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If you are a small business owner, then there is no doubt you understand the vital importance of keeping accurate financial records. From fraud prevention to cash flow analysis, there are so many reasons why accounting’s role in day to day business operations is so crucial to the ultimate success of the company.
One decision that many entrepreneurs have to face is whether to outsource their accounting needs or manage them in-house. After weighing all the factors, many companies have decided to enlist outside assistance.
The following information details some pros and cons of outsourcing to an accounting firm:
- Expertise. Dedicated accounting firms generally offer a higher level of experience and expertise than in-house employees can provide. For instance, professional accountants are familiar with all the standardized techniques of double-entry bookkeeping, which gives small businesses an extra layer of protection against fraud, embezzlement, or inconsistent record-keeping. In short, outsourced accounting often results in fewer mistakes and higher efficiency.
- Comprehensive analysis. Small business owners that outsource their accounting needs to a firm of specialists often receive the benefit of thorough financial analysis from their partner’s team of experts. An experienced accountant can examine a client’s books for cash flow inefficiencies, nascent financial trends, and other important performance markers. Subsequently, the accountant can compile his/her findings into a detailed report that will help the business owner make sound decisions moving forward.
- Cost-effectiveness. In many cases, an outsourced accounting service is less expensive than retaining a dedicated employee, or even a dedicated staff, for in-house bookkeeping. One reason for this is the lack of “hidden costs” frequently associated with maintaining a team of full-time employees: e.g., sick pay, vacation pay, benefits, taxes, etc.
- Scalability. An outsourced solution offers small businesses a high degree of flexibility with regards to the fulfillment of current needs. For instance, during tax season a company may require a large volume of assistance from its accountant partners, whereas during the summer these needs are significantly lessened. An outsourced solution allows a company to scale back and ramp up accounting services as needed, instead of retaining year-round staff members.
- Focus. When small business owners outsource their accounting needs to a 3rd party provider, they free themselves up to focus on core competencies, such as product development and distribution, marketing, and so forth. In the long run, this often results in higher profit margins and increased sustainability.
- Reduced communication. Many small business owners struggle at keeping the lines of communication open between them and the 3rd party accounting firm. Whereas communication is simple and straightforward when dealing with employees in the same office, at times there may be a disconnect when working with business partners on the outside.
- Lack of control. Highly motivated, self-starting entrepreneurs are typically accustomed to enjoying total control over their business endeavors. Thus, voluntarily delegating a measure of authority to an outsourced accounting firm may require a significant change in mindset. In many instances, this is the number one reason why a small business owner hesitates to entrust his/her accounting needs into the hands of an outside partner.
Fortunately, both of these potential drawbacks can be avoided if you choose the right accounting firm for the job. For instance, Cavanaugh & Co has been an industry leader in outsourced accounting since 1974. Since our establishment, we have dedicated ourselves to delivering high-quality work and tailor-made guidance to each and every one of our clients. We work hard to develop and maintain sustainable relationships that drive business growth; and we believe that strong, open communication is a key component of any solid partnership.
With locations in Sarasota and Venice, FL, we are community-oriented accounting experts that take pride in our work. If you’d like to learn more about how we can help you with your accounting needs, reach out to us today.