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Outsourcing Your Accounting
There's a lot of hoopla these days about Business Process Outsourcing (or BPO). In case you haven't heard, this is a new kind of outsourcing that doesn't involve sending jobs to India. Instead, the idea is that any company (large or small) can save time and money by outsourcing non-core functions like HR, IT or accounting to outside firms. The basic idea is that, thanks to the internet, you can now hire a company to do these jobs better than you can yourself, enabling you to focus on other areas of your business (sales, product development, etc.). Sounds like a great idea in theory. The question is: does it work in real life?
The primary challenge with any type of outsourcing is figuring out how to hand off the non-essential functions (i.e. the ones that don't add any value to your company) while maintaining control over the important ones (namely, oversight and decision-making). This is particularly true when it comes to accounting, which is not as easy to outsource as stand-alone functions like HR or IT. If you are considering outsourcing, here are four factors that will help you decide whether your company is a good candidate for this strategy.
Ideal Customers for Outsourced Accounting
Based on our experience, ideal customers for outsourcing have the following five characteristics:
1) Straightforward accounting. If your company's accounting processes are relatively straightforward, then outsourcing is a viable strategy. If your accounting is complex and intertwined with your business (for example, companies that sell financial services), then you should probably handle it yourself.
2) Companies who are at an "in between" stage. The best candidates for outsourcing are growing companies who are at what we call an in-between stage: big enough to need full-strength accounting, yet too small to build their own accounting department or hire a full-time CFO. Intead, what they really need is CFO-type expertise, but on a limited (i.e. part-time) basis.
3) Interested in online accounting. Most outsourcing arrangements use online accounting systems (QuickBooks Online, Intacct, NetSuite), which allow customers and their accountants to have joint access to the company's records. Long story short, the best candidates for online accounting are small to medium-sized companies who are ready to upgrade to a new accounting system but don't want to make a large investment in hardware/software. (For more info., see this post: The Pros and Cons of Online Accounting).
4) Owner(s) want to manage the forest (not the trees). This may be the most important characteristic of all. Strategically, outsourcing is often chosen by business owners who want to maintain oversight of the company's finances but do not want to manage all the day-to-day stuff. Therefore, they are willing to hire an outside firm to help handle the company's accounting operations (in essence, a trusted vendor). Their role then becomes working closely with the vendor and staying involved with key decision-making (i.e. forest, not trees).
Posted by
at 10:49 PM November 6, 2004
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