Outsourced accounting non-core activities has long been a strategy of businesses grappling with getting the best possible service for the best price. Outsource service providers have the advantage of economies of scale when gearing up there service offering, which are not necessarily available to an enterprise, purely based on the size of the enterprise and the utilisation of resources.

If one considers taxation as the prime example, many corporations would not be in a position to employ a full time tax expert, and the tax expert would be under-utilized. Yet the benefits of having a tax expert at your disposal are paramount. Decisions on how to acquire assets, financing options and a host of other day to day business decisions, greatly affects the tax burden of an enterprise. Clearly then, having an expert on hand to strategically guide the corporation on important bottom line decisions is obvious.

Taxation is just one component of the effective financial management of a corporation, and even a tax expert needs the whole picture. A good tax strategy is guided by good information, and good information is the result of well implemented and well managed accounting practices. Depending on the size of the corporation, financial management may entail multi-disciplines, and multiple roles. Besides the obvious day to day bookkeeping functions, dealing with debtors, creditors, petty cash, the accounting systems and functions include strategic financial management.

Balance Sheet management, managing gearing and stock levels and other important financial data are many aspects that the small to medium enterprise neglects, purely because they cannot justify the cost of having to employ the necessary qualified resources. Important management functions are then neglected, and ultimately the enterprise suffers as a result of not fulfilling basic financial management disciplines.

Cloud Accounting and its impact on Outsourced Accounting

Cloud accounting software is accounting software that is hosted on remote servers. It provides accounting capabilities to businesses, and has evolved dramatically over the last number of years. The accounting functionality available on many cloud accounting applications can be compared to more sophisticated self-hosted software. The big advantage is you generally ‘pay as you go’ and avoid the upfront cost of having to purchase expensive software.
Data is sent into “the cloud,” where it is processed and returned to the user. All application functions are performed off-site, not on the user’s desktop.

In cloud computing, users access software applications remotely through the Internet or other networks via a cloud application service provider. Using cloud computing accounting software frees the business from having to install and maintain software on individual desktop computers. It also allows employees in remote or branch offices to access the same data and the same version of the software.

Many of the forward thinking accountants, who offer outsourced accounting services, are encouraging clients to migrate to cloud accounting packages, as it solves numerous logistical issues, and allows the accountant to have a hand on view of the business’ activities. When the accountant has access to the data directly from the internet, the ability to analyse and detect issues is greatly enhanced.

Cloud accounting has certainly made the options and benefits of outsourced accounting and financial management functions both practical and appealing. Having a ‘pool’ of multi-disciplined experts available, who have direct access to the accounting records gives the business owner a strategic advantage. The primary advantage has to be in effectively acquiring a business partner, qualified in a discipline that is fundamental to an enterprises’ success. Good strategic decisions, ably assisted by a qualified business partner, probably in many instances generate more benefits than the cost of the outsourced accounting and financial management functions.

David Ogilvy, widely revered as a founding father of modern advertising (and founder of one of its most famous agencies), is credited with the following:

“Most entrepreneurs are so focused on their core business, they neglect the important functions, often leading to a good business not surviving. Outsourcing assists entrepreneurs in getting the very best, without having to go through the process of recruiting, hiring and managing.”

There are of course numerous other reasons an enterprise should consider outsourcing non-core activities.
There are certain (cliché-ridden) phrases, such as cost reduction, improved process, access to best talent resource, focus on core competencies and faster turnaround time which essentially drives industries to consider outsourcing business functions.

1. Cost reduction
Many enterprises believe that if they had externalized accounting processes in early stage of their business, they would probably have reduced operating costs and improved business productivity levels significantly. There is also strong evidence that had they utilized an outsourced accounting partner from the outset, they would have made better decisions on balance sheet structuring, and would have less of a tax burden

2. Efficiency-driven Results
Due to increasingly tough outsourcing markets worldwide, outsourcing accounting companies face the pressing need to adopt latest technologies and client-satisfaction-centric business strategies. With this in mind, enterprises can expect efficiency-driven results for their outsourced projects, as vendors can’t afford the risk of losing clients by providing substandard services.

3. Access to Best Talent Pool
Without a doubt, if you outsource your accounting to a vendor, you invariably get an access to vast talent reservoir, effective and useful for your business to scale up. Start-up, small and medium size organizations should make a cost-efficient business strategy involving the outsourcing of there accounting process

4. Faster Turnaround Time
Outsourcing accounting, ultimately leads to a better quality service within the deadline, thus helping it many ways. A client gets service within the deadline as its outsourcing partner has all requisite resources essential to streamline client specified accounting process, with faster turnaround time.

5. Focus on Core Competencies
When a client outsources accounting process, it actually gets relieved from the tension of concentrating on that particular project. Businesses benefit by having the time to actually focus on its core competencies.

6. Cost Savings
Accounting processes are complicated and staffing an entire account department with new workforce will involve budget-draining recruitment and training processes. To avoid this, an organization outsources the entire or part of the whole accounting function to save considerable amount on operating costs.

You might also be interested in

How to calculate Markup percentage

How to calculate Markup percentage

Markup is the difference between a product’s selling price and its cost. It is typically expressed as a percentage of the cost, known as markup percentage. To calculate markup percentage, divide the difference between the selling price and cost by the cost. This will...

read more
How much do payroll companies charge?

How much do payroll companies charge?

Payroll is one of the most complex accounting tasks faced by companies. Even a small company with just a few employees faces tightly regulated payroll processes. The labour law regulations, SARS and other statutory requirements associated with payroll can become a...

read more

Erasmus Pretorius

With over 23 years of unwavering expertise, I am a seasoned Chartered Accountant committed to financial excellence. My journey in the realm of finance has been marked by astute strategic insights, meticulous attention to detail, and an unyielding dedication to precision. Over the years, I’ve navigated the complexities of financial landscapes, providing invaluable counsel to diverse clients. My proficiency extends across auditing, taxation, and financial management, coupled with a profound understanding of regulatory frameworks. As a registered professional, I have consistently upheld the highest standards of integrity and ethics, earning a reputation as a trusted advisor in the dynamic world of finance.