Posted by Cedric Joshua Martinez
Sep 28, 2018
Share
Finance and accounting outsourcing (FAO) has been around for quite some time now. And, for years, organizations of all sizes have reaped the benefits of outsourcing these critical services, such as reducing operational costs and gaining access to skilled professionals. If you're considering joining the ranks of organizations benefiting from this activity, you're on the right track.
Related: A Comprehensive Guide To Accounting Outsourcing Services
How Does Accounting Outsourcing Work?
In a typical finance and accounting outsourcing setup, you delegate specific tasks or entire functions (e.g., bookkeeping, payroll, tax filing) to a third-party provider. These experts then manage these services remotely, while maintaining close communication with your in-house team.
The outsourced team acts as an extension of your organization, which means that they closely follow your established processes while bringing their specialized expertise to the table at the same time.
Why Outsource Accounting Services?
There are several reasons why outsourcing accounting services makes sense for organizations, especially for those looking to optimize their financial operations. Here are some of the benefits of outsourced accounting:
1. Cost Efficiency
One of the most significant reasons organization choose finance and accounting outsourcing is cost savings. Hiring and maintaining an in-house accounting team can be expensive, particularly when you factor in salaries, utility expense, benefits, and training. Outsourcing allows you to access expert-level services without the overhead costs associated with full-time employees.
2. Scalability
As your organization grows, your financial needs will evolve. How accounting outsourcing works is that it offers scalability—you can easily increase or decrease the level of service you need without the hassle of recruiting or downsizing your internal team. This flexibility is particularly beneficial during periods of rapid growth or seasonal demand.
3. Focus on Core Business Activities
Outsourcing allows your in-house team to focus on strategic activities that drive growth, rather than being bogged down by time-consuming administrative tasks like bookkeeping and payroll processing. This added focus can lead to better decision-making and more innovation within your company.
4. Access to Technology
Many finance and accounting outsourcing providers use advanced accounting software and tools that may not be feasible for other businesses to invest in. By outsourcing, you benefit from these cutting-edge technologies that are essential for improving the accuracy and efficiency of your financial reports.
Read: 5 Major Benefits of Outsourcing to the Philippines
How to Outsource Accounting Services Effectively
Understanding how to outsource accounting services is critical to make sure it works for you. Here are some key steps you may consider doing:
1. Conduct a Strategic and Needs Assessment
Before looking for an outsourcing provider, you must identify your needs first so you can pinpoint the specific services you must outsource. You may consider talking to the members of your finance and accounting team to identify the tasks they are confident of delegating.
It’s also the best way to learn how outsourcing can assist them in streamlining certain F&A processes. You can also discuss with other executives and partners how introducing outsourcing to your organization will affect processes outside the F&A department. This way, you’ll get a wider picture of why you should outsource and how outsourcing will impact your organization.
Why is this step important?
Every organization is different—some might only need help with bookkeeping, while others may need a full range of services like payroll, taxes, and financial reporting. That’s why it’s important to do a detailed assessment to make sure you’re getting the right help and pinpoint the services you need to outsource.
2. Choose the Right Finance and Accounting Outsourcing Provider
Once you’ve identified the services you need to outsource, the next step is finding the right partner to provide those services. With numerous outsourcing firms available, selecting the best one can feel overwhelming, but this decision is critical.
What should you look for in an outsourcing provider?
A good outsourcing provider should offer the flexibility to integrate seamlessly into your organization’s processes. Their team should be able to handle both short-term tasks like month-end reporting, as well as long-term needs such as strategic tax planning or compliance.
Key question and considerations when selecting a partner:
- Do they have experience with companies of your size and within your industry?
- Can they work with the accounting systems you currently use?
- How will they ensure compliance with local and international financial regulations?
It is important to note that choosing the right finance and accounting outsourcing provider is the biggest decision you will make in this process. So, make sure to find the right partner who can deliver tailored services and meet your organization’s goals. You may also consider asking other chief or business executives about their outsourcing experience and how they choose their outsourcing partner.
3. Discuss Your Requirements and Establish a Service Level Agreement (SLA)
Once you have chosen an outsourcing partner, you have to discuss your needs, expectations, and other business specifics that are vital to the outsourcing process and service delivery requirements. This is where a Service Level Agreement (SLA) comes into play. The SLA is a formal document that outlines the services to be provided, deadlines, communication protocols, and performance metrics.
What should an SLA include?
Your SLA should be comprehensive, covering every aspect of the outsourcing arrangement:
- Scope of services: Clearly define what you expect from your outsourcing partner, whether it’s day-to-day bookkeeping, payroll, tax preparation, audit support or all of the above.
- Timelines and reporting: Set specific deadlines for deliverables and outline how often you’ll receive financial reports or updates.
- Software and tools: Ensure your outsourcing provider is equipped to use or integrate with your existing accounting systems.
- Communication channels: Establish regular communication touchpoints to ensure smooth collaboration between your in-house and outsourced teams.
This step is important because it provides both parties with a clear understanding of responsibilities and expectations. Having a well-crafted SLA can prevent misunderstandings down the line and ensure that your accounting outsourcing engagement runs smoothly from the start.
Read Next: The Inflation Dilemma: Why US Companies Are Turning to Outsourcing
4. Start the Outsourcing Engagement and Evaluate the Progress
Like any relationship, the first few days of your engagement will be a period of adjustments and improvement. Hence, to make the engagement work, it’s important to have regular meetings and feedback sessions with your outsourcing partner to identify which areas of your engagement can still be improved.
If you need to adjust timelines, processes, or the SLA itself, don’t hesitate to have those discussions. Remember that building a good working relationship requires effort from both sides.
Why outsourcing accounting requires ongoing evaluation?
To maximize the benefits of outsourcing, it’s important to regularly evaluate the performance of your outsourcing provider. Metrics such as process efficiency, and the quality of financial reporting should be tracked. This ongoing assessment will help you ensure that the outsourcing arrangement continues to meet your organization’s objectives.
In need of an accounting outsourcing provider?
Consider D&V Philippines. D&V Philippines is a business process outsourcing firm specializing in finance and accounting that has been in the industry for more than a decade.
Serving clients all around the globe, we pride ourselves on delivering quality accounting solutions. Schedule a free consultation with us today to find out more about how we can help you.
You can also read testimonials from our clients and access our whitepaper D&V Philippines’ Solutions for Modern Accounting Firms to know how we can build a great back-office support for your organization.
This article was first published on 28 September 2018 and has been updated since then for relevancy and comprehensiveness.
Last edited on 17 October 2024
Edited by: Angelica Garcia
