How Outsourcing Your Finance & Accounting Can Boost Your Firm
The business landscape is rapidly and constantly evolving, and for this reason, firms are increasingly turning to outsourcing, considering it a strategic tool for growth. Finance & Accounting sector is showing rapid growth in embracing this option. Precision, expertise, and efficiency are paramount in accounting and outsourcing. This allows firms to leverage external expertise to manage F&A tasks while freeing up in-house teams to focus on core activities.
Explore the blog further to learn how outsourcing these critical functions can boost your firm’s performance.
What is Finance and Accounting Outsourcing (FAO)?
Delegating tasks related to finance, like payroll, bookkeeping, financial reporting, and tax preparation, to external service providers is referred to as Finance and Accounting Outsourcing (FAO). Companies typically engage with outsourcing providers that specialize in financial services to handle these tasks efficiently and securely. FAO can include outsourcing simple back-office functions to contracting full-scale finance departments.
1. Significant Cost Savings
Cost savings are widely regarded as one of the major benefits of outsourcing finance and accounting. High expenses, such as salaries, benefits, office space, and training costs, are necessary when a firm employs a full-time in-house team. However, when a firm outsources its tasks, it can reduce or eliminate overhead costs like these and further gain access to a highly skilled workforce at a lower rate, especially when partnering with providers in countries with a lower cost of labor.
An extensive survey on US outsourcing statistics shows that around 59% of businesses cite cost as the biggest reason for outsourcing, Which demonstrates that outsourcing is a cost-effective option without compromising the quality of financial management.
This includes savings on:
Salaries and benefits
Office space and equipment
Training and development
Software and technology investments
Administrative overhead
2. Access to Specialized Expertise and Technology
Outsourcing finance and accounting provides you with access to specialized expertise. This doesn’t mean that the in-house team you have lacks expertise or knowledge; indeed, they are also well-equipped with essential skills, but outsourcing gives you more exposure to talent and expertise. External providers often have a professional team of experts with in-depth knowledge of specific financial functions like international tax compliance, auditing, or advanced financial reporting.
In addition, many outsourcing providers make investments in cutting-edge accounting technology, such as cloud-based accounting software, automation tools, and advanced analytics platforms. The accuracy and speed of financial processes are improved by these technologies, and they frequently come integrated with robust data security measures, assisting firms in ensuring compliance with changing regulations.
Outsourcing provides:
Access to certified professionals
Specialized knowledge in various accounting areas
Up-to-date compliance expertise
International accounting standards knowledge
Advanced technological capabilities
3. Focus on Core Business Functions
Do you know with outsourcing, firms can focus appropriately on their core functions? Yes! Outsourcing is one of the most underrated yet crucial benefits of outsourcing, and it directly drives growth and profitability. Financial and Accounting operations are necessary but time-consuming, and they divert management’s attention away from core functions or strategic initiatives.
By outsourcing these functions, you can let your internal team focus on growing the firm, improving customer relations, and more - without getting bogged down by routine financial tasks.
As per a study shown, FAO allows 80% of companies & firms to have more time to focus on their core functions. This is because, with outsourcing, firms can allocate more resources and time toward core activities. And so, firm owners can focus on what matters most: Firm Growth.
4. Scalability and Flexibility
Outsourcing offers scalability, making it simpler for firms to respond to shifts in demand. Outsourcing partners can quickly scale their services to meet your firm's needs, whether you're experiencing rapid growth, managing a seasonal spike, or downsizing.
Outsourcing gives firms access to a flexible workforce rather than hiring and training new employees, which can be time-consuming and expensive. Outsourcing partners can provide immediate access to skilled professionals, whether you require additional assistance during tax season or temporary assistance for an audit.
In simpler terms, outsourcing is an attractive solution for firms dealing with fluctuating demands to scale services accordingly:
Easy scaling during peak periods
Reduced overhead during slow periods
Quick access to additional resources
Ability to add specialized services as needed
No long-term staffing commitments
5. Enhanced Compliance and Risk Management
For small and mid-sized firms, it can be overwhelming to navigate the complex landscape of tax regulations, financial laws, and compliance standards. Even a minor error in tax reporting or compliance could lead to dangerous consequences like penalties, audits, and tarnished firm’s reputation.
Outsourcing your firm’s finance and accounting functions to specialized partners ensures that experienced professionals are handling your firm’s finances. Many outsourcing companies have dedicated teams who stay updated with local and international regulations, ensuring that firms remain compliant with less or no financial risks.
A survey by Deloitte reveals that around 39% of firms outsourced to ensure compliance and risk management.
6. Improved Financial Reporting and Decision-Making
Accurate financial records are essential for the firm's well-guided decision-making as a going concern. Most outsourcing service providers have established procedures for the preparation of periodic management accounts, which are timeous and assist the firm owners in monitoring their operational results with ease. Reports such as these enable proper planning for cash flows, forecasts, and evaluations of the firm’s financial position.
In addition, outsourcing service providers employ advanced analytic applications and tools to present more meaningful information than mere financial numbers. Trends application tools can help firms analyze their patterns of operation over time and predict future patterns to help with planning for enhancements that may be necessary.
7. Increased Data Security and Confidentiality
Financial data is sensitive, and handling it comes up with a significant set of risks. A firm needs a solid IT infrastructure to protect data from cyber threats. However, outsourcing providers frequently place a high value on data security and protect your financial information by employing cybersecurity protocols, secure servers, and encryption.
The risk of internal fraud or data breaches is reduced because outsourcing companies are equipped to handle financial information in accordance with global data security standards.
8. Improved Efficiency and Productivity
There are several time-consuming routine tasks in finance and accounting, like payroll processing, invoice management, and tax filings. Outsourcing these tasks lets firms leverage automated systems and specialized expertise. This enhances the efficiency of the firm while enabling in-house teams to focus on high-value strategic activities.
9. Gaining a Competitive Edge
Outsourcing the finance and accounting functions of a firm provides it with a competitive advantage. Firms can operate more efficiently and effectively as outsourcing reduces costs, improves financial reporting, and enables faster decision-making. Also, they can also invest their resources and valuable time into strategic initiatives that set them apart from competitors.
More than this, access to specialized financial experts and cutting-edge technology can help firms innovate and respond to market changes more rapidly than competitors who manage these functions in-house.
Final Thoughts
Finance and accounting outsourcing is much more than a cost-saving measure. It has evolved into a strategic decision for firms. It can boost the core performance of firms with a wide range of benefits, including cost savings, improved accuracy, specialized expertise, and scalability & flexibility. As technology is evolving continuously, FAO is becoming an integral part of a firm’s success.
However, every approach needs careful planning. While outsourcing, keep in mind that you are selecting the right partner like MYCPE ONE, which has over 9+ years of proven expertise. The company has had 0 data breaches as it implemented rigorous security and privacy measures to ensure services are delivered securely and responsibly, including compliance with SOC, ISO, and GDPR standards.
Shawn Parikh is the CEO and Co-Founder of MYCPE ONE. A Chartered Accountant by qualification, he has over 15 years of experience of being a problem solver for small to mid-size firms and over time he has given consultation to thousands of CPAs, accountants and tax pros. Shawn has always been a big believer and advocate of social enterprises and small accounting firms & businesses. He consults and speaks on several topics ranging from Building Remote Team - Remote Working, Offshore Staffing, strategic planning, Scalability of Accounting Practice, cloud accounting, practice management, LinkedIn marketing, etc.
Christopher Rivera
Shawn Parikh
