A business practice in which a company takes services of their various departments from a third party is known as Outsourcing.
It is very difficult for start-ups, small businesses, and entrepreneurs to hire a qualified accountant. Significantly those pursuing righteous skills in preparing and analysing financial statements of a company, managing their banking operations, and preparing invoices.
It is also very difficult to get an eligible and qualified person at an economical rate. At present time, almost 1/3 of the start-ups and small businesses are not preferring to perform the accounts on their own. So, most of the start-ups are comfortable in subcontracting their accounts work.
Although it is felt that book-keeping and accounting should be done internally. But for that company must make sure that their accountant has enough experience and skills to perform the task. As most small businesses and start-ups end up paying more tax, it shows that they don’t have enough qualifications, skills, and expertise.
So, now-a-days most of the start-ups are preferring to outsource accounting work from third parties. Outsourcing helps the company to manage its finances smoothly and is compliant to rules.
There are many other benefits of outsourcing book- keeping and accounting work like:
- Save in time: Hiring a trustworthy service provider helps a start-up to save a lot of time. Senior leaders/ management can focus on other aspects for the smooth functioning of the business. Start-ups need financial experts to maintain, handle and ensure that their profits are safe in the financial market. Once the concern of handling financial transactions is reduced, senior level managers can focus on the business plans effectively, having knowledge that accounts are monitored and safe.
- Cost effective: As it is known that the recruitment process is costly. And, after hiring an accountant there are many costs involved like giving salary and other employees benefit, office equipment and additional associate materials. It also helps the company to save their office spaces. So, in all these ways outsourcing helps to save the cost of recruitment.
- Unbiased financial guidelines: Outsourcing gives unbiased views and guidance on the critical financial status, transactions, and data of the company. It acts as an additional eye on the companies’ records, which helps them to maintain their data in order, effortlessly and correctly.
- Fully scalable as the business grows: Outsourcing service providers has the amount of availability to scale the services significantly as per need.
- Best Practices: By putting the accounts into the hands of a highly experienced outsourcing service providers who understand the best practices and how to properly staff for certain tasks, the work of the organisation becomes easier, smooth and effective.
Parameters to choose outsourcing company:
After a start-up decides to outsource their accounting and book- keeping function, the next step is to see whether the company is fit to achieve your goals and objectives. But before that company needs to check whether it matches their requirements and needs. So, following are the factors which can be considered before selecting the outsourcing company:
- Need and type of accounting services: Start-up needs to decide whether they want to outsource the accounting service for month end report, payment services, looking after accounts receivable and payables or just for preparing and analysing bank reconciliation and entering data into software. So, whatever may be the reason for outsourcing, companies need to be clear about their needs and requirements.
- Cost effective: All the book-keeping and accounting companies have their own remittance scheme depending upon the needs and requirements of the clients. Few of them charge on an hourly basis while other charges on the monthly basis. So, the payment terms can be chosen according to the suitability and budget of the start-ups. But start-ups should ensure that their sole decision for outsourcing should not only depend upon cost- effective basis.
- Competence: Start-ups should make sure that the company they are outsourcing for accounting is highly professional, knowledgeable, and experienced. Start-ups can also do reference checks of that from their existing and past clients, popularity check, and the most crucial thing is whether they are delivering good quality and consistent results.
So, there are many ways in which start-ups can reap the benefit of outsourcing accounting and book-keeping. To start with, it is cost effective, and it also provides flexibility in requirement and payment terms. As book-keeping and accounting plays a very important role in an organisation and is also very complex and it requires good knowledge, understanding and experience, and start-ups cannot afford to hire a qualified accountant, so it can outsource these functions.