9 Mistakes to Avoid in Outsourcing Accounting Services
Although accounting is a crucial part of every business, it is often not the main focus of most firms. However, with outsourced support, your accounting and finance department may contribute to the expansion and cost-cutting that your company needs to succeed. With outsourcing, you have access to a global talent pool and find the best candidates. However, it can also bring about a number of issues if you do not consider essential factors and decide hastily. As a financial officer or business owner, here are some mistakes to avoid in outsourcing accounting functions.
Vague Outsourcing Goals
The first and most typical error is failing to define your company’s needs and how outsourcing accounting can assist you. You should know your goal. Is it to save costs, access specialised services, or save time on labour-intensive accounting tasks like bookkeeping? You might not achieve the expected outcomes if you outsource accounting services without a strategy in place and only to get services at a lesser cost.
You should also choose whether to hire an accounting firm to handle an entire accounting function, such as payroll and bookkeeping, or just a single service, such as accounts payable and receivable. For instance, you can get professional service at a cheaper cost by outsourcing a single procedure rather than paying more to hire the same talent in-house. In addition, outsourcing the entire accounting process can free up your own team to concentrate more on other important business functions. Remember, the accounting services you must avail of should depend on the company’s goals.
There may be firms that may pressure you for services that your firm does not really need, especially if you are new to business process outsourcing. The financial officer or the business owner knows what is best for the company. You may want to choose an outsourcing company that listens to client requirements and caters to your needs by crafting a solution that exactly meets your outsourcing goals. And if ever you find yourself uncomfortable with an arrangement, you do not need to force yourself into agreeing with the terms. Even if they provide accounting solutions that address your concerns, if you find them using unknown software or signing up for anything that is not beneficial to your company, it would be best to look for another accounting service.
Uncareful Scrutiny of Outsourcing Company
Follow the screening process to assess an outsourcing company thoroughly, even if their profile looks promising or you receive a referral from a close friend. It is best to ensure you share your confidential data with a trustworthy company. To start, submit a written interview via email. You may arrange for a voice conversation once you are satisfied that it can meet your accounting needs. You may ask for the following information:
- The total number of outsourced accountants in their team and how many will be servicing your company
- Policies, procedures, and contingency plan for employee attrition
- Experience in the industry and their grasp of the nuances of your company’s domain
- Type of technology or software to use
- Explanation of how to ensure the accuracy of financial statements
Lastly, you may want to arrange a video interview to learn more about their work setup, culture, systems, and procedures.
Settling for Low-Cost Solutions
Saving costs is an objective of outsourcing for any scale of business – big or small. However, it is not a guarantee that you will get good service for less money. If you consider cost the only criterion in hiring an accounting firm or resorting to a freelancer to save money, it may jeopardise your company’s accounting outputs. Their service may be subpar, and your operations may get delayed due to repetitive work outputs. Some price advertisements, at times, do not live up to expectations and may incur additional fees and hidden costs. So, it would be best to opt for a reputable outsourcing firm that offers multiple and customised services, even if it means disbursing more.
Outsourcing the Most Complex Accounting Work
Outsourcing the most complex work without testing the waters is not a smart move. It might bring your entire accounting process to a halt. You may want to begin by outsourcing more standardised, procedure-directed, and laborious operations. By doing this, you can optimise the general processes before proceeding to more complicated tasks.
Trivialise Cultural Fit
As a financial officer or business owner, you may prioritise technical capabilities over people (soft) skills. While the former is essential, your outsourced firm should quickly conform and adapt to your company’s core values and processes because it reflects as your brand extension. Consider the essence of cultural fit in choosing an accounting firm in Singapore so that you select one that sees the value you are hiring them for. How they treat their people, and other clients will help you figure out if the outsourced company is a good fit for your business. So, try to find out if it has many long-term clients or a low turnover rate. These are indicators of cultural harmony and quality.
Expectations Not Properly Communicated
It would help if you communicated your expectations properly before closing the deal. Have them legalised through a textual BPO agreement. You may want to stipulate the following:
- Mode and frequency of communication
- Frequency of reconciling accounting books
- Approach to issues on accounting services
- Number of hours per day the outsourced accountants manage your account
- Protocols for security breaches and power/internet outages
Not Keeping in Touch With Outsourced Accounting Team
You must check in regularly to know their work progress and address early issues. It also helps them to get the work done according to your style. You can also redirect them to conform to your core values and vision in case they deviate.
Absence of Standardised Systems and Performance Metrics
Standardised workflows and setting up performance indicators can help you measure the performance of the outsourced accounting team and identify their shortcomings. You will be knowledgeable of how they function and take data-driven actions. There are numerous productivity management and performance enhancement tools out there that you can use.
One outsourcing mistake can significantly affect your company’s reputation and goodwill. Do not get carried away easily by the idea of outsourcing and make uninformed decisions. By being aware of the accounting outsourcing mistakes you could commit as a financial officer or a business owner, you can save your company from incurring irreversible losses and achieve the accounting service your business needs.