careful planning and management for a smooth transition. Here are some best practices to consider:
Define scope of services needed
- Take stock of current accounting workload and identify non-core tasks that could be outsourced, like AP/AR, payroll, financial reporting, etc.
- Prioritize functions based on costs, strategic value, and bandwidth of in-house team
- Develop clear expectations around deliverables, quality standards, and timelines
Perform due diligence on providers
- Vet provider experience, security protocols, transparency, and communication policies
- Validate certifications, compliance controls, BCP/DR plans, and client references
- Ensure a cultural fit and availability during your core business hours
Start with non-essential functions first
- Pilot outsourced accounting on supplementary tasks not vital to daily operations
- Slowly transition more critical functions once processes are refined and confidence built
- Define metrics and SLAs to track performance before expanding scope
Maintain open communication
- Set regular status updates, goal check-ins, and performance reviews
- Encourage transparency about workloads, challenges, and efficiency ideas
- Foster relationships between in-house and outsourced teams
Following structured best practices when outsourcing accounting functions can lead to greater cost optimization, productivity, and risk mitigation over the long-term.
Conclusion and Key Takeaways
Outsourcing accounting and finance functions can provide significant benefits, but requires careful planning and management to implement effectively. Here are some key takeaways:
Outsourcing delivers access to expertise and economies of scale
Outsourced accounting providers leverage specialized expertise and technology to efficiently deliver services at scale. This makes them well-equipped to provide high-quality deliverables that would be difficult and expensive to replicate internally.
Vet providers thoroughly and define engagement models
Conducting thorough due diligence in selecting a provider is crucial - assess their competencies, communication abilities, security protocols, quality control processes, etc. Clearly defining expectations, metrics, and working models in contractual agreements further enables accountability and transparency.
Start small then expand services for smooth onboarding
Initially outsourcing a narrow, non-critical function allows evaluating providers and ironing out processes before ramping up. This minimizes risk and disruption during onboarding. As relationships mature, expanding the scope leverages economies of scale and frees up internal bandwidth.
