Find balance when outsourcing accounting services, say experts

For business owners, outsourcing frees up time to focus on a business’s core elements, including competitive differentiation, restructuring and transformation (Getty Images/filadendron)

Once mainly the practice of big businesses with large budgets, outsourcing accounting services has become mainstream, with organizations that do so performing better, according to statistics.   

A 2018 Client Accounting Services (CAS) survey—conducted by Bill.com and CPA.com, which interviewed 1,700 small- and medium-sized firms (SMEs)—found that companies that outsourced their accounting services reported increased profits (28 per cent) and revenue (23 per cent). This compared to 16 per cent and 14 per cent, respectively, of companies that did not outsource.

The advantages extend beyond dollars. From that same study, 80 per cent of respondents said they had more time to focus on business, 68 per cent said their accounting was made easier and more efficient and 53 per cent worried less about errors.

The trick is assessing whether financial and accounting outsourcing (FAO) is the right move. It’s a balancing act, say experts, particularly with businesses that want to maintain control, while taking advantage of expertise and technology without heavy investment.

Here are some things to consider before committing to FAO.

1) WHAT TO OUTSOURCE

According to the Bill.com survey, the top services outsourced are accounts payable, accounts receivable, general ledger management, payroll and financial statement preparation. 

This, however, is evolving with data analytics, strategic planning and business advisory amongst other services being taken on by external vendors, indicates CPA Canada’s guideline Finance and Accounting Outsourcing, Assessing and Planning for Success. 

Deciphering what services to siphon off, and what to keep hold of, will depend on the business and clients served. For example, Mark Gervase, director of product marketing at Bill.com, points out, some businesses are comfortable farming out the transaction- and compliance-based services including bookkeeping, payroll, audit and tax preparation, but hesitate to let go of more strategic activities including analytics, mergers and acquisitions or succession planning. 

“Things that involve a lot of sophisticated planning, scenarios, sometimes they [companies] feel that that is something they need to own,” says Gervase. “It’s that feeling of control, that peace of mind from keeping things in house…that takes precedence.”

2) THE RIGHT VENDOR

The relationship between vendor and client is paramount for aligning your business approach, communication style and fostering trust.

Relinquishing control of financials isn’t easy, and dependent on the business, its industry, size and culture, can take an attitude shift. This is particularly true for those that are family run, have a tight knit culture, or with a sole proprietor, says Anna Abbruzzese, founder and president of Actium Consulting Inc. 

“People are nervous and hesitant to put their financial records out there, which I don’t blame them. It’s a lot of private, important information,” she says. “It’s a bit of a misunderstanding that somebody has to be there, on site, to understand your business well. It’s getting past that with business owners.” 

A hybrid FAO model, as the CPA Canada guideline describes, whereby finance and accounting services are shared and managed between vendor and client can be a solution, meeting client objectives, while they maintain some control.

Whatever the deal, Gervase says, vendors must understand a client’s needs and adapt accordingly, while clients may need to shift how they do business based on the partnership’s terms. 

“Firms really need to communicate the way their clients want to communicate,” he says. “Firms need to be responsive to that and business owners need to make sure the firm will accommodate their communications preferences and style.”

3) TECHNOLOGY ADVANCES 

According to the Deloitte 2018 Global Outsourcing survey—which interviewed more than 500 executives from leading organizations—companies aren’t shying away from cloud technology, with 93 per cent of respondents considering adopting solutions, and many incorporating it into strategies to stay competitive. 

From an FAO perspective, perceptions are similar. For SMEs, outsourcing accounting services gives them access to the most innovative technology without heavy investment. Risk areas where caution is exercised include data security, performance and resilience, law and regulation compliance. Appropriate risk mitigation techniques for cloud computing should be applied to minimize such risks.

“[With] this new trend of cloud accounting, technology became more prevalent, more reliable and less expensive,” says Gervase. “All of a sudden you could afford to do this as a business and you could afford to do this as an accounting firm given these tools.”

Abbruzzese also emphasizes streamlined production and reduction in errors as distinct advantages to using automation tools such as Robotics Process Automation (RPA). 

“Everything now can be complied and reported on significantly faster than in the past because we have immediate access to information,” she says. 

4) FOCUS ON BUSINESS

Beyond technology, comes access to expertise. It’s another hefty investment if kept in house, says Gervase. 

“It’s the ability to have expertise on-demand, and technology-enabled buyers and sellers of expertise on-demand, who can do this affordably,” he says. 

For business owners, outsourcing also frees up time to focus on a business’s core elements, including competitive differentiation, restructuring and transformation, points out the CPA Canada guideline.

“Most of the time, as their business grows, their time is more valuable doing other things,” says Abbruzzese. “We always say focus on what you do best, and we will be your backend to assist you.”

Another key advantage to outsourcing is flexibility, Abbruzzese adds. As the CPA Canada guideline points out, organizations can scale services or operations up and down, and expand geographically, with ease. 

“Whether they are looking to grow their business, or cut down on spending, they could have a team there with different plans and options to help achieve those goals,” Abbruzzese says.   

PUT TO PRACTICE

Considering FAO? Check out CPA Canada’s Finance and Accounting Outsourcing – Assessing and Planning for Success guideline for further insights into outsourcing best practices.