Making the decision to 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:
So, before you select an outsourcing company, 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 systems 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 Being Burned by 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
- Lack of intelligent, optimized systems for billing, payment, or collections
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.
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 communication, 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.
Top 3 Outsourcing Best Practices
If you conduct some research on professional outsourced bookkeeping companies, then you can avoid many of the problems faced when partnered with undesirable outsourcing providers.
1. Understand Your Scope of Services
Before signing the dotted line to a particular deal, understand every aspect of your contract. Understand which services they include, what might cost extra, and how flexible you are to downgrade, upgrade, or otherwise modify your level of service before your contract has ended. Be sure to ask questions so you completed understand the process, policies, and procedures involved.
2. Find Out about Industry Experience
Your back office has the power to drive your business to success or failure. As a result, it is extremely important to ask about industry experience when looking to outsource your company’s bookkeeping, accounting, controller and, maybe even, CFO functions. You should choose a company that understands the ins, outs, and intricacies of your business’s industry. You would be best partnered with an outsourcing company that has employees with plenty of experience working with other clients in your industry.
3. Ask about the Team and Technology
Consistency and efficiency of service are essential to choosing a strong outsourced accounting company. Before making your decision, find out how many people they have on their team. Then, find out how many members will be dedicated to your account. You should also ask about their policies, procedures and contingency plans for employee loss.
In addition, ask them what technologies they offer to improve efficiency, accuracy, and compliance in your financial department. Find out what type of technology support they provide. And learn how they will help you streamline your financial department’s software integration to best partner with them and grow your business.
When it comes to outsourced accounting services, your company should get everything it needs from the company you choose. Look for a company who provides the experienced team and robust technology your business needs for an efficient, smart, and strategic back office. It should not only accurately records your financial history, but it should also leverage the information to accelerate your company’s growth well into the future.
GrowthForce: Outsourced Accounting & Bookkeeping Services
“The GrowthForce methodology and management accounting practices, combined with the fact that you understood my needs for the business, established the P & L the way that I needed to have it set up to run the business, was very beneficial to me. We were profitable the first month, and I knew it because my accounts and books were clean and I could understand where the money was coming from and going to.”
~ President, JTAM Engineering
GrowthForce is one of the original U.S. based outsourced bookkeeping and accounting leaders in the industry! Tap into over 20 years of expert bookkeeping and accounting experience.
To learn more about how our reliable and professional teams can assist you with our online accounting services, get the Guide to Outsourcing Your Bookkeeping and Accounting. Avoid being burned by outsourcing accounting again!
Stephen King is a guest blogger at The Strategic CFO. He is the President and CEO of GrowthForce – an outsourced bookkeeping firm based in Houston, TX.