Accounting is integral to many businesses. Many firms have started outsourcing to cheaper countries to enjoy its inherent benefits. Let us consider the two sides of outsourcing accounting services and why companies should choose India as their outsourcing destination.
Bookkeeping and accounting have been a significant portion of a business’ functions for decades. While earlier it was popular in-house, today, all companies choose to outsource accounting services. Outsourcing was popular among mid and large-scale firms as an expensive option to handle their complex accounting needs.
However, competition and price affordability have made it common among small businesses. Finding good accountants for in-house accounting is a challenge, primarily due to the immense growth in the accounting sector. It has led to shortages in skilled and competent accountants. This situation has made it difficult for businesses to find proficient accounting staff for their departments.
Such issues, paired with several other outsourcing benefits, have led to a rise in outsourcing accounting services. Companies outsource to achieve cost-efficiency, focus on core business functions, and solve capacity problems. Many leading organizations use outsourcing to transform their processes and improve business results.
Since it seems to become a trend, companies must weigh both sides of the coin and analyze the consequences before implementation. An in-depth assessment of the pros and cons of outsourcing accounting are as follows:
Pros of outsourcing accounting services:
Accounting services allow companies to know their finances through accurate record-keeping, financial statements, and compliance with tax provisions. Outsourcing these services offer the following merits to companies:
Saving your bucks:
The primary benefit of outsourcing is visible in the money saved by the firm. Outsourcing accounting and bookkeeping eliminates several expenses incurred in-house. On-site accounting requires technical and other infrastructural requirements, human resources, maintenance, and repair expenses. Moreover, training the human personnel, bearing employee turnover losses, etc., add to these costs.
On the other hand, outsourcing involves contracting with an independent party about the service package. The package rates include everything without heavily burdening the firm’s pocket.
Furthermore, the labor rates vary for different geographical locations. Thus, outsourcing to a cheaper country or nation with equal expertise can enhance firms’ functionality. Thus, the fixed and operational overheads come down significantly with outsourcing.
Outsourcing makes it accessible for firms to adapt to changes and comply with regulations through highly trained professionals having up-to-date compliance knowledge. The outsourcing vendor has years of experience and expertise in managing the accounting books of several industries. It protects them against different complexities and challenges that can attack business operations. The outsourcing partners are more of an extension of the business, with onboarding, training, and ongoing management handled by the third party. They can offer insights, advice, and in-depth information about financial performance, potential, and strategies.
Fostering growth by saving time:
Outsourcing accounting services save a firm’s time and effort in handling tedious and cumbersome tasks. It reduces the organization’s time overseeing financial activities, records, statements, presentations, etc. Now, the attention can get diverted to revenue-generating and growth opportunities. Moreover, the employees can focus on strategic tasks, increasing employee satisfaction.
Cons of outsourcing accounting services:
Outsourcing doesn’t always present a rosy picture. Like every other thing, it also has a side of thorns. The cons of outsourcing accounting services include the following:
Although the company and outsourcing partner negotiate the contract and cover every service aspect, including clarifying the charges, the outsourcing firm can still add hidden costs to the bill. Firms can overcome this issue by evaluating every detail and settling the costs beforehand. Moreover, the terms must state how imposing a hidden charge will get dealt with in the future.
Outsourcing accounting refers to hiring an external independent party to handle specific services. Since the work happens on remote ground and not on-site, companies may not have adequate control over the operations. There may be communication difficulties due to the distance. The outsourcing vendor in another country or region presents time challenges.
However, this issue has a solution. Setting communication expectations beforehand will help prevent obstacles. Creating schedules and various communication points helpful to both firms will allow for streamlining services. Moreover, implementing KPIs and monitoring them constantly will foster healthy control. Outsourcing vendors employ state-of-the-art technological facilities that further enhance their approach toward seamless communication.
The accounting jargon can impact the severity and complexity of communication between parties. Outsourcing accounting services to a remote location where the language is different will cause issues in communication. It can lead to misunderstanding or misinterpretation. Thus, these barriers can have significant consequences for companies.
Ensuring compatibility between the outsourcing partner and company can help prevent such issues. Thorough checking and evaluation will be valuable in such cases.
Inadequate protection against computer viruses, attacks, data theft, and threats can be burdensome. Firms can worry that their sensitive financial data can get leaked, misused, or misappropriated by another party. A lack of control over the operations, tools, and equipment can cause this worry among businesses.
Therefore, evaluating the safety terms and provisions implemented by businesses is crucial. Many outsourcing companies receive security and quality standards and certificates for authenticity. Firms should check the level of advanced technology implemented by such partners and their background with other clients. The key processes to look into include:
- Preventing unauthorized access through entrance security
- Access to main operational areas through biometrics
- Electronic gadgets like phones are restricted to avoid data leaks
- Policies and procedures for a healthy and safe workplace environment
Thus, these points highlight how outsourcing can be a boon and bane for organizations if they do not undertake due diligence in choosing the right partner.
Why should firms choose India for outsourcing accounting?
India is a developing country with low labor rates, proficiency, and experience in accounting. High-quality infrastructure at affordable rates makes it a primary destination for outsourcing accounting services. The government policies are favorable towards foreign organizations looking to outsource to India. Moreover, English is one of the main languages in India, thereby removing any language barrier.
Indian outsourcing partners maintain an optimal balance between tech-savvy and labor-intensive infrastructure. With their robust networks, firms are sure to enhance their competency and competitiveness.