Why outsource accounting

Outsourcing accounting can have many significant benefits, especially for lean startups and other fast-growing businesses. 

To help you determine if the strategy is right for you, this guide will explore its advantages over keeping things in-house, the situations in which it makes the most sense, and the functions you can typically expect to outsource.

Cost savings and financial efficiency

One of the primary benefits of outsourcing accounting is that it can significantly reduce your overall costs. Hiring, training, and retaining an in-house accounting team is often less financially efficient than paying an outsourced accounting firm.

First, outsourcing helps you eliminate the expenses involved in recruiting, onboarding, and training new hires. This can be surprisingly expensive. Not only are there direct costs, but it also pulls other employees away from their usual responsibilities.

Similarly, outsourcing helps you avoid the long-term costs associated with having more full-time employees. 

In addition to salaries and wages, these include health benefits, payroll taxes, year-end bonuses, and increased overhead costs, such as for extra office space and equipment.

Financial services outsourcing also allows you to pay only for the level of support you need. Instead of keeping full-time employees on the payroll indefinitely, you can scale up during busy periods and back down during slower ones.

Access to specialized accounting expertise

In addition to reducing costs, outsourcing can help you access a broader range of specialized accounting expertise than most in-house teams can provide.

Outsourced accounting firms employ professionals with diverse backgrounds to ensure they have someone with the financial expertise for every client situation. For example, they may have separate specialists for taxes, auditing, and bookkeeping services.

Replicating that breadth of experience in-house is often prohibitively expensive. To avoid breaking your budget, you’ll usually end up using a handful of generalist accounting employees to manage everything instead.

Accounting firms also invest heavily in ongoing training to keep their employees up to date on changing regulations and industry best practices. Working with them lets you benefit from cutting-edge knowledge without having to manage training internally.

Lastly, an outsourced accounting team typically has a broader perspective because they work with so many different clients. Their experience across industries can help them learn strategies and tactics that in-house teams may not be able to replicate.

Scalability and flexibility for growing businesses

As your business grows, your accounting needs naturally become more complex. Outsourcing accounting gives you the flexibility to quickly and efficiently bring on additional support whenever necessary.

This flexibility is especially valuable for fast-growing or seasonal businesses. You can quickly access additional accounting support when transaction volume spikes, then scale back during slower periods without the disruption of layoffs or underutilized staff.

Outsourcing also reduces the risk of outgrowing your accounting function. As your financial operations expand, you can add new services or deeper support without rebuilding your internal team, helping your capabilities keep pace with growth.

With an in-house team, scaling often means adding permanent headcount, even if your increased accounting tasks are temporary. It takes much more time to hire, onboard, and get employees up to speed, and you risk overcommitting resources.

Enhanced financial accuracy and compliance

Outsourcing accounting can improve your financial accuracy and strengthen compliance with tax and reporting requirements. Because this work is an outsourced accountant’s main focus, you benefit from processes built to reduce errors and maintain consistency.

In addition to standardized workflows and quality controls, that includes multiple layers of review. Instead of a single employee handling everything, your financial data is verified by several professionals, reducing the risk of mistakes.

As mentioned earlier, these firms are also required to stay current on accounting standards, tax laws, and regulatory requirements. Ongoing training and compliance monitoring help ensure your records and filings align with the latest rules.

Finally, outsourced accounting providers are held to higher service and accuracy standards than an in-house employee. This built-in accountability often results in a lower risk of penalties or corrective filings.

Access to advanced accounting technology and tools

Outsourcing accounting often lets you benefit from more powerful technology than you have in-house. Many accounting firms use advanced platforms that would be too time-consuming and expensive to implement and maintain yourself.

For example, in addition to an automated bookkeeping tool, this might include accounting software like the following:

• Payroll management systems
• Audit process management software
• Project management technology
• Financial statement analysis tools
• Tax preparation and compliance software

Outsourced finance and accounting firms are incentivized to integrate and refine these solutions into a unified system that minimizes manual work. This can unlock additional capabilities and efficiency gains that drive faster and more accurate accounting results.

It’s often challenging to replicate the enterprise-grade accounting technology they deploy in-house. Even if you manage it, that means having to purchase licenses, implement integrations, and dedicate internal resources to ongoing tech support.

Improved financial reporting and real-time insights

Accounting outsourcing can significantly improve the quality and timeliness of your financial reporting. Instead of relying on delayed or incomplete data, you often gain clearer visibility into your financial performance.

Many outsourced accountants offer real-time access to financial dashboards. This allows you to track key metrics like cash flow, revenue, and burn rate as they change, rather than waiting until month-end to understand your position.

In addition, because outsourced teams have dedicated experts whose core responsibility is to manage financial reporting, they’re more likely to provide formal deliverables on time than in-house teams.

Together, these factors help promote better-informed strategic decision-making. 

For example, with financial statements that are always accurate and up to date, you can more confidently evaluate hiring plans, pricing changes, and potential investments as a small business owner.

In many cases, this shift is the difference between being reactive and proactive in your financial planning.

When your business should consider outsourcing accounting

Typically, you should consider outsourcing accounting services when your financial needs start to outgrow what you can efficiently handle in-house. For example, here are some common indicators that you might need to make the switch:

• Your business is growing: As transaction volume and complexity increase, managing accounting internally can become overwhelming. Outsourcing can help you keep up without constantly expanding your internal team.
• You lack in-house expertise: If a generalist is no longer capable of handling your financial needs, outsourcing can give you access to an accounting professional with more specialized knowledge and experience.
• You want to reduce overhead: Maintaining an in-house accounting team is expensive. Outsourcing allows you to minimize permanent staffing costs and pay only for the level of support you need.
• Compliance risk is increasing: Operating in multiple jurisdictions or facing complex tax requirements increases the risk of costly mistakes. Outsourcing can help reduce the risk of penalties due to compliance gaps.
• Accounting distracts from core work: When your team spends too much time on accounting and financial tasks, outsourcing can free them to focus on more valuable responsibilities.
• You need better financial insights: If your monthly reports are often delayed or unclear, an outsourced accounting service can provide more accurate and timely reporting, which helps support better decision-making.
• You need more flexibility: Outsourcing helps seasonal businesses and rapidly changing companies scale accounting services up or down as needed without repeated hiring and layoffs.

What accounting functions can be outsourced

Fortunately, you can outsource just about any accounting function, especially if you’re willing to work with multiple service providers. Here are some of the service offerings you’re most likely to encounter:

• Bookkeeping
• Financial reporting
• Payroll management
• Tax preparation and planning:
• Auditing and compliance
• Financial analysis and strategy

Remember, outsourcing can be invaluable, but there are situations where it’s better to manage certain functions internally. Use the flexibility of outsourcing to experiment with different approaches and develop a system that works for your business.

Outsource your accounting with Zeni

Zeni is a comprehensive financial management platform that offers outsourced accounting services for startups. These include outsourced bookkeeping, payroll management, business tax management, and fractional CFO advisory services.

All clients also gain access to our powerful suite of financial technologies. For example, in addition to our AI accountant agent, which includes automated bill pay and reimbursements, we also offer a business credit card and checking account.

Schedule a demo today to see how you can free up internal resources and enhance your accounting process by outsourcing with Zeni.