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We teamed up with the renowned CPA exam mentor and founder of CPA Exam Guide, Bryan Kesler, to write this awesome article about outsourcing your business accounting. We obviously couldn’t agree more, so we wanted to share his expertise on the topic!
One of the most critical operational aspects of any business is a transparent and efficient accounting system. However, many business owners are not equipped with the necessary skills or acumen to perform the accounting function for their business. A lack of time and mindspace can prevent them from regularly updating their accounts, even if their business is thriving.
Businesses outsource all kinds of functions, and the outsourcing market amounted to $92.5 billion in 2019. Advances in technology and innovation in the accounting domain have made outsourcing the complete accounting function possible. The best part is that it can be a cost-effective, easy-to-access, high-trust experience as long as you partner with the right platform.
Here are eight key reasons to consider outsourcing the accounting function, so you can focus on what you do best – build your business and brand.
It seems pretty basic, but many businesses have no idea if they are profitable. This makes it difficult for owners to make smart decisions that benefit the business. For instance, securing a small business loan, investing in new areas of development, and building an emergency fund will be difficult if you are unclear about your numbers.
Your accounting partner will keep your books up-to-date and empower you to make intelligent decisions faster. They will also advise you on how to best manage cash flows and streamline your financial processes.
If you aren’t an accounting wizard, it is best to outsource this function because it frees your precious time to focus on building your core business. Pouring over the books while trying to learn the ropes of accounting from scratch is a poor usage of time.
You may also miss out on other core functions such as product management, marketing, and community building. Secondly, bookkeeping is merely one aspect of accounting.
At the end of it, the work may be riddled with errors, and you will miss out on other core accounting functions. Sometimes genuine errors can result in scrutiny by the IRS, and this can result in them initiating an audit, which once again leads to more investment of time and energy. Having a reliable, efficient accounting partner can ensure that all your books are in order.
Hiring a full-time in-house resource or setting up an accounting department comes at a high cost. Hiring and training and offering employee benefits contribute to the overall investment. If key members leave, the cycle starts all over.
Partnering with an accounting platform translates into significant savings in terms of human resources. Some businesses make the mistake of hiring freshers to save on costs or offer an internship to accountancy students. However, this could cost them dearly as a lack of experience and credentials could jeopardize their company’s functioning.
Every business can avail of multiple tax deductions based on their business identity. However, most business owners are unaware of these benefits and how to leverage tax credits. Hence, they lose out on simple ways to save on taxes.
Secondly, the tax rules for businesses keep changing, and sometimes it is hard to keep track. Your outsourced accounting partner will be an expert in this area. They will be keeping a tab on all changes and will pass on this benefit to you.
Secondly, they are also in a position to advise you on the basics. For instance, if you should register as a C-Corp or S-Corp and the pros and cons of both.
When accounting is an unmonitored function, there’s always room for human error or fraudulent practices to prevail. At a large corporation, you have CFOs who are accountable for the business’s financial health. However, not every company can afford to hire a full-time CFO, who often comes with a CPA credential.
Getting a credible accounting partner on board will ensure that this function will proceed without any scope for mismanagement and liability, which can cost companies millions of dollars. You could be sued by clients, chased by the revenue services, and even shut down due to fraudulent practices. Ensuring basic accountability to all stakeholders in the business is key to building a sustainable business.
Bookkeeping and saving on taxes are merely two aspects of accounting. Accounting partners also provide other services that are core to the financial wellness of any business. These additional services include keeping track of accounts payable, accounts receivable, CFO services, audit support, and financial risk advisory.
Understand what services your business can benefit from, and then explore the various packages offered by your outsourcing partner. Find one that best suits your business needs and budget.
Traditionally accounting has been associated with a lot of physical paper – from receipts and invoices to faxes and letters. However, accounting platforms these days leverage technology to ensure that your accounts are all neatly saved on the cloud and accessible on the go.
Typically, accounting partners tend to leverage various softwares to make things seamless for their business clients. For instance, earlier invoice information that has to be manually uploaded. However, nowadays, scanners are available to do the work. You can say goodbye to messy paperwork and clutter in your office space.
A structured reporting process is a key benefit of outsourcing your accounting needs. By partnering with an efficient partner, you will get access to accounting reports in simple, easy-to-understand segments, sans the jargon.
They will help you make business decisions quickly and efficiently. For instance, you can understand if you should invest your profits back into the business, take a business loan or put profits towards clearing all accounts payable.
Ensure that you only outsource to a business headed by a CPA (Certified Public Accountant). Only a small percentage of accountants worldwide succeed in gaining the CPA certification because completing it takes knowledge, skills, networks, and a high degree of trust. Check that the platform is transparent about its approach, has a focus reporting strategy, and makes the whole process jargon-free. If all boxes are checked, you’re in good hands.
About the Author:
Bryan Kesler is a renowned CPA exam mentor and founder of CPA Exam Guide. He aims to provide affordable mentoring and tutoring solutions to smart accountants to pass the CPA exam. You can connect with Bryan on Linkedin and follow him on Twitter.
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