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Outsourced Accounting Services: Everything You Need to Know

Published by Jody Grunden on Aug 8, 2023 6:00:00 AM

Many small businesses jump at the chance to grow. But growth inevitably means increasing staff. Unless you’ve been hiding under a rock these past few years, you’ll be quick to note that staffing is incredibly challenging right now, especially for accounting services. The accounting industry, in particular, is dealing with a painful shortage of CPAs. The answer, for both growing CPA firms and businesses in other industries, may be to outsource accounting services.

Before you hire outsourced accounting or bookkeeping services, however, make sure you cross your t’s and dot your i’s. Outsourcing comes with notable benefits, but it can also cause significant headaches if you don’t account for (pun intended) a few issues that may arise.

What can you expect from outsourced accounting services?

When you outsource more of your accounting functions, you can expect benefits, including:

  • Accurate record keeping

  • Financial reporting: preparing monthly financial statements (balance sheets, industry financial comparisons)

  • Cash flow management services

  • Paying bills (accounts payable) / invoicing clients (accounts receivable)

  • Payroll processing

  • Credit cart receipt tracking

  • Business and personal tax returns / tax planning

Beyond meeting these transactional accounting needs, an outsourced team that offers advisory services can step in and provide support with day-to-day business decisions:

Think of outsourced accounting the same way you think about any other services you contract out. When you run into aoutsourced accounting services capacity or capability issue that impacts your ability to get things done, you either hire someone internally, which can be expensive, or you outsource to a professional services company.

While accounting can seem a bit more sensitive of an area to outsource, it can make smart financial sense, especially when you’re outsourcing your services to a trusted provider.

That said, you don’t want to jump right into it without making sure you’ve considered potential roadblocks to success.

Consider Your Budget

Outsourcing services is a cost-effective way of getting the benefits of a full-time internal accounting department: Because outsourced accounting solutions work on a fractional basis, you essentially pay only for the services you need.

However, keep in mind that outsourced accounting firms bill in different ways. While some may bill hourly, others offer package deals or use a subscription based model. When comparing quotes, be sure to consider whether the price is fixed or may creep upwards if you happen to have more questions in a given month.

Consider How Quickly You Need Accounting Services

Staffing needs can pop up unexpectedly, especially during high-growth periods for your business. Accounting roles are not ones to sit and wait to fill, however. Accurate and updated records take time to prepare, while late filing during tax time or filing inaccurate or incomplete forms can be exceptionally expensive.

The average time to hire is currently 36 months, according to LinkedIn. Yet that’s an aggregated number. In industries where talent is difficult to find, accounting included, you can often expect the time to hire to be much longer. Considering how important accounting roles are to any business, making sure you get the right person for the job ultimately results in a lengthy process — unless you get lucky early on.

If you need accounting services in a time frame that’s too short for the typical time to hire and time to onboard, outsourced accounting likely makes the most sense.

Consider Where Your Outsourced Accountants Are Located

Your outsourced accountants are most likely going to be remote. That’s nothing shocking, especially in our now remote-first work culture. Remote doesn’t always mean easy to work with, however, and it’s always important to be intentional about keeping a remote team connected. The differences in time zones can make your remote work challenging.

In an episode of our Modern CPA Success Show on Finding Joy in Accounting, we spoke to Kristen Keats, Founder & Advisor of Breakaway Bookkeeping and Accounting. Kristen personally discovered the benefit of working with outsourced teams in her career, both with teams in India and with teams that work for Breakaway located in Mexico.

In the episode, she recommended anyone working with outsourced accountants take potential time differences seriously.

“The time difference is really, really tough,” she explained, especially if you’re trying to work with remote accountants who are located halfway around the globe. The solution? Finding outsourced accountants who are closer to your time zone that can be more easily integrated into your team.

“That's the other great thing about being in the same time zone,” Kristen noted. “They can be on the Zoom calls with me, even if they don't ever speak or say anything, they can listen and learn.”

The greater the time zone differences, the harder it will be to integrate your accountants to your team. Larger time zone differences will ultimately slow down communication which can be troublesome at times.

Consider Whether Your Processes Are Ready for Outsourced Teams

There’s no substitute for well-established, streamlined accounting systems. Once you have these in place, onboarding and integrating outsourced accountants into your team will be easy.

Lacking good processes and systems won’t always be a deal breaker for whether outsourced accounting teams can work with you. Part of our Virtual CFO service includes a structured onboarding process, that allows us to get on the same page with any company, regardless of how they run their back office (or if they even have a back office to begin with).

However, if you want your outsourced teams to get work done as quickly and efficiently as possible, having repeatable processes will make a world of difference in helping your outsourced team hit the ground running and in delivering the product you need.

If your business is not quite there yet, we recommend checking out Episode 37 of the Modern CPA Success Show where we chat about processes and systems with David Jenyns, author of SYSTEMology.

Outsourced Accounting Is a Win-Win for Everyone

As an owner of an accounting firm, you may find outsourcing makes sense for your business, rather than looking for a full-time employee or trying to build an in-house team. If filling your roster is challenging, professionally-trained CPAs located in different parts of the US or abroad may be able to help improve scalability. Outsourcing work to remote accounting professionals removes the inability to find local talent for your team.

And if you’re an entrepreneur desperate to get your accounting in order and off the ground, outsourcing may be the next best step. By lowering the cost and eliminating the time-to-hire, outsourcing your accounting team can accelerate scale, right when you need it most.

So who benefits from outsourcing accounting services? In today’s tight labor market, the answer is simple: