Finance and accounting outsourcing is the process where a company employs external resources to perform business functions that are critical in achieving the goals of the company.
Today, more and more office functions are being outsourced such as human resources (HR), and IT support. Though it’s hard to imagine crucial tasks being outsourced, more and more companies are doing so because of its numerous benefits. To better understand how outsourcing works, let’s use finance and accounting (F&A) as an example.
Case in Point: Finance and Accounting
F&A is the office function concerned with invoices, payments, payrolls, bookkeeping, taxes, and investments. These professionals work to ensure that the company is getting paid, employees are receiving their salaries, taxes are filed properly, and financial resources are allocated to keep things going.
Obviously, the work entrusted to the F&A team is vital to the company’s day-to-day operations. One can only imagine how roles like this are outsourced, knowing how critical the tasks are. However, with the advent of new technologies, performing some bookkeeping tasks is now easier through automation.
F&A tasks done by outsourcing are processed through state-of-the-art technology called cloud accounting. This introduces cloud-based software and remote servers that enable outsourced accountants to work online and perform various finance-related tasks (e.g. payroll, invoicing, etc.) in real-time. It allows both the accountant and the client to access their documents in any place, anytime with the help of the internet. The cloud also serves as a backup to keep the files safe and secure in case of computer malfunction and theft.
SMSF accounting outsourcing
In Australia, there is a special accounting requirement called the Self-managed Superannuation Fund (SMSF). As the Australian Taxation Office (ATO) puts it, SMSF is a way of saving for your retirement. Individuals have the liberty to choose the investments and insurance their savings are invested in, so a number of people chose to handle it on their own terms.
In ATO’s released statistics last April, there are nearly 600,000 SMSFs in Australia. More than 1.1 million individuals are members of this fund to date.
However, contrary to what others refer it to (which is the do-it-yourself super), there are parts of the population as well who choose to outsource their SMSF to accounting firms for reasons of maintenance and government compliance. In essence, the legwork and management will fall under their outsourced team.
When you outsource your SMSF account, they handle various accounting and bookkeeping work, do financial planning, lodge annual returns, and create an investment strategy for you.
Accounting functions are traditionally performed by in-house employees but are commonly outsourced these days. How do the two differ?
In-house accounting vs. outsourcing
Skyrocketing the list is the lower costs offered by outsourcing firms compared to hiring and maintaining employees to perform these tasks. In-house accountants include overhead costs such as recruitment fees, superannuation, insurance, and pension.
On the other hand, offshored accountants can be more cost-effective as they can be charged by the hour, or at a fixed monthly rate while they tender full-time accounting services.
Your in-house team is upfront convenient since you can walk right into their office when you need to ask something, or meet them about your financial reports immediately. However, should there be any discrepancies in your books, it will be hard to pinpoint since it’s the same people looking at it. Whereas if you outsource it, you have a new pair of eyes looking at your financial reports to tell what needs to improve.
To add, you are ensured with reliable work output with outsourcing as some outsourcing firms have backup employees in case of absences, leaves, and other emergencies.
In-house accountants typically work an 8-hour shift for you, which translates to a 40-hour workweek. They are solely focused on organising your accounting paperworks and tax filings. But if you get more hands on deck, your in-house team can have more time to focus on higher-level tasks, which in turn, adds value to your operations. Let the outsourced team do the legwork for you so you can work on what you do best.
How to start outsourcing
To get started in outsourcing, assess your business’ F&A needs. Do you have enough resources to begin the engagement? What support does your team need? Will it be full-time or part-time?
After identifying these requirements, you can shortlist your partner firm among the roster of finance and accounting outsourcing companies available in the market. Make sure to find one that will serve you and the company’s F&A needs well.
Outsourcing your finance and accounting functions increases the quality of desired output. Companies like D&V Philippines have quality assurance and feedback and escalation mechanisms to address your issues and guarantee that work is done with utmost accuracy.
When done with the right partner, finance and accounting outsourcing can definitely help your company grow with the benefits that it presents. It gives you more ways to reach your goals and take your company to the next level.
Looking for an outsourcing partner? Download our latest whitepaper D&V Philippines’ Solutions for Modern Accounting Firms to know how we can build a great back-office support for your organisation. You can talk to our experts at D&V Philippines today.
This post was first published 17 July 2015 and edited 13 August 2021.
Edited by: Maria Katrina dela Cruz