Meaning of Outsourcing
Outsourcing is a business practice whereby a company hires another company or individual to perform certain tasks, handle operations of all the business activities that have either been executed or previously been done.
Outsourcing accounting system – Is it a Dilemma for every business organization?
The Accounting system is the most important component of any business, which should be managed precisely with intense care. Once the accounting system is disturbed, the whole business stands still because without accounts all the expenses and incomes may not be managed correctly.
So, to maintain the accounting precisely, there are two ways – one is to hire the professional accountants and the other is to outsource it to the third party. This decision is to be taken by the management of each and every company.
Even at the initial stage, the implementation of a robust and accurate accounting system will help to set-up the business correctly.
Let’s look at the benefits of a full-time in-house Accountant:
- Working with the team – The accountants once hired for the company will be working with the team of the business which will help to get all the updates on the spot and can precisely manage accounts work.
- Focused Expertise – The accountants can be focused and may accurately work as the information will be available on the spot and even the business will work on proper track as they will get the information regarding their accounting instantly.
- Regular Updates – The business will get regular updates on how the firm is maintaining its incomes and expenses and what needs to be improved.
Disadvantages of full-time In-house Accountant:
- Expensive – Hiring a professional accountant for a small business can be expensive for them to hire a full-time accountant.
- Changing Tax Laws – There are various changes in tax laws and amendments but the owners may not be aware of changing rules and regulations. Because of a lack of awareness about the accounting and taxation laws, it becomes necessary to provide training for the same and keep them updated.
- Taking leaves and holidays – If an accountant takes some days off then the whole accounting work stands still, which leads to delay in maintaining the bookkeeping activity.
- Hiring the new accountant – For a business, hiring a new accountant becomes the challenge as they need to make sure whether the accountant selected is fit for that position or not.
- Termination of one’s contact – There are chances that the accountant can terminate their services at any time which disturbs the whole accounting activity of the company and it becomes difficult to find the new professional accountant in a short period to complete the accounting and taxation processes on time.
- Multitasking Issues: The ability to multitask can become a problem when a bookkeeper’s additional responsibilities prohibit them from focusing on their core duties, which can, in turn, result in late reports and other obstacles.
These are some of the things taken into care while hiring an accountant. This becomes one side of the coin but the other side is as follows –
As the business grows it becomes difficult for the owners to manage every activity on time and hence the accounting services are not easily managed by the accounting professionals. Thus, maintaining the whole accounting system is not a cup of tea, it requires proper accounts handling system which helps them to manage the whole accounting system with ease. This means hiring Chartered Accountants, Cost Accountants, Company Secretary and many more accounts specialists, which ultimately increases the cost to the business. But for a company which is a start-up is not able to cope up with the expenses. This makes the outsourcing concept to come up.
Outsourcing the accounting systems of the company’s accounts will help these companies to manage their expense, as the outsourcing expenses are less than the expenses which are incurred by the company to hire all the accounts professionals.
Benefits of Outsourcing Accounting and Taxation to a professionally managed firm:
- Cost Reduction – Businesses can perform their accounting and finance maintenance far more cheaply than other companies who manage their accounts on their own.
- Benefits from superior capabilities – It helps the business to develop long term strategic benefits and can take the best expertise services.
- Increased innovation – The business is focused on their core business and is not concerned with the new ways of technology, so by outsourcing the accounting system we can gain the advantage of new and safest ways of doing accounting.
- Focus on revenue generation activities – It allows the business to focus on core business activities without worrying about the books of accounts. This will help to generate more revenue.
- Customized accounting services – Outsourcing helps the business to ask for a detailed accounting reports whenever required.
- Prioritization of tasks – It helps the firm to prioritize the work better and will also help them to focus on the revenue generation activities.
- Relief from juggling various activities together – It helps the business by focusing on the major and important tasks instead of juggling all the activities together.
Disadvantages of Outsourcing Accounting and Taxation to a professionally managed firm:
- Risk to proprietary data – Confidentiality and risk to intellectual property are often cited as key reasons why companies choose not to outsource.
- The risk to innovation – Outsourcing the accounting companies can lead to erosion of knowledge and skills of the employees of a particular business.
- The risk to succession planning – An in-house accounts department can be a training ground for future senior accountants and business managers. An outsourced function is less likely to be a source of talent in the future.
Thus, it can be concluded that it depends on company to company whether to outsource their accounting system or not.