Outsourcing has long been recognized as one of the most cost-effective and efficient solutions for handling business functions such as accounting. And yet, several companies continue to balk at the thought of handing the reins over to anyone outside their team.
There are also many misconceptions about accounting outsourcing, all of which bear no relation to facts and none of which should influence your CPA firm’s decision to outsource. Let us look at 10 biggest myths about outsourced accounting companies – and the truth behind them.
1. Outsourcing is the same as offshoring.
The two might sound like they mean the same thing, but they are complete opposites. Offshoring refers to hiring accountants from different countries to save money but who will become part of your company, merely relocated to another location.
On the other hand, outsourcing involves an agreement between you and a third-party service provider. The latter fulfills certain functions but remains a separate entity from your CPA firm and acts as your vendor.
Plus, many outsourcing companies are located in your country, too – so if you are worried about your sensitive client data going ‘somewhere overseas,’ choose a partner based in the US.
2. You do not need it if you are a small business.
It is often assumed that only large accounting and auditing companies handling complex client accounting functions can benefit from outsourcing.
However, small CPA firms looking to grow can benefit hugely from outsourcing time-consuming and tedious functions to experts who help them create time for more high-end advisory and consulting support.
This frees up the CPA firm to focus on its service and also assures a clear picture of resource usage, which is especially important for small-scale businesses with limited funds.
3. Outsourcing is too expensive.
If you think paying a fee to an outsourcing company is expensive, think of the costs of maintaining an in-house team of accountants and financial consultants. It is much higher and much more tricky, as you have to invest in their career path and well-being!
By contrast, you can pay for the time and services you avail of with an outsourced accounting company without any extra infrastructure costs or overheads.
Plus, as accounting experts, the outsourcing service provider can show you new ways to save money for your clients and avail of benefits. That means higher returns for you.
4. You will lose control of your business.
While it may seem like you are ‘handing over’ your clients’ accounting functions to an external party, the truth is you end up gaining more control in the process. With standardized accounting processes and a fixed set of software tools, the service provider ensures that your clients’ accounts are delivered promptly and in ship shape condition every time.
This gives you more visibility into your client’s financial health, helps you educate them on matters like investments and tax planning, and prepares you for new challenges and opportunities that may arise for your clients.
5. It is too time-consuming to work with an external party.
If you have any notions of endless follow-ups and reams of paperwork when dealing with an outsourced provider, think again. You will be freeing yourself up of a lot of time by letting an expert handle the accounting function through safe, proven processes and tools that deliver results on time, every time. Plus, the service provider themselves will send you regular updates about how things are progressing. So, no need to keep calling and emailing!
6. Data privacy will be compromised.
It is natural to worry about how secure the cloud is, probably because there are not any physical secure hardware rooms to look at. However, security is one of the top priorities for any accounting cloud provider worth their salt. They have a variety of security procedures in place to comply with domestic and international standards.
Many companies hesitate to hand over their confidential data to an external service provider. As an accountant, this is an evident fear to have as you are responsible for safeguarding the sensitive data of so many clients!
However, you have nothing to fear as long as you thoroughly vet the outsourced accounting company’s credentials, data security processes, and experience beforehand. Plus, it is custom for them to sign an NDA that safeguards your data security and privacy.
So if there are any conflicts, you can seek legal recourse. Remember – the outsourcing partner has as much of a market reputation to maintain as you do. So they’ll be extremely cautious about making mistakes, even inadvertently!
7. You still have to pay them during down periods.
The economy goes through ups and downs, and with it, your accounting business may have to make some tough decisions. But unlike an in-house team whom you will have to figure things out judiciously, you can inform the outsourced service provider that you will be working fewer hours with them owing to a financial crunch. And once things improve, you can up your hours again without any trouble. Most outsourcing partners offer multiple engagement models.
8. You will have to train the service provider in your way of doing things.
A top-rated accounting service provider will have worked with several clients in your industry space and be perfectly mindful of how things are done, from legal formalities to software usage.
They may even know a few handy tricks that you were unaware of, especially when it comes to software handling and preparing neat, comprehensive reports. So, do not worry about having to train the outsourcing partner in the ways of doing things.
9. You will need a lot of expensive IT infrastructure.
While it used to be true that working with outsourced service providers required one to have a lot of communication tools and an extensive IT database, that simply is not true anymore. In fact, the pandemic has accelerated our reliance on technology.
Most tools are highly affordable, even for small CPA firms, and you might even get some for free. So there is no reason to worry about expensive extras when outsourcing.
10. You cannot have a long-term relationship with an outsourced accounting company.
While it is true that some accountants use outsourcing for specific needs only, the truth is that many establish long and loyal relationships with their service providers. Many accounting needs are recurrent, such as tax filing and payroll preparation, and it makes sense to have long-term annual contracts to fulfill those needs and any others that crop up over the year.
Over to you
In conclusion, most myths are born from a few isolated experiences that may have been an issue in the past and have no bearing on the present-day norm. CPA firms everywhere have been enjoying the benefits of outsourced accounting for decades now without a hitch.
When you decide whether or not to outsource, do your research and inform yourself as much as you can about facts and not stories. You will likely find that it is a profitable decision in more ways than one.
Speak to Stellaripe!
We have the experience, expertise, and resources to help your CPA firm spend less time doing bookkeeping and more time giving strategic advice to clients.