Written by Lidka Scott
Many companies outsource their accounting function to access expertise, gain efficiency, and save costs. The decision is also taken to manage scale as many small businesses do not have sufficient volume that requires an accountant for 40 hours per week to handle the company’s affairs. Having full-time staff for less than full-time work leads to inefficiencies and high overheads.
An accountant is a key and trusted part of the company; significant knowledge is reposed in that individual, knowledge which walks out the door if that person ever chooses to leave the organization. Outsourcing helps to mitigate the turnover risk as the knowledge is reposed in the outsourced company who is contractually obliged to ensure continuity of operations in the event a member of staff departs.
With in-house staff, a small business usually allocates space, computer resources, printers, software and sometimes training to ensure that person has what they need to do their job. They must also provide health cover, pension benefits, vacation, sick leave, and other benefits in accordance with the Labour Act. These overhead costs are sometimes not calculated when making a comparison between in-house provision and the outsource option; however, they can be significant.
When a small business hires an individual, the extent of the benefit is the knowledge and experience that individual has. When you hire a company, you gain access to a breadth of expertise in several areas from a team of professionals encompassing decades of experience in multiple industries. This enables a small business owner to discuss ideas, business challenges and scenarios with the benefit of confidentiality and experienced objective advice.
Your accounting support function should grow and scale with you. An adage in business is that if you are not growing you are dying. Outsourcing provides a solution that is agile and can flex with the needs of the business as it grows, and as its requirements become more complex. This gives the business owner confidence and the ability to focus on growing the business knowing the back-office support and functionality is taken care of.
Many business owners know that proceeds from sales are deposited, bills are paid, and the doors are locked at night. But if you ask how the business performed last month, how many years of useful life is left in machinery or equipment before a replacement is needed, or what the cash projection is for the end of the year, many would struggle to come up with an answer. That is because over time, inhouse staff become transactional fire fighters, they make sure the business stays afloat but cannot find time to provide the strategic support to the owner through monthly reporting that explains performance, position, and projections. Under an outsource arrangement, monthly reporting is a key deliverable of the contract, the owner can therefore not only remain compliant with reporting requirements for key stakeholders (banks, partners, shareholders etc.), but will keep their fingers on the pulse of the company spotting key opportunities for growth and or cost savings.
Business owners sometimes face circumstance where they need to meet with other professionals to make a pitch for a potential new client, financing, meet with a major vendor etc. you need a professional beside you who understands your business and will represent you and your company in the best light. Outsourcing provides you access to a team of individuals who can support you in these forums and ensure you and your business are shown in the best light. In other words, you get people!
Written by Lidka Scott