In small businesses, owners often tend towards keeping account functions in-house. It can be quite a dilemma to consider outsourcing this function. Unfortunately a lot of businesses consider only the cost while making this decision and not the benefits. However, there are some highly positive aspects related to outsourcing which must be weighed against the costs.
To outsource or not: The real question to think about is: 'what can you do with the extra time you will have, if you outsource?' Can that time be used better, to bring more revenue by meeting, networking and building relationships with your customers? Consider whether you really need to do your accounting in-house or whether it could be outsourced without having any negative effects on the business, your employees and, most importantly, your customers. Perhaps in your small business accounting is a mundane task done in-house because it has always been done like that. Do you have the necessary skills to do the job, or would it be better to outsource to someone with the right skills who can do the same job in less time and in a more cost effective way?
Outsourcing company: There is lot to consider before you can outsource accounting. Check whether the vendor has got the appropriate skills to do the job – take note of qualifications. They should have a pool of qualifications in their company such as ICB (Institute of Certified Bookkeepers), ACCA (Association of Chartered Certified Accountants) CIMA (Chartered Institute of Management Accountants), and AAT (Association of Accounting Technicians). They should also be flexible enough to use various accounting software such as advance spreadsheets, Sage, MYOB, IRIS, QuickBooks and Xero.
Consider how well respected they are in the market and how their current customers grade them. Ask for testimonials. Also, check how quickly they can turn around the job. Are they financially sound? Competitive? And, how flexible is the service level agreement? Check the conditions if you want to end the contract.
Depending upon services outsourced – such as credit control or bookkeeping – the business will need to provide different information to the outsourcing company. This could be everything from giving information about your debtors for credit control, to raw records – such as invoices and bank statements for bookkeeping. If the business is looking for complete outsourcing (bookkeeping, payroll, VAT and annual accounts), they would need to provide the following:
• Sales and purchase invoices
• Bank statements and loan statements, if applicable
• Pay-in books and cheque book
• Petty cash details
• Details of employees - personal and salary information
• Stock level, if applicable
• Debtors and creditors List
There might be some further information needed, as requirements change depending on the business sector, as well as each individual client's needs.
Cost puts off most businesses from outsourcing. This could be because they consider it to be an additional, and therefore unnecessary, cost to the business; however, in reality, the savings can be quite considerable.
These savings can include the running cost of accounting in-house. Businesses can increase revenue as time can now be used somewhere else and the cost of outsourcing is, of course, tax deductible.
Any business seeking to outsource should get a quote from a few companies first to find the most competitive. It is important to pick the right provider, as picking the wrong one can prove very costly later. If the provider is picked solely on cost, it may not be right for your business-specific needs, as the provider might not be qualified to provide certain services and, in turn, you will not receive the right service or advice on time. This can not only get your business in trouble with tax authorities, but can cost the business financially in penalties and having to put it right.
If done properly outsourcing can benefit your business.
Deepaman Prabhakar is an accountant working for Taxclaim Accountants
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