As a business owner, you might often find it challenging to utilize your precious and limited time efficiently. While you remain busy ensuring your core business operations are carried out properly. However, poor management of your business accounts and finances can take a toll on your business growth. In fact, not paying attention to these aspects can lead to unorganized financials, incorrect financial reporting, and errors in tax files. You should know where the red flags in your business accounting are. To get help with this, read experts’ opinions on signs showing it’s time for your business to outsource accounting services.
Signs Indicating the Need for Accounting Outsourcing Services
Owner of Isolated Marketing Nights
Not Having Accounting Knowledge and Experience Demands Experts’ Support
Big Reasons For Outsourcing Accounting: One of the biggest reasons why a business owner should outsource accounting services is simply for lack of experience (or they are new at running their business).
This is a part of your business where you need both expert knowledge and experience.
The fact of the matter is that starting a business can come with quite a few fees and payments that quickly add up. Combine that with the fact that you’ll most likely be investing in your business as well; it makes it even more important to get your accounting services done by someone who is an expert in their field. It can save you plenty of time, effort, hassles, and even money.
Continuous Occurrence of Errors in Accounting Books
Increases Bookkeeping Accuracy
Quite often, the person doing the bookkeeping typically does not have a lot of training in accounting. Think about it, though. When you’re dealing with finances, accuracy is crucial. By outsourcing your books, you get a full team of trained people who have experience. This ensures:
– You won’t miss important deadlines
– Mistakes will be far less likely
– Your designated funds are separated correctly in the books
– Your financials are intact, accounted for, balanced, and up to date
Years Of Experience
A professional will actually manage it. Hiring an accountant is usually cost-prohibitive, but when you outsource, you have access to a higher level of expertise at a much more affordable price. These accountants can help answer complex questions as they arise and ensure you are following best practices.
You have a million things to do each day to keep your business running smoothly, and it is a much more efficient use of your time to use your expertise in those areas. Having an outsourced bookkeeper can free up this administrative task so you can spend your energy focusing on managing day-to-day operations.
Frances Schagen, CEO
Clear ToYou Bookkeeping and Business Support Agency
Lack of Accounting Expertise In-House
Everyone should outsource their accounting, i.e., taxes from the start unless they have the expertise in-house.
If you are talking about the recording of transactions and management of day-to-day financial matters, that is bookkeeping. Signs to outsource bookkeeping now!
- Missing deadlines for reporting taxes and paying them on time
- When not paying what is owed on time and incurring late charges
- When you aren’t sure who owes you and how much. Many small businesses lose money by not invoicing quickly and/or following up in a timely manner.
- Spending time on this work when you aren’t spending time on more important work I used to have to pry the bookkeeping out of a lawyer client’s hands. He could have been paying me $50/hr instead he wasn’t charging his rate (much, much higher)
- Worrying about doing it and doing it right. I tell my clients I can do it faster than you can worry about it
- Not having accurate, timely financial information when needed
- Losing sleep over money worries. The unknown is always worse than knowing what is going on and being able to make a plan.
- When you aren’t sure if you can cover upcoming payments or not
- Outsource payroll, it’s so cheap and they do it better than you can.
Not even a question
- When you need to prove your financial position to other people. An outside source is trusted more.
CEO & Co-founder, Choosing Therapy
When You Need a Helping Hand to Remain in Compliance with the Tax Laws
You are accidentally categorizing employees as independent contractors. Some estimates show 20% of businesses misclassify workers. Many small business owners want to pay workers as contractors to avoid paying employment taxes and benefits. An accountant can help you know the rules for who needs to be paid as an employee. The fines for misclassifying workers can be very high and enforcement of these rules is becoming more stringent.
You don’t know what you will need to put aside to pay taxes. Many small business owners confuse the amount of money in their business bank account with profits. However, they have expenses that are non-deductible (meals for an LLC) or pay personal expenses from the business account. While there is no money in the bank account, the business has profits and tax obligations that the owner is not aware of.
Delay in Filing Business Taxes That Too with Errors
If you always file close to the deadline, you should outsource your accounting; it’s likely that you didn’t have enough time to thoroughly review the expenses and deductions – either paying too much tax or potentially claiming expenses that are not fully allowable –
If you are growing rapidly, you need to focus on the business; accounting is an area you can outsource, with the benefit that you have professional advice to help you grow and let you focus on other areas of the business – if you are growing rapidly, cash flow will be essential, most businesses fail as they run out of cash, having your accounting outsourced will allow you to have a detailed plan, know when cash flow is likely to be an issue.
When Your Only Accountant is Wearing Multiple Hats, Accounting Problems Can Arise
We outsourced our accounting last year, and things have been much smoother because of it. I’m happy to share our reasons and experience.
My name is Jesse Silkoff, founder of MyRoofingPal, an online marketplace that connects people with the best local residential and commercial roofers in 4,000 cities across the U.S.
We decided to outsource our accounting because it was a more cost-effective option and gave us access to top-notch accounting services that we could monitor and make adjustments to if the need arose.
Previously, we had one employee handling all the financials. This included accounting, payroll, tax prep, bookkeeping — everything. As you can imagine, this was too many hats for one person to wear. Through no fault of their own, accounting was suffering overall, and we needed to make a change. Rather than hire on a full-time employee who we’d have to provide benefits, we decided to outsource it.
Outsourcing allows us to hire by contract, so we get the services we need when we need them. If an accountant doesn’t work out, it’s far less of a hassle to terminate the contract than terminate a full-time employee. Less money is lost, less time is wasted, and both parties are happier in the end.
I would recommend other small businesses take a look at their projected growth before deciding on this option. You likely have someone wearing all the financial hats and if your business is very small and looks to stay that way for a while, that may be fine. But if you want to grow and manage your accounts more effectively, you owe it to your business to hire someone — ideally someone remote who will work as a contractor.
When Small Businesses Cannot Utilize Their Accountants’ Capacity to the Fullest
My name is Paul Bromen. I am a serial entrepreneur who currently buys and fixes up websites. Right now, I own HelpfulHabitat.com and UponaMattress.com, two websites with 7 figure sales and 600,000 visitors a year.
I just started shopping for outsourced accounting services and it is time. I think any entrepreneur spending more than 5 hours a week on accounting should outsource it. It’s not value-added to your business, the time would be better spent prospecting new customers or improving operations.
Outsourced accounting will do a better job than you can. You could hire your own accountants, but it will be highly unlikely as a small operation you can use them to their fullest. In every small business, I’ve worked with the accountants are either overwhelmed or only being utilized to 50% of their capacity. For this reason, unless you could justify hiring more than 10 accounts, I recommend outsourcing to a company that can be spread the cost among many clients.
Struggling to Organize Your Books and Receipts
If every year you scramble to get your bookkeeping and your receipts together, you need an accountant you can outsource to. Collecting receipts and having them go missing or not add up on your balance sheet is one of the most frustrating things of ever dealt with.
Now that we do outsource, it does cost us money, but the time and aggravation we save is totally worth every dollar spent.
When Current Accounting Practices Don’t Work
You should outsource accounting services if and when your SME reaches a point at which you’ve grown to such as size that handling things in-house without a professional accountant or accounting team has become both inefficient and laden with mistakes and pitfalls. But your business isn’t large enough/turning over enough revenue/in a position of sufficient financial stability to create your own accountancy department or hire a professional for the role.
Generally, for all but very large businesses, outsourcing to the right accounting organization will remain more cost-effective (and provide more peace of mind in terms of having far less concern about costly errors and the impact this can have if they’re made by representatives of your own company). This is true even when the business has subsequently scaled up to a size at which creating an in-house department might well then be viable.
When Accounting Keeps You Distracted From Your Core Business
The simplest sign that your business needs to outsource accounting service is when you are beginning to struggle to put your focus on the business. Accounting tasks might be very strenuous, and you get lost or making mistakes while handling it yourself is a big red flag. It may ruin your business sooner or later. Your focus should be on strategic business goals and operations, not on receipts and daily accounting tasks.
Outsourcing gives you more time to focus on expanding your business. I saved myself a lot of time and stress when I outsourced my accounting services, my business was growing, and there was just too much to handle as the CEO. Outsourcing also improved my data security and gave me access to a variety of accounting services I didn’t know even know about before. Generally, outsourcing has a whole lot of benefits to a business owner, and you can never go wrong when you work with the right accounting firm.
If the IRS Audits Your Business Due to Late Tax Submission
One definite sign is
Your business is being audited by the IRS.
Another key sign is:
You are behind on your payroll tax deposits.
A client who was very successful as a film editor started her own business. Her office manager was terrible at handling accounts and payroll – they ended up about $50,000 behind. With the right outside accountant handling things every month, she would still be in business. Instead, she went back to her job and let her boss handle the business end of things.
Optima Office, Inc
When You Need an Expert For the Core Bookkeeping and Accounting Functions
What functions can you outsource? Accounting, Finance, human resources, marketing, information technology—and that’s just for starters.
Technology has transformed outsourcing capabilities and gives professionals the ability to work from virtually any location. These benefits business owners by increasing the pool of available talent, lowering costs associated with travel and occupancy, and providing the flexibility to add―or reduce―resources on demand without the costs of hiring and turnover.
Let’s look at accounting, for example. While specific degrees or experience are must-haves for certain aspects of accounting, there’s always a need for data entry and other lower-level work. However, it would be inefficient for a CFO to enter data, and most bookkeepers couldn’t generate the high-level analysis a CFO provides. In this scenario, it’s clear that one person can’t do it all.
What if you could have a team of people all doing exactly what they do best for between 20 and 40 hours per week, and it cost the same as one in-house hire? That’s the beauty of outsourcing, which brings increased operational efficiencies, better checks and balances, and less room for errors or fraud. Putting people in positions where they are most effective for your business saves you money and allows you to focus on driving the business forward.
When Accounting Starts Stealing Most of Your Precious Time
If you are spending more time looking at your books and accounting than actually working on growing your business, that is one sign you should outsource your accounting services. If you stop working on business growth simply to balance your books, your books may be in order, but your business may start falling apart, or at the very least, not have as much of a chance to continue growing.
After considering the opinions shared by experts, we can say that multiple signs come up in front while we perform the daily business tasks. The signs showing the need for accounting outsourcing services should not be ignored and responded to promptly. Outsourcing your business accounting functions provides you with more time to focus your energy and time on scaling instead of remaining stuck with tiresome and time-consuming bookkeeping & accounting. Outsourcing also enables your business to take advantage of better accounting practices as performed by industry experts. Additionally, you can redeploy your resources to other vital functions, in order to enhance customer relations, increase revenue, and attain business objectives or set new ones.