Pros and Cons of Outsourcing Accounting and Bookkeeping Services

Pros and Cons of Outsourcing Accounting and Bookkeeping Services

Once your business starts growing, you simply need a professional who can manage your accounting and bookkeeping. Every business owner has to decide whether they want to hire a bookkeeper or accountant to work in-house or engage an outsourced accounting service. There’s no right or wrong choice here, it’s about what works for you and your business.

Saying that, outsourced accounting is quickly becoming more popular, especially since the beginning of the Coronavirus pandemic. This is partly due to the cost and time saving that outsourcing provides business and also the ability to maintain a finance function when a business has had to close offices or furlough staff.  Outsourcing can be an extremely effective solution while fighting for survival in tough economic times

This is not to say that outsourced bookkeeping services are the best solution for everyone - just like hiring your own bookkeeper, outsourcing has certain advantages and disadvantages. So, to help you see if your business can benefit from it, we’ve outlined the most important pros and cons of outsourcing your accounting and bookkeeping:

Benefits of outsourcing

It’s cost effective 

Outsourced bookkeeping is often much more cost effective than having an in-house bookkeeping department to handle your finance function. Outsourcing eliminates a number of costs associated with hiring, such as recruitment costs (job advertisements, agencies, interviews, etc.), dealing with payroll and employee deductions. 

Working with an external accounting firm also means that you don’t have to worry about paying Employer’s National Insurance Contributions, pensions, holidays, sickness and maternity pay and other costs associated with employing staff.

Outsourcing will also help reduce other business overheads.  You don’t need a dedicated office space for an accounting department nor do you need to pay for payroll and accounting softwares, IT support, data backups and so on.  All of these add up, so you are better off minimising them.

Outsourced accounting services means that you just pay for the work done without any other costs. Many accounting firms also have a fixed fee option, so your costs are stable each  month and it’s easy to budget. 

Time saving

Bookkeeping and accounting can be very time consuming and take your focus away from your business.

The latest accounting software advertisements might make everything seem easy, but managing payroll, keeping up with the latest legislation, calculating taxes and contributions, etc, all takes time. 

As a business owner, you know better than anyone that your team’s time is valuable and costs money, so you need to use it as efficiently as possible. Getting your team to do bookkeeping and payroll may not be the best or most profitable way to use their time.. 

An outsourced bookkeeping service, will enable you and your team to focus on your core business activities for the growth of your business and generation of revenue. 

Using experts 

Outsourcing gives you the benefit of having your accounts managed by experts. Some firms will have substantial experience in many sectors.  Others may focus on specialist sectors, such as construction or digital agencies.

You can be sure that your accounting will be done professionally, on-time, accurately and in a way that works best for your individual business. 

Additionally, a good outsourced accountancy practice will be able to provide other valuable services, such as expert advice on your business strategy, helping you reach your growth goals and providing additional resources.

Lower risks of fraud

It doesn’t matter how much you trust your team, there’s always a risk of fraud in your business and it most often happens within the accounting department. 

Employed bookkeepers and accountants are in a position of trust and have access to sensitive data about your business.  They may have visibility of your profits, loans, turnovers, personal expenditures and so on. Potentially, they have the ability and knowledge to misuse their position.

Keeping data confidential and secure should be your top priority at all times.

Outsourced accounting eliminates the risk of fraud and theft.  Accountants will have extensive control systems and security to prevent fraud and to protect data.

Peace of mind

One of the greatest benefits of outsourced bookkeeping is peace of mind. 

Professional accountancy firms will ensure your accounts are completed and filed on time, they can deal with HMRC, banks and lenders, especially in times of stress and handle your personal and business tax affairs efficiently.. 

In the case of any issues, challenges or even tax audits you are in the safe hands of professionals that will have relevant experience and know exactly what to do. 

On top of that, you can get full business support and expert advice on questions other than just finances. Essentially, outsourcing allows you to completely forget about that part of your business and just focus on what you do best. 

Potential drawbacks and how to overcome them

Unexpected costs 

Unexpected costs can occur sometimes when outsourcing accountancy services and bookkeeping.  It could arise from a genuine misunderstanding about the scope of work that has been agreed.  Or that you need to pay for additional services that were not discussed at the start of the agreement.   Any unexpected cost will come as a surprise when the invoice arrives.  Your costs will be more than planned and outsourcing is not quite as cost-efficient as you expected.. Good news is, this is pretty easy to avoid.

Pro tip: 

When choosing a firm of accountants, you should ask as many questions in advance as needed. Make sure that the fees structure is clearly explained. You might be offered the choice of fixed fee accounting so that your monthly costs always stay the same, and you can budget for it.  

A professional firm will provide you with a Letter of Engagement. This document outlines what exactly both parties expect from each other and, in detail, what services the accountancy firm will be providing and what your obligations will be. This will be your point of reference to look at, in case of any disagreements about costs or services.

Ideally, your agreement should be reviewed regularly to take into account any changes in your business needs and changes in the quantity of work that you are outsourcing.  This is especially important if your business activity fluctuates throughout the year.

Less Control

If you’re someone that likes to have direct control over all business activities, even if you don’t have time for them, outsourcing your accounting may feel like some control is taken away from you. This may be partly true, as outsourced accounting services means that you cannot make all of the decisions for the accountancy firm. For instance, you might not control what software is used or exactly when and how your accounts will be handled. 

But ask yourself if it really matters, or if the benefits outweigh that element. 

Pro tip: 

Whilst you cannot control the way an accountancy firm operates or what softwares they use, you will still be very much involved and aware of everything that is happening with your accounts. 

A professional accounting firm will be transparent about everything, so your working relationship will be clear.  You’ll have online access to your financial information and regular communication regarding your accounts will ensure you’re equipped to make important decisions. 

Just make sure that you let your accountants know about your needs and preferences before you engage them. 

Reliance 

When outsourcing your accounting, you need to be prepared to fully rely on an external firm handling your finance. Whilst most people don’t mind this aspect of outsourcing, we understand that it may be a potential drawback to some.

As a business owner, you might have the mindset of “if you want it done right, do it yourself” and the idea of relying on someone may seem scary. However, this is not necessarily the right way to look at it.

Pro tip:

Relying on a professional and experienced team of accountants shouldn’t be scary and, if anything, it should be the most trustworthy option. When you think about it, in your personal life, you usually tend to trust and rely on many professional firms for different services. For instance, when your car breaks, you bring it to a team of mechanics in a garage or if you have an injury, you go to a hospital full of experienced doctors. These examples are no different to trusting a team of professional accountants handle your accounting and bookkeeping. 

The key here is to choose the right accountancy firm for you. There are thousands of accountants in the UK and you can afford to be selective. You need to be sure that your potential accountant is aligned with your expectations and needs.  Trust your instinct and find a firm that could become a long-lasting partner that you trust 100 percent. 

Not local

This might be a drawback for some but not for others. If your accounting firm is not local you won’t be able to have face-to-face meetings with them. In some cases, if an accounting firm is not good at communicating with their clients, you may also find it difficult to get in touch with them for a quick question or another urgent matter. 

Pro tip:

Communication has never been easier with online video meetings, email and instant messaging. This is why many businesses are more than happy to have their accountant on the other side of the country, or even world - they find that they save travelling time and get things done faster online. 

And with the Coronavirus pandemic, we have all become used to virtual meetings online instead of face to face meetings.

But if you do think that’s an issue for you, though, and you want the option of face-to-face meetings - just find one that is close to you.

Another great tip is to prioritise communication when picking your outsourced accounting service. A good accountancy firm will ensure that you can easily contact their team and get quick replies to queries and keep you updated regularly.  Some firms have a communication schedule in place. 

When interviewing your potential outsourced accountancy service provider, ask about their ways of keeping regular communication and dealing with client enquiries.

Final word

Outsourcing your accounting and bookkeeping can have great advantages which will almost certainly far outweigh any disadvantages. It’s up to you to decide whether it’s right for you, but we do hope this article helps you better understand what impacts outsourced bookkeeping and accounting can have on your business. 

Looking to outsource your accounting and bookkeeping?

If you do decide that outsourced accounting and bookkeeping is right for your business and want to begin your search, why not start with us?

At ASfB, we have great passion for helping you grow your business and reach your most ambitious goals. We offer total business support, including basic bookkeeping, business and personal tax, VAT returns, payroll management and business advisory services.

We work with each of our clients on an individual basis, meaning that our experienced team of Chartered accountants will find solutions adapted to your specific business needs and wants. We also work with the most intelligent cloud-based softwares to date, providing you with better insight to your financial health and business operations.

Our main offices are based in Bournemouth, but we offer outsourced accounting and bookkeeping services world wide. 

If we sound like the right fit for your business, don’t hesitate to get in touch! Call us on 01202 755600 or email to hello@asfb.co.uk.