Making the decision enlist an outside company to handle any portion of your business is a big choice, and you should not take it lightly. With the right outsourced professionals, your business stands to improve leaps and bounds. However, we have heard so many stories of companies being burned by outsourcing accounting and bookkeeping. If you select the wrong outsourced service provider, you risk causing irreversible damage to your company with things like:
- Inefficient and unorganized system
- Poor communication
- Lowered standards
- Unhappy customer
So, before you select an outsourcing, be sure you understand their strengths, expertise and service model, and the types of pitfalls to avoid. When you select the right company to partner with, your business will work smarter, your system will improve. You and your employees will have more time and resources to dedicate to your company’s primary functions. Then, your business will flourish.
4 Common Mistakes to Avoid with Outsourcing Accounting
Like almost any choice you make in business, outsourcing your company’s bookkeeping, accounting, controller and/or CFO has both pros and cons. While outsourcing frees up your time, saves company dollars on benefits and payroll, secures an unbiased perspective on business finances, and can potentially increase profitability, choosing the wrong company outsourcing can be detrimental to your business. Before you decide to partner with an outsourcing company, take precautions to avoid the following 2 things:
- Being burned by outsourced accounting
- Running into these all-too-common problems with outsourced accounting and bookkeeping services
We often have new clients approach us because, in spite of having a complete outsourced accounting department, their businesses continues to run into cash flow issues. When our representatives look into their back office practices, we find extreme inefficiencies. When evaluating the bookkeeping practices established by other outsourced providers, we have seen everything including the following:
- Late billing
- No established processes
Facing these types of concerns, companies have no chance of leveraging the numbers reported by their back offices for strategic planning, cash flow improvement, or revenue generation. They also face audits and paying potential fees and penalties due to non-compliance and tax errors. In these cases, extremely inefficient outsourced bookkeeping severely curtail the potential for business growth.
2. Hidden Costs or Prices Which Seem Too Low to Be True
Many outsourced services advertise prices way below average. They collect the true value of their services in additional fees and hidden costs. In the end, clients are not happily surprised when the bill arrives. Outsourcing providers will also sometimes charge well below average. They will consequently deliver well below average quality service with copious mistakes and a disregard for timeliness. It is also a good idea to be wary of rigid, all-or-nothing service options. Most reputable companies offer a range of flexible, customizable service plans.
A truly professional bookkeeping provider will openly disclose the cost of service, additional fees for add-ons, and offer clients a range of pricing options.
3. Lack of Communication, Expertise, and Professionalism
We group these outsourcing concerns together because they often occur together. Below-average outsourced accounting and bookkeeping providers hire self-taught bookkeepers. They often do not keep enough employees on staff to provide consistent service in the event of an employee’s illness, vacation, or decision to leave their company. In addition, businesses working with outsourcing companies located overseas might also face a breakdown in communication due to cultural differences and time zones. All of these concerns can lead to a lack of communications, expertise, and professionalism.
These providers often operate without a written set of policies or established procedures for their own business operations, nor do they apply these sorts of high standards to their clients’ operations. A low quality outsourcing provider leads to the following:
- Inaccurate work
- Regulatory concerns
- Communication issues
- A lack of transparency
4. Threats to Your Company’s Confidentiality and/or Security
Poorly run, mismanaged outsourcing service providers can also pose a threat to the security and confidentiality of their clients’ personal or proprietary information. Outsourced accounting providers receive lots of confidential information pertaining to their clients’ employees and businesses. Whether an outsourcing provider has a poor vetting process for bringing in new hires or lacks information technology security, these oversights put their clients’ confidential information at risk.