Accounting, for any business, be it brick and mortar or a completely digital or e-commerce-based, is one of the key business functions. No company can make financial decisions and keep up with their growth without having complete control over their finances.
For this purpose and the survival of the company in one of the fastest growing and highly competitive market, every company needs dedicated resources allocated to accounting. Hence, companies pay special attention to this task.
Traditionally, organizations hire people in-house and create a department for accounting within the company. The other approach that some organizations take is that they outsource their accounting tasks to another company or agency that specializes in accounting services.
While both approaches are valid and work, unfortunately, people seem a bit reluctant to outsource their accounting. Over time, various kinds of myths and misconceptions have surrounded outsourcing accounting. Consequently, companies feel hesitant in doing so.
Mostly, companies assume that having an entirely different firm or agency handle their finances will lower its visibility into the business itself. In other words, organizations think that they won’t have direct insight into how and where financial flows come in and go out of the business.
Therefore, many businesses decide to hire an entire finance and accounting department, even then it becomes costly to sustain and retain them. In fact, some companies still struggle with their accounting and reporting even when they have a dedicated finance department.
For such companies and new e-commerce and digital startups, outsourcing their accounting can benefit them and still emulate the expertise of the accounting model they need. But lack of information and misinformation can create confusion and stop companies from employing their services.
To clear some of the misconceptions and debunk some of the most common myths about outsourced accounting, we will dissect each in this post.
Myth 1: Sending financial details to an outsourced accounting firm is not secure for the organization.
Since the service deals with sensitive information, most companies wonder about the safety of handing over their financial information. While this is a myth, it is not entirely false. The explanation for this is that nothing is entirely 100% secure in any context.
It is a known fact that financial documents are always at risk of a data breach. This can happen whether all accounting activity takes place within the company, at another firm or in your home office. This means that when it comes to the safety of documents, you can never be too sure.
Hence, outsourced accounting firms take extra measures to ensure the safety and security of all documents. For instance, there are various file-sharing programs, such as Dropbox that allow you to share files using cipher encryption.
Besides that, they conduct regular audits of all the files they possess to ensure there was no breach. Outsourced accounting firms understand the sensitive nature of their work so they have even more security procedures that the company itself implements. They go above and beyond to follow security and quality standards and industry codes along with maintaining strict non-disclosure agreements or NDAs.
Myth 2: Outsourced accounting is expensive and only large companies and conglomerates can afford them.
While the second of the most common ones, this myth is completely untrue. Outsourced accounting services, like others, are available at various rates. You can find companies that charge more but on the other hand, you can also find companies that have specialized structures for small businesses. For instance, our outsourced accounting services are designed to meet the needs of both larger digital organizations along with startups.
Upfront, doing all the accounting in-house might seem like the affordable decision but it has several hidden costs you might not be taking into account. For instance, retaining employees dedicated to the finance department can be expensive.
Apart from that, there can be other costs in terms of missed opportunities for tax deductions, penalties, missed deadlines, and credits you might not know of. Collectively, this option might be pricier – especially for smaller companies and startups.
Outsourced accounting companies are an alternative for these companies who can’t hire in-house resources and cover payroll taxes and overhead benefit costs for the employees. Outsourcing eliminates the need to cover for these charges as companies only pay for the services they hire. Hence, this makes outsourced accounting a viable option for e-commerce and digital companies/startups.
Myth 3: The organization will lose control over its financial documents by outsourcing their accounting to another firm.
It’s quite understandable that being a business owner, you want to have complete control over each of its aspects. In fact, we think that since it is your company – you should be in control and oversee all its business functions.
This can sometimes lead companies to think that by outsourcing one of the most important functions will cause them to lose control over it. In fact, the Association of Chartered Certified Accountants released a report that said that most business owners accepted that outsourcing accounting can help them cut costs. But at the same time, they also said that they were reluctant because they think they will lose control over their financials if they do so.
But this is, indeed, a myth. In actuality, by having a specialized firm keep your books in order, you’ll have more control over your finances. With the expertise of the outsourcing firm, your accounts will be organized in a way that you have a clear picture of your financial standing.
This way, your company will be more well-informed of the financial position. Consequently, it will enable you to take more informed decisions for the business. Along with that, it will save the company costs as well.
Myth 4: I can do the accounting myself and save more money.
It’s true, the business owner can do the accounting for the entire company themselves and save money. In order to save money on a new business, the business owner might think that they are being lean by updating and managing the books themselves. Or they might think that this is the right thing to do since they run a digital business. But that’s not it. By doing so, one might be saving money but at an opportunity cost.
Being the business owner, accounting is not the only business function that you will be responsible to oversee and conduct. You need to conduct a time-value analysis of yourself and measure how much each working hour you spend working its worth. The results might surprise you.
For instance, you might find out that by letting someone else do the accounting, you’ll be saving money by focusing on another task instead. By not capitalizing this opportunity, you’ll be basically doing a job that doesn’t earn you revenue.
Along with that, there’s the question of expertise. No matter how many specialized programs and applications you use, if you don’t know how to use them to their potential and/or don’t have financial expertise, you are bound to make mistakes. This means, more valuable time wasted and cost incurred.
Therefore, overall, it makes more sense to have a firm that specializes in accounting to handle your books so you can focus on work that can increase your company’s revenue.
With that said, the four most common myths that are often associated with outsourcing accounting services are now debunked. But these are not the only ones. Here are some other common misconceptions about outsourced accounting:
Myth 5: Outsourcing services and sending files takes too long.
This myth is entirely false; as with programs like Dropbox, you can send or transfer files much more easily and faster. Everything can be done electronically, which is even better for digital and e-commerce companies. Besides that, you can also just simply email back and forth with the company to send over files.
Outsourcing companies understand that you have acquired their services to free up your time. Hence, they create models that allow you to do just that. The process is not complicated once the outsourcing company has onboarded you and set your account up.
If your company has kept track of previous books and finances, outsourcing accounting becomes easier to do. You can hand over all records you have kept until then and let them organize everything in a way that is understandable for you.
Myth 6: The organization still needs to hire an in-house bookkeeper.
The whole purpose of outsourcing accounting is to eliminate the need for having an in-house bookkeeper or finance department. This means that this myth is false. From among the companies that do outsource their accounting function, only a handful decides to also hire an in-house bookkeeper or accountant. Ultimately, this decision depends on the individual company’s choice.
This decision may work for business owners that might not have a strong understanding of even basic finance and accounting terms. But for the majority of companies, there is no need to employ an accountant as it would beat the purpose of saving costs by outsourcing accounting in the first place.
Myth 7: The business model is too complicated for the outsourced accounting company to understand.
This is clearly a myth as companies providing outsourced accounting services have expertise in understanding a wide range of business aspects. This means that once you explain to them what your company does and how you run the business model, they will be able to tailor-make a convenient solution that works effectively for your company.
Also, they will be able to provide an unbiased third-party report of your finances. They will be able to point out areas of improvement and any financial risks that you might be facing.
Myth 8: The company is too small to outsource its accounting.
As mentioned before, outsourcing is designed to benefit companies of all sizes. Whether the organization is a large company or a small digital startup, all can utilize outsourced accounting. Outsourcing companies create specialized services and systems tailored to meet the accounting and bookkeeping needs of smaller companies.
Not only do these services create efficiency for small companies, but they are also made for smaller budgets. This makes it easy for small companies to maintain and cut costs and prioritize different business functions to focus on in-house tasks.
Myth 9: The company doesn’t have time to spend on implementing a new accounting system.
Bringing even the smallest amount of change in business-as-usual processes can be time-consuming. You have to do your research, dig-up and arrange records, and then actually explain everything to another company that has no insight into your company or how it conducts its business. Other than that, you have to learn and get used to a new system.
But in order to cut costs, which is more efficient in the longer-run, it is important that you put in time while your company is expanding. As your business grows, it will demand more time from all employees. Having everything already set up then will eliminate one operational task for you and free up your time to focus on other tasks.
To put it in fewer words, outsourced accounting grows as your business grows with time. In fact, firms providing outsourced accounting can actually help you during this time by keeping your finances in order. The will keep up with your growth so you can have a clearer picture of your company’s current financial position.
Myth 10: Outsourced accounting means overseas accounting.
In the United States of America, the word outsourced comes with a negative connotation. The word immediately creates an image of job loss. Business owners assume that by outsourcing their business functions, they are preventing people within their country in favor of somewhere abroad.
But this is not true for all outsourcing companies as outsourcing simply means to obtain a good or service from an outside source. While this can be someone from another country, it doesn’t necessarily mean that it will always be.
There are several domestic, local companies within the US that provide outsourced accounting services to companies of all sizes. Fully Accountable is one such company; based in the US and offering expert outsourced accounting services to digital and e-commerce companies.
If you want to find more benefits of outsourced accounting and how it can help your company, click here and download the guide for free.
About the Author:
Vinnie Fisher is a businessman, entrepreneur, lawyer, author, husband, and father. He has been married for over 20 years to his wife Debbie, and together they have four children.
Vinnie discovered a much-needed service for business owners, after starting a few successful digital businesses. In 2014, he opened Fully Accountable, a full service, outsourced accounting, and finance firm for digital and eCommerce businesses.
The team of data analysts and accountants do the work and provide the proactive, forward-thinking feedback business owners need to make the right decisions to increase growth and double their profit margin.
Our mission is to double the profit margin of 10,000 eCommerce and Digital Companies through our outsourced accounting and finance services. 5 years later we are the leader in the industry serving hundreds of companies in eCommerce and Digital only. We speak Digital.