The modern-day business dynamic has considerably evolved over the course of time. As a matter of fact, companies today are striving to be more agile in order to survive in a fast-paced environment. In this regard, it is imperative for businesses to ensure that they are able to make decisions on grounds of business strategy.
This in return helps them retain their competitive edge. With shrinking profit margins, companies are always looking for options that are in line with the cost-cutting objective.
This has been a fairly important consideration for companies since it gives them much-needed flexibility that is well suited to the current business outlook.
Rapidly transforming business practices have also been coupled with new innovations, not only in product lines that the company offers but also in terms of innovative processes that can help the company save up considerable costs.
Outsourced Accounting has been a new trend in this regard and over the course of years, it has seen an exponential increase that is mirrored by a larger number of companies shifting towards outsourced accounting.
Financial planning and accounting are considered to be highly critical elements in business reporting and analysis. It is an integral ancillary function for the business that helps the business to learn and grow, and ensure that they can make decisions based on both, qualitative, as well as quantitative metrics.
However, more often than not, hiring in-house accountants are often not feasible for companies because they have an underlying financial constraint they need to keep in mind when making these decisions.
Therefore, the best course of action, in this case, is to outsource the particular accounting division, so that the accounting department is duly taken care of by external third-party accountants.
Therefore, outsourced accounting can simply be defined as an act that involves an organization outsourcing its accounting and finance division to an external third party. This third party is not necessarily on the payroll for the company.
It mostly works on a contractual basis where the concerned person (or party) to whom the work has been outsourced to is responsible for managing accounts for the company.
Over the recent past, outsourced accounting has exponentially grown in popularity. Broadly, outsourced accounting includes the following fundamentals for the clientele:
- Real-Time Accounting and Financing: Accounting and Finance records need to be perpetually maintained in order to ensure that all transactions are noted down in the system without anything being missed out. Outsourced accounting division helps to ensure that the respective accounting and finance data entry tasks are maintained in real-time.
- Audit and Compliance Related Process: Outsourced accounting to reputable firms enables companies to comply with audit and compliance. Since it is outsourced to professionals who have a clear understanding of accounting and finance, it is easier for them to comply with the said rules and legislations. Similarly, it also acts as an aid in the preparation of the final audit.
- Financial Modelling: Financial Modelling is considered to be a highly important decision-making tool for organizations. It is considered to be an important resource for quantitative and qualitative decision-making. Outsourced Accountants are also responsible to provide companies with financial models that can be used as viable sources for decision making.
- Process Automation: The greatest advantage of outsourced automation is the fact that it helps organizations to automate their accounting processes. Firms that manage accounts for companies manage end-to-end automation, and it helps their clients to focus on the core activities. Knowing that the accounting division is fully outsourced helps them to be at ease knowing they do not have to worry about month-end closings and year-end reporting.
- Personalized packages: CPA Organizations that manage accounts and finances for other companies normally have personalized packages for clients, which are best suited to their needs. For example, for medium and small-sized enterprises, they have different packages, and for larger organizations. The size of the company is never an issue when it comes to outsourcing accounting. It can always be managed and tweaked as per the requirements of the company.
Therefore, outsourced accounting provides numerous different benefits to companies on the grounds of much-needed flexibility to the users.
It is a cost-effective solution for companies that might have a dearth of financial resources to hire a permanent accountant on board.
It is also a viable option for small business owners who suffer from a lack of time to manage to account and bookkeeping themselves.
This can be attributed as the core reason behind the exponential growth in outsourced accounting over the course of time. Other than that, outsourced accounting has a number of advantages for the company, which are given below:
- Increased Efficiency: With a major ancillary function outsourced, the existing human resources that were currently managing accounts can do something worthwhile. It not only minimized current expenditure but also gives a chance to the business owners (or managers) to offload their duties and responsibilities to specialized personnel.
- Professional Help: Hiring professional help can be challenging for businesses because of the associated payroll costs. Outsourcing accounting gives the company a chance to have its accounts managed by certified personnel, at a limited cost.
- Cost Reduction: The overall cost reduction, in the form of reduced hiring and recruitment costs, in addition to an infrastructural setup for accountants is also considered an important advantage of outsourced accounting. There is no need to set up hiring and recruitment posts, and this can result in considerable cost-saving advantages for the company.
Hence, it is safe to say that outsourced accounting is perhaps the best possible solution to modern-day problems. It can greatly help companies maintain their accounting records on a perpetual basis, without any cause of concern for the company.
Outsourcing accounting might seem to be a cumbersome task, but once it is properly executed, the results are flabbergasting in terms of higher efficiency, better reporting, and better compliance.
It is safe to say that outsourced accounting is considered to be a solution for companies looking for agility and receptiveness in the longer run.