Accounting and bookkeeping are the most crucial fragments of any business organization. It gives them an exact idea of the status of their operational and financial activities in the past financial years.
The process of recording every financial transaction of the business in the accounting system or journals and creating reports is called bookkeeping. As the modern world is shifting more towards online, more companies are adapting to the idea of outsourcing their accounting and bookkeeping needs instead of maintaining an in-house accounting division.
If you are a business owner and thinking about opting for outsourced bookkeeping accounting or in-house services, this blog is for you.
What is Outsourced Bookkeeping?
Outsource bookkeeping refers to the process of hiring a third party (a person or company) to carry out your organization’s accounting and financial functions on a contractual or pay per-project basis. You can outsource almost every economic function such as bookkeeping, payroll, tax management, creation of annual financial reports, etc.
Outsource bookkeeping can be cost-effective and provide the different levels of expertise all at one place. At the same time, you’ll have to maintain a workforce of varying expertise to get the things done for in-house accounting.
Outsourcing Vs. In-House Bookkeeping Practices:
Hiring and Training:
With in-house bookkeeping, you need to put effort into looking for qualified accountants with past working experience and then train them for your organization’s system and procedures.
On the contrary, when talking about outsourced bookkeeping services, you get a team of specialized accountants who hold a proven track record of working with different clients. It saves your organization time and resources for more productive use.
Risk of Fraud:
When you have an in-house accountant who is solely responsible for handling all your financial records, then you are more likely at the risk of getting fraud. The reason is the expanse of internal control and information they hold of your company. They can easily tamper with the bills and reconcile your bank statements. The solution is to have a different person performing different duties and responsibilities, but it’s not possible in in-house bookkeeping.
Whereas the outsourced accounting service is performed by a team of accountants who are responsible for different duties, and every work gets reviewed by a second set of eyes. Hence this reduces the risk of getting fraud.
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Cost and Expenses:
For small and medium-sized organizations having an in-house accounting department can be costly. You’ll have to maintain a workforce at a monthly salary, pay for their medical insurance, etc. Apart from these, you’ll have to spend on their office and training costs.
On the other hand, Outsourced bookkeeping services free you from the obligation of maintaining monthly expenses of salary and overhead costs. The advantage of outsourcing is that you will have to pay only for the services you utilize. It helps you to save money and use it for your business expansion.
Quality and Productivity of Work:
With the handful of accountants, there is an immense workload on the in-house accounting department, which also affects the quality and productivity of their work. So you’ll have to invest in regular training programs to keep your bookkeepers and accountants up to date.
Outsourced accounting and bookkeeping service providers keep their team of accountants upgraded with current norms. Also, they have experts for different work domains, which gives you an array of expertise under one roof.
Should you Outsource Bookkeeping?
Whether you should choose in-house or outsourced bookkeeping for your business is totally dependent on your organization’s goals and needs. With the concept of remote working being broadly accepted now, more small businesses are open to adapting outsourced services.
You should Choose to Outsource Bookkeeping Services if you are a:
- Small Scale Business: Small businesses do not require to maintain a permanent accountant as an employee. They need someone with the accounting skills to manage their transaction, and hence outsourcing can be a cost-effective option for them.
- A company at a developing stage: A company at the development stage needs finances to invest in its expansion. With its outsourced accounting needs, it can focus its resources on other essential affairs.
- Organizations with the need for temporary services: Sometimes, even after having an in-house accountant, organizations require to have an expert consultation or services. In cases like this, outsourcing the bookkeeping and accounting services is the best option for your company as you pay for only and only the service you require.
Benefits of Outsourcing Bookkeeping:
- Cost-Effective: Hiring a third-party outsourced bookkeeping service is much more efficient than hiring a full-time employee for it. You need to pay for only the services you require at the moment.
- Expert Access: With outsourcing, you get to have services from the top industry experts at affordable service charges. An outsourced accounting firm has to keep its team up to date and has to continuously prove its level of professionalism to its clients, which assures you of quality work.
- Access to the latest tools and technology: With your accounting needs being outsourced, you will get access to their latest accounting tools and automation systems. This scenario reduces your need to invest in such dedicated software and provides you with ease of working and a lower risk of fraud.
Accounting bookkeeping service is a complex process that requires a certain level of skills and expertise. However, choosing whether you need in-house or outsourced accounting and bookkeeping services is a matter of your organization’s requirements and needs.
However, it can be said that outsourced bookkeeping services have some added advantages over the traditional bookkeeping methods.