With the increasing globalization of businesses, especially in regions like Asia, outsourcing and offshoring have become inevitable.
Over the years, this trend has picked up momentum and can be seen in various sectors of the world’s business community.
Outsourced accounting is one of the most common services in the business process outsourcing (BPO) industry, along with IT and contact center outsourcing.
In fact, a 2019 study made by Clutch revealed that 37% of small businesses outsource their accounting processes. The same study showed that 52% of small businesses plan to outsource one or more of their processes.
Fortunately for these companies, there is no shortage of possible partner BPO firms when it comes to outsourcing.
However, they should still conduct due diligence and ensure they partner with a reliable BPO, especially for businesses looking to outsource their accounting functions.
This article will shed light on what businesses should look for in an outsourced accounting partner.
What is outsourced accounting?
Outsourced accounting pertains to hiring a third-party company to deal with your financial records, taxes, and anything that has to do with money management.
The outsourced accounting provider essentially acts as their business partner’s accounting department. Unlike an in-house accounting department, an outsourced accounting provider can be both on-demand and to-scale.
As mentioned earlier, smaller businesses often outsource their accounting processes.
Doing so is the best course of action for them, as having an outsourced accounting team is more cost-efficient than keeping an in-house accounting department.
Qualities to look for in an outsourced accounting partner
There are many things businesses should consider when choosing an outsourced accounting partner.
The intricacies of accounting and financial management – combined with the inherent complexities of the outsourcer’s industry – make it difficult to have a cookie-cutter approach to outsourced accounting.
However, there are general outsourcing fixtures that businesses can use as guideposts when finding a good outsourced accounting partner.
These factors include:
Cost-efficiency
Outsourced accounting will typically be more cost-efficient than building an accounting team from scratch.
However, not all accounting BPOs charge the same rate for their services.
Thus, it’s advisable to have a selection of accounting BPOs to choose from and partner with one that gives the best value for your money.
Business specialties
Some accounting firms specialize in particular industries rather than being generalists.
As a result, they’re able to provide better services in their fields of specialization compared to accounting generalists.
When choosing an outsourced accounting partner, businesses should ensure they partner with a firm that specializes in their business industry.
Certifications
Businesses with greater accounting needs will need the services of accounting BPOs with certified public accountants (CPAs).
Small businesses benefit from partnering with BPOs with CPAs as these firms can provide in-depth advice and assistance.
Level of service
It’s also important to know the level of services provided by an outsourced accounting firm. Some accounting BPOs only offer the services of an accountant.
There are also full-service accounting BPOs with accountants and bookkeepers who manage the day-to-day transactions.
Knowing this can protect businesses from unexpected charges or higher rates.
Reputation
An accounting BPO firm’s reputation is as important as the services it provides. Business owners should conduct due diligence before inking a partnership with any BPO provider.
They can also inquire about a potential outsourced accounting BPO partner through the BPO’s current and past clients.
Advantages of outsourced accounting
Outsourcing accounting processes gives business owners plenty of benefits, and these include:
Cost reductions
Outsourced labor is generally cheaper (as much as 70% to 85%) compared to hiring the same talents in-house.
The more affordable labor market of developing countries where most BPOs operate allows businesses to save on salary costs when they outsource.Businesses also save on overhead expenses (e.g., recruitment, training, and equipment costs) as these are already covered by their partner BPOs.
Access to diverse global talent
Having an outsourced accounting team lets business owners connect with the global workforce and hire talents from around the world.
This is especially helpful when businesses are trying to diversify their accounting team’s specialties, as talent shortage is not a problem.
Greater flexibility
Outsourcing gives businesses flexibility and agility.
Having access to an at-the-ready workforce lets companies increase and decrease their workforce’s size depending on demand.
They can do this without worrying about slowing down their processes with recruitment hassles, as their BPO partners handle this aspect for them.
Improved efficiency
Outsourced accounting teams perform better than most in-house accountants and bookkeepers.
These outsourced accountants often have access to premium accounting software (e.g., QuickBooks, Zoho Books, and Xero) and have years of experience under their belt.
These advantages allow them to have better performance than their in-house counterparts.
