The global business process outsourcing market worth is projected to reach an all-time high of $405.6 billion by 2027. That’s an unfathomable amount of money directed towards outsourcing services. It’s also a good indication that many businesses choose to outsource one or more of their business processes to an outside entity from their own.
So if you’re considering outsourcing the bookkeeping or accounting services of your small business, take a look at what you need to know down below before making a decision.
What is Outsourcing?
Simply put, outsourcing is the action of one company hiring another company to perform its specific internal services. When you consider external accounting or bookkeeping services, you want to hire an outside service to fulfill all of your small business accounting and finance responsibilities.
Benefits of Outsourcing Your Accounting
There are many reasons companies choose to hire external services for their internal practices. The benefits of accounting outsourcing for your small business include the following:
- Saves your Company Money: Outsourcing could be the most cost-effective way of covering all accounting responsibilities without having to hire a full-time employee. A professional accountant knows the ins and outs of the financial system, meaning they could also find more tax breaks and save you more money in the long run.
- Saves you Time and Resources: As the owner of your small business, your time is invaluable. It could be better spent on other aspects of the company without worrying about getting financial documents in order.
- You’ll have an Expert at Your Disposal: Hiring an experienced accountant or firm to take over your company’s finances means you have extensive knowledge and expertise working for your business’s best interest.
- A Professional will Streamline the Service for You: Where it could take you weeks of stressful planning to put together a financial report, an expert could do it in days.
- Things are Less Likely to Fall Through the Cracks: If you are pulled every which way, looking after every department in your business, you could miss important deadlines. Having one set of eyes, and a focused brain on the project will ensure a higher standard of work with lower financial risks.
What a Bookkeeper Does for Your Business
A bookkeeper helps with the day-to-day financial activities for your business to free up more of your time. It’s always a good idea to oversee the activities and check in with your bookkeeper through regular updates and reports. But letting a bookkeeper do the actual work is usually more efficient and lets you focus on handling your business.
What does a bookkeeper do? A good one does more than just input your monthly expenses and income, although that’s certainly an important aspect of the job. Your bookkeeper should be your part-time partner and keep you up to date, providing most if not all of the following:
- Accounts payable
- Accounts receivable
- Bill payment
- Detailed general ledgers
- Payroll and check registers
- Bank reconciliation
- Financial statements
- Customized reports
- Budget preparation
- Business and workers’ compensation insurance
- Employee health insurance
- Payroll services
- Payroll cheque writing
- Payroll tax returns
- Monthly, quarterly and annual payroll reports
- Federal, provincial and local tax reports and filings
- Business tax returns and tax planning
- Income tax returns
- Tax representation in the event of an audit
Many of these capabilities overlap with what your accountant does, although the bookkeeper provides your financial foundation. Much of the bookkeeper’s work feeds into a larger, comprehensive accounting function that your accountant completes – the most important part are your corporate and personal taxes.
When Should You Consider Hiring External Services?
The first question you have to ask yourself is whether outsourcing your accounting needs realistically works for your business. Hiring a large accounting firm to cover the full service of all accounts can take a considerable hit from your small company’s net profits. However, it still could when hiring an in-house, full-time employee.
Therefore, considering cost efficiency and the standard accounting or bookkeeping fees of these services is a vital aspect of when to outsource. If you’re losing money on this service, it could be in your best interest to pass on external hiring. However, if you can find accounting or bookkeeping services that can save you time, stress, and overall resources, it could be a perfect fit.
What An Accountant Does for Your Business
You might think a bookkeeper and an accountant are one and the same. They’re not. You usually need an accountant for less time than a bookkeeper, but when you do need one, they’re invaluable. An accountant is an important resource, not only at tax time but also for regular financial planning and forecasting. While most small businesses don’t need to hire an accounting professional full time, that doesn’t mean you should do it yourself.
Accountants help you through your quarterly tax requirements and annual tax filing. A bookkeeper isn’t qualified and shouldn’t do that for you. Instead, a bookkeeper should track everything in a program like QuickBooks to hand over to your accountant when the time comes. Most of your bookkeeping reports provide crucial information that your accountant uses to perform your annual corporate and personal taxes.
Some specific things your accountant should do on your behalf include:
- Examine all financial statements from your bookkeeper to ensure accuracy
- Ensure financial statements and records comply with local and federal laws and regulations
- Compute taxes owed and prepare your final tax returns
- Inspect your account books and accounting systems biannually or more frequently
- Organize and maintain financial records, in addition to what your bookkeeper does
- Improve businesses efficiency where money is concerned, such as advising you on large corporate purchases, pointing out shortfalls in your business cycle earnings, and assisting with corporate financial planning
- Advise you on ways to reduce costs, enhance revenues, and improve profits
- Provide auditing services for your business when necessary
- Offer guidance on long-term financial projections
- Help you with any new tax laws or changes to existing ones.
How do you Find the Right Accounting Services?
If you choose to outsource your small business accounting, then there are a few things you should consider before handing over critical financial statements to an outside entity. First, you have to find an individual or firm that can provide you with the expertise and knowledge you need, and they must also be trustworthy.
The Chartered Professional Accountants of Canada is the governing body of accountancy in the country. This organization offers a list of provincial and regional accounting bodies for individuals and businesses, which can help you find reputable accountants through their provincial websites. Each region provides lists of directories of CPA members in good standing, of firms registered to the organization in good standing, and individuals who hold public accounting licenses entitled to practice public accounting.
Which accounting package is best for a small business?
The financial service packages you can hire out will depend upon the entity you are working with. It is best to research the individual accountants and bookkeeping services offered around you, with those provided by small, medium, and large accounting firms. Typically, outsourced services provide full coverage of all accounting and financial services for the company.
Why Choose to do Your Own Small Business Accounting
Suppose you have decided against outsourced accounting and have opted to tackle the financial responsibilities of your small business yourself. In that case, the proper accounting software is essential to this task. QuickBooks offers cloud accounting to make the process of recording and creating financial documents easier.
There are numerous resources and teaching materials online that can provide you with a better understanding of what is needed to do the job right. This includes QuickBooks, offer bookkeeping courses and certifications that grant business owners a solid foundation of financial knowledge to help them succeed.
As a business owner, you have to decide what’s the best option for your success. Do you outsource your accounting, or opt to cover the responsibilities for yourself? Whatever you decide, Intuit offers finance and accounting software that can aid you in the smoothing running of your company.