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Accounting teams are often over-burdened with what feels like endless tasks — especially when they do things manually. This leads many teams to explore the option of outsourcing.
Outsourced accounting involves handing over your financial tasks to external experts rather than managing them in-house. Companies are increasingly exploring this approach because it ensures accurate financial management without the overhead of growing their accounting team. In fact, global spending on outsourced accounting has increased by 40% in the last five years.
Outsourced accounting allows businesses to tap into specialized knowledge and software, reduce costs, and free up internal resources for other critical operations.
In this guide, we’ll explore how outsourced accounting works, its benefits, how to leverage it, and how accounting technology is changing accountants’ workload.
What is outsourced accounting?
Outsourced accounting is the delegation of accounting functions to external experts or firms. This can include a complete transfer of all accounting processes or a partial handover of specific tasks, such as payroll accounting or cash management.
Businesses outsource their accounting for various reasons, such as cost reduction, increased efficiency, or simply to gain access to specialized professionals in the field. However, outsourced accounting is not limited to engaging with other firms or experts; it also involves leveraging software that automates key accounting functions.
Why do companies outsource accounting?
The primary reason for outsourcing accounting is to streamline operations and enhance overall efficiency. However, companies outsource their accounting for many reasons, including cost savings, improved accuracy, access to specialized professionals, and more.
Companies also outsource accounting to gain flexibility, as they can easily scale their accounting services up or down based on current needs and benefit from the expertise of the outsourced accounting firm.
When you outsource your accounting, you share operational risks with the outsourced accounting firm or solution, mitigating the impact of potential financial discrepancies.
Also, as many outsourced accounting providers prioritize regulatory compliance and staying up-to-date with changes in the industry and regulatory landscape, they consider various accounting standards such as Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and special regulations like ASC 842 for lease accounting, ensuring that your organization remains compliant and efficient.
Who is outsourced accounting for?
Outsourced accounting is an option for everyone who handles the accounting process for a business or who needs to start accounting for their financial activities. This includes:
- Accounting teams: Outsourced accounting allows accounting teams to focus more on making strategic decisions rather than spending time on data entry and other manual accounting tasks.
- Nonprofit organizations: Nonprofit organizations may not have the budget or need to employ a full-time accountant. However, they can overcome this challenge with outsourced accounting.
- Teams with temporary needs: Outsourced accounting also helps businesses fill a temporary gap in their accounting team or processes. This could be due to staff turnover or an unexpected increase in workload.
- Growing companies: Growing companies are at risk of financial mismanagement without proper accounting. For example, they may need cash management software or experts to control their finances; otherwise, they may lose track of cash flow. Outsourced accounting can solve this.
Outsourced accounting options and alternatives
Companies can take different routes to outsource accounting or reduce the accounting workload based on their needs. Here are some popular options.
1. Freelance accountants
Outsourcing accounting to freelance accountants is ideal for small businesses that only need professional accounting services for tasks like tax preparation and month-end reports. Although freelance accountants may be expensive, they are flexible and can provide specialized expertise without the commitment of a full-time hire.
2. Accounting firms
Though similar to working with freelancers, specialized accounting firms can offer more comprehensive services than freelance accountants as they typically have larger teams, broader expertise, and advanced accounting software. Additionally, companies can retain outsourced accounting firms at a much more competitive price than hiring a full-time accounting team.
3. Virtual accounting services
Virtual accounting services are a good option for businesses with trained accounting professionals or staff with basic accounting knowledge. These services allow in-house staff to collaborate with external accountants virtually, providing expertise and support without fully outsourcing the accounting department.
With on-demand services, it’s possible to access accounting services when you need them. All you may need to do is log in to a platform and request the specific service you require. On-demand accounting services are convenient, but you should be cautious to ensure that you don’t overspend on these services to the point where it negates the cost benefits of outsourcing.
4. Accounting software
Accounting software is a cost-effective option for automating accounting tasks and reducing the workload for your team, making it a good alternative to outsourcing accounting to a firm or freelancer.
Software solutions allow accounting teams to automate routine tasks and enhance accuracy. You can think of it as outsourcing repetitive manual tasks to a software solution.
One such solution is Netgain, a modern accounting solution founded by Big 4 accountants who understand the intricacies of accounting as well as the unique needs of different firms.
Driven by automation and AI, Netgain revolutionizes accounting processes for accountants by streamlining routine tasks and freeing up time for strategic tasks such as financial analysis and business planning.
If you already have accounting software, you can evaluate its efficiency using this accounting software evaluation checklist.
Benefits of outsourced accounting
Outsourced accounting offers your team many benefits. Let’s explore each one:
Reduces costs
One of the main reasons firms opt for outsourced accounting services is cost reduction. According to recent statistics, companies can save up to 84% of their accounting costs by outsourcing these functions. This is appealing for both small and large businesses as it allows them to allocate resources more efficiently, reduce overhead, and focus on core activities.
Another way to keep costs low is with accounting solutions like Netgain, which save both time and money with automation and AI assistance, making accounting processes easier and more accurate for small accounting teams.
Saves time
Some accounting tasks, such as payroll processing, invoice management, and bank reconciliation, consume valuable time that could have been invested in completing more impactful tasks. Outsourced accounting also saves accountants and finance professionals time on routine and monotonous tasks and financial reporting.
Boost productivity
Accounting teams are more productive when they reduce manual accounting tasks, as they have more time to focus on strategic tasks and high-level decision-making. But to maximize this benefit, you need to fill in the gap created by reallocating tasks with more strategic work for team members.
How to outsource accounting for your business
Wondering how to start reducing the workload for your accounting team? Start with these steps:
1. Identify your goals
What are your accounting needs, and which activities would you like to outsource? Make a list of your accounting processes and tasks, from bookkeeping to financial reporting, and decide whether you want to outsource all of them or only some. This is key for choosing the right option for your team.
2. Research options
There are many options for reducing your accounting workload — accounting software, freelance accountants, accounting firms, and more. The best option for you will depend on your unique goals.
If you don’t have a consistent need for accounting services, then you can opt for freelance services, but if you need accounting services regularly, you may need to invest in accounting software that helps your team work more efficiently. Software gives you access to real-time data insights and advanced analytics that you wouldn’t get easily if you opted for freelance accounting services.
3. Get stakeholder buy-in
Implementing a new process will be challenging without stakeholder buy-in. Consult with stakeholders to ensure that everyone is on board with the decision or at least aware of the impact of the proposed changes. Your stakeholders include employees, customers, and board.
4. Create an implementation plan
How do you intend to implement the new outsourced accounting solution? Usually, businesses implement in stages, starting with outsourcing the least critical tasks. Others dive right in. But regardless of which option you choose, you need a detailed plan of action.
Learn more about outsourced accounting
Want to know more about outsourced accounting? Here are answers to some FAQs.
Is outsourcing accounting a good idea?
This depends on your existing resources and needs. If you don’t have an accounting team or are working with a small team, outsourcing can be a good idea as it helps you focus on your core activities and strengths. But there can be drawbacks, such as reliability and communication.
If you have an accounting team that is looking to work more efficiently and with greater accuracy, a better option can be adopting a reliable, secure, and scalable software solution, like Netgain.
What types of accounting services can be outsourced?
You can outsource the following accounting services:
- Bookkeeping
- Financial reporting
- Payroll processing
- Tax filing
- Month-end reporting
Try accounting software for your business
Accounting software can give you more time to focus on strategic tasks, improve your team’s productivity, and provide better work-life balance. But to get all these benefits, you’ll need an accounting solution that balances affordability, functionality, and security.
Netgain makes accounting easy with automation and AI. It offers an extensive product suite, with solutions for lease management, end-of-month reporting, fixed asset management, and more, providing visibility into all your accounting processes.
Want to discover how Netgain can streamline your accounting processes and lighten your team’s workload? See it in action now with a demo.
